How to Know If Your Business Strategy Is Working
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How do you know if your strategy is working? It’s a question every entrepreneur and business leader should ask regularly. The answer, in its simplest form, comes down to free cash flow—the ultimate measure of business success.
At Coltivar, we build great companies. But what defines a great company? Years ago, I went down a misguided path, buying into popular business culture that emphasized everything but the financial fundamentals. I learned the hard way that no matter how great your culture, your mission, or your product is—if your business isn’t generating stable, healthy cash flow, it won’t last.
Why Free Cash Flow Matters
Warren Buffett defines value as the present value of all future cash flows a business will generate. This is how investors assess businesses, and it’s the metric that ultimately determines whether a company thrives or fails.
Free cash flow is powerful because it allows you to:
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Pay down debt
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Reward investors and employees
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Reinvest in innovation and culture
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Expand operations and fuel long-term growth
Ignoring cash flow is one of the biggest reasons 8 out of 10 businesses fail. You can have revenue, even profit, but if you’re not monitoring the relationship between profit and invested capital, you can run out of cash. And when that happens, everything else—culture, employee development, mission—collapses.
The People vs. Profit Debate
One of the biggest misconceptions in business is the false dichotomy between people and profit. A CEO once asked me, “Steve, which one is it? People or profit?”
My response: You can’t separate the two.
Of course, people matter. A business is nothing without its employees and customers. But if you aren’t generating free cash flow, how will you give raises, create career opportunities, or invest in a thriving culture? Cash flow fuels everything.
This is why I emphasize strategic financial leadership—knowing your numbers, knowing your targets, and knowing how to influence them.
The Power of Unit Economics
If you want to move the needle in your business, you have to understand unit economics—the building blocks of financial performance. Instead of looking at revenue as one big number, break it down into actionable components:
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Revenue per customer × Number of customers = Total Revenue
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Lifetime Gross Profit per Customer (LTGP) ÷ Customer Acquisition Cost (CAC) = Customer Profitability Ratio
Want to increase revenue? You either:
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Get more customers
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Increase the average revenue per customer
Want to improve profitability? You either:
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Increase the lifetime value of a customer
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Reduce your customer acquisition cost
Every executive should not only understand these metrics but also know how to influence them.
The Role of Strategy in Financial Leadership
The best leaders aren’t just number crunchers—they’re strategic financial leaders who know how to align strategy with financial performance. This means:
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Setting clear KPIs tied to unit economics
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Understanding the story behind the numbers
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Taking action to move key financial metrics
This isn’t about being a finance nerd obsessed with spreadsheets—it’s about knowing the levers that drive growth and profitability. When you master these, you can take any business to the next level.
Focus on the Right Things
At the end of the day, business success comes down to cash flow and execution. If you focus on the right things—free cash flow, strategic leadership, and unit economics—everything else falls into place.
So ask yourself: Are you measuring the right numbers? Do you know how to move them?
When you do, you unlock the ability to scale, create wealth, and build a truly great company.
Uncover new opportunities and unlock hidden value with Coltivar: Your strategic partner for financial guidance.
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