Audio version 7’45”
Who’s Marking Your Homework?
The greatest thing about having your own business is the glorious freedom from being ordered around by anyone.
Nobody can cancel your Christmas party. You can do whatever the hell you like and focus on what’s really important, rather than wasting all your time responding to whatever new brain spasms have afflicted the management level above you, and compiling the endless reports that are the bane of corporate existence.
And yet, like in all of life, balance is important. Too much freedom and you can end up a bit mad, cast away on your own business island talking to a volleyball like Tom Hanks.
I’ve seen quite a few people start businesses and end up two years down the track still working at home in a tracksuit with no staff and not much growth, because they were accountable to no-one and spent the first six months fussing over the color of their business cards.
(Yet those business cards will still often say “CEO”, for more of these fast-track-to-nowhere symptoms: 7 Steps To No Success).
If you don’t have a boss, consider getting someone to mark your homework.
Find Some Advisors
I’ve just been reading a board-style report from Andy, a friend who founded Song Division, a business with offices around the world. They do corporate culture-building through music. The company isn’t massive, but it’s growing and they have a brilliant product.
He has put together a voluntary advisory board of seven people, the rest of them far more accomplished than me, with solid track records as CEOs and chairs of big name-brand companies. (I’ve never checked the recruitment process, I suspect most of us ended up there because we have secret music side-projects going on).
The advisors get a periodic report on what’s happening with the business:
- Revenue growth
- Profit growth
- Specific KPIs that relate to the above two
- Marketing strategy
- Sales strategy
- Production processes
- Staff structure and recruitment
All the information would fit on two pages. That’s all you need to get a good sense of where it’s going.
We don’t have meetings, but Andy sends us periodic email reports and catches up with each of us when he’s in our various towns to bounce ideas around. It’s a good system, we’re delighted to help because he actually listens to the advice.
How To Find Advisors and Keep Them
If you’re looking to assemble a group of pro bono advisors, here’s how you do it:
- Take the time to get to know them first. Sure in business terms you are a baby turtle flapping down the beach for your first taste of the ocean, and you need expert knowledge, but maybe you have knowledge that would also interest your potential advisor. Like say trends in younger customers or recruitment and so forth.
- Ask nicely and be ok if they don’t have time. Accomplished people are usually delighted to help where they can, but they are constantly being ‘reached out’ to by randoms who want to ‘pick their brains over a coffee’ and that can often feel pretty dirty.
- I try not to get all aggressive all-caps about this but IF THEY GIVE YOU ADVICE ACT ON IT. Nobody expects you to do every single thing but if you get free advice then consistently fail to act on it – and it happens a lot – FFS STOP WASTING PEOPLE’S TIME.
If you manage to get one or more director-style advisors, here are some tips on how to keep them informed.
As Few Words As Possible
You need to be producing hard numbers, like you’re reporting to an actual board (or if you actually are reporting to a board).
Remember last month I wrote that words, not numbers, are what get you there? Don’t let that confuse you. The words are how you inspire your staff to do the great job that generates the numbers. You still need to be all over those numbers. As a board person, I want as few words as possible. I’d like to know specific, inarguable numbers.
Too many words are a warning that there’s something to hide.
Don’t say strong growth, give us a number. Don’t say premium pricing strategy, tell us what extra percentage you’re charging over your competitors. Don’t say committed staff, give us staff turnover figures.
Sure your LinkedIn bio might be Storyteller-In-Chief but please spare us your JK Rowling work in board reports. Each adjective makes your report weaker and more suspicious.
Explanation Practice Is Valuable
Committing to putting those numbers together every few months is a really valuable discipline. As is explaining them to other people. If your numbers are shit, you’d better have a decent explanation of how you’re going to fix it.
The old saying that you don’t actually understand something until you can explain it clearly to others is never truer than when you’re handing in your business homework.
None of it is rocket science. You are not a multinational company, and 90% of the practical value is in about ten numbers/percentages. Ask your advisors what figures they look for and why.
It’s never stationery costs or Christmas party expenses, and it’s important to understand the reasons for that. So many managers don’t understand the difference between ‘manager’ and ‘admin busybody list-ticker’.
Cash Cash Cash
If you run out of cash you have to shut the doors, and maybe get disqualified as a company director.
If you own a business and you can’t tell me a rough idea of bank cash plus A/R less A/P* off the top of your head at any given moment, you probably shouldn’t own a business.
Those numbers, along with your sales numbers for the next few months, should influence your behavior all day – should you allow that new customer credit or ask for cash up front? Should you buy that new laptop? If you’re not across those 4 numbers, you’re driving without headlights.
I talk to plenty of business owners who don’t have this basic information to hand, and say things like “my accountant handles all of that for me”.
Dead business walking.
* If you ever hear the term Quick Ratio it’s basically that but you need to know the actual numbers rather than just a percentage.
EBITDA is Weak
As a general reporting thing to beware of: businesses that talk of EBITDA do so because they’re trying to distract you from their embarrassing net profit and cash flow.
Try going to a restaurant and settling up your meal with EBITDA without getting held up against a wall by a Wüsthof-toting owner. Actual money profit is what you need to lead a relaxed life.
Confess Your Bad News
Good news is good, but it kinda looks after itself.
Good managers can see bad things coming and work on a plan. Managers who can’t, or won’t, are a nightmare. They think presenting a sanitised package of good news makes them look professional. “It’s all good,” they chirrup, until the figures show the apocalypse is upon you. You should have been acting on the causes six months ago and now everything’s on fire.
I’m not sure what’s worse: hiding bad news or not even knowing that it’s there. Either is pretty unattractive.
As a manager, ask yourself all the existing and potential problems that are coming up, and think about how you’re going to deal with them. And report it. It shows strength and competence. You’ll go much further in business life and never have to call yourself Storyteller-In-Chief.
What a result that would be.
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Number of extra emails trying to sell you self-improvement programs: zero. Now there’s a KPI.
And if you liked this story you might also enjoy The Top 5 Sayings Of Financially-Illiterate Managers