I was weighing up some options for a client over the weekend. They are worried about what might happen if a plan didn’t work.
It got me thinking. What was the worst thing that could happen? If the plan didn’t work, there was still a business, a reputation, and a lot of goodwill. Life might not be easy, but life would carry on.
When starting a business, it is essential to know what your bottom line is. If the idea doesn’t work, when is the right time to walk away, or change the plan?
To some, running a small business is almost a hobby – the impact of financial failure is minimal due to other streams of income (for example a partner’s salary). But if the consequences of failure are more material (no money to pay the rent, buy petrol, or eat), then knowing when enough is enough starts to seem sensible.
Motivation to succeed is often fuelled by an appreciation of the consequences of failure.
In the same way that success can be measured in terms other than pounds in the bank, so can failure. Working out what you want, or what you don’t want to lose, is harder than you think when you start to think beyond the bank balance.
I am not suggesting that businesses should always worry about the worst case scenario, but I would suggest that having the option to quit while still ahead is better than the alternative.
So, having identified the worst case scenario, now it’s time to focus on the positives, aim high, and succeed!
Much is being said in the media these days about what economic recovery will look like. I suspect that life is too complicated to find generalised answers to this question, and that we are better looking at more specific areas.
One measurement of economic output I was told about many years ago was the “crane count”.
Very simply, how many cranes can you see on the skyline of your city?
Each crane represents an army of workers delivering a building project. Each one represents confidence in investment. There is no such thing (unless I’m much mistaken) as an idle crane.
How many cranes can you count, and are there more, less or about the same as this time last year?
We have much to thank Donald Rumsfeld for. Although mocked for his listing of “what he knew he knew”, “what he knew he didn’t know”, etc, this analysis of your situation can often distinguish perception from reality.
Compiling a list of things that you know you know about your business might seem like a waste of time, but put it beside a list of things you don’t know about your business, and you might surprise yourself just how many things you suspect, but aren’t sure about.
If you aren’t sure about it, then you don’t know it.
And then ask yourself, what are you doing to find out?
Met an interesting person yesterday – which sparked a debate about types of accountants. Not whether they are interesting or boring (!), but whether they are financial or management accountants.
Financial Accountants produce the raw data – they are the unsung heroes and heroines who make sure your numbers are produced on a timely and accurate basis, that debts are called in, and creditors appeased.
Management Accountants are a different breed. They look at the data and ask the “difficult questions”. Such as “Is this a good number?”, “Have we achieved what we thought we would, and if not, why not?”, and perhaps the most important question, “What is the implication of this data to our financial future?”.
Most businesses have Financial Accountants (for example the bookkeeper). I believe businesses need both kinds of accountant, and that it is very hard to find someone who can be both.
Who is asking the difficult questions in your organisation?