“When you argue with real­i­ty, you lose, but only 100% of the time.” – Byron Katie

Opti­mism and finan­cial data are both dou­ble edge swords.  Too much of either is a slip­pery slope. Exces­sive focus on opti­mistic pre­dic­tions can lead to poor deci­sions and, as a result, finan­cial chal­lenge.  Exces­sive analy­sis of finan­cial data can lead to paral­y­sis in deci­sion mak­ing and there­fore sti­fle the for­ward move­ment of a company.

Last month I wrote about how opti­mist think­ing and finan­cial data cre­ate win­ning deci­sions when treat­ed as equal part­ners.  This month, I tell a sad­der tale, one of opti­mism refus­ing to acknowl­edge when finan­cial data clear­ly says change is necessary.

Here are a few exam­ples of what it can look like when opti­mism speaks loud­ly and ignores finan­cial data.

Case Study 1: A train­ing company

You know there is one thing your busi­ness must do excep­tion­al­ly well to achieve its goals, your annu­al conference.

If the con­fer­ence suc­ceeds, the rest of your year falls in line.  To that end, you devel­oped a flow­chart of the crit­i­cal mar­ket­ing steps, build­ing con­sen­sus with your team as you went along.  Respon­si­bil­i­ty was assigned for each task.

When it is time to kick off this year’s mar­ket­ing, you are dis­tract­ed, and you miss it. Your opti­mistic self-steps up imme­di­ate­ly and tells your team not to wor­ry, you will catch up. Your CFO has a dif­fer­ent point of view, express­ing con­cern with­out hes­i­ta­tion.  You shrug it off.

As the months progress, your CFO points out that the num­bers are way down over the pri­or year and you are already under plan. You brush it off. CFOs can be so neg­a­tive! Your opti­mistic self steps up and insists, you will make it up.  This same con­ver­sa­tion hap­pens month after month.

Your event comes to pass and you miss bud­get­ed rev­enue by 25%.  Hav­ing missed step one, you nev­er caught up. Your CFO points out that you are head­ed for a pend­ing cash flow cri­sis in the next 60 to 120 days.

You knew what to do.  You didn’t do it.  The prob­lem was com­pound­ed month after month, as you ignored the clear finan­cial data that you were off track.

You are angry. You want to shoot the mes­sen­ger. That is an option. It is easy and if you do, for a brief time, you will feel better.

A more coura­geous option, is to look in the mir­ror and learn some­thing. If you step up and look, you will see that you refused to give finan­cial data the respect it deserves. While this les­son is painful now, by learn­ing from it, you’ll avoid repeat­ing it and more pain in the future.  The choice is yours.

Case Study 2: A niche con­struc­tion firm

You have a nice, mod­est­ly prof­itable firm.  You see oppor­tu­ni­ty in the mar­ket place for a niche strat­e­gy. It will cost you at least a $250,000 to get off the ground.  You know it is a win­ner!  You find an out­side investor who agrees to invest in your busi­ness, with the under­stand­ing you will make this unit prof­itable in 24 months.

You hire a mar­ket­ing firm and spend 90 days work­ing with them to for­mu­late an e‑marketing lead devel­op­ment strat­e­gy. It sounds like a win­ner and the out­comes they have laid out are con­sis­tent with what your investor wants. Giv­en your short, 24 month win­dow, the mar­ket­ing firm urges you to front load the mar­ket­ing cost to build the pipeline faster.

Your CFO urges you to test the plan first, tak­ing the first 90 to 120 days to see if the pipeline builds as antic­i­pat­ed.   Finan­cial peo­ple can be such Deb­bie Down­ers, bring­ing up the pos­si­bil­i­ties for fail­ure.  If you fol­low the CFO’s advice, you are like­ly not to meet the 24 month win­dow your investor pre­scribed.  You can’t be patient.  You go all in and com­mit to the plan.

Three months in, your web­site is get­ting a ton of clicks, way more than antic­i­pat­ed.  You are feel­ing val­i­dat­ed by your deci­sion.  Your Deb­bie Down­er CFO points out that the clicks aren’t mov­ing from inter­est to sales pipeline and that you have missed first quar­ter sales by 95%.  You tell your­self it is OK. You’ll make it up. The incom­ing web traf­fic is amaz­ing.  It just a mat­ter of time. Full steam ahead.

Three months lat­er, 6 months into your mar­ket­ing strat­e­gy and 9 months since your new investor came in, you have viru­taly noth­ing to show for the $175,000  you’ve spent to get your new strat­e­gy off the ground.  Ana­lyz­ing the pipeline tells you that this mar­ket­ing pro­gram will nev­er achieve the lev­el of suc­cess nec­es­sary for this new ser­vice to break even.  You’ve spent 70% of the cap­i­tal you had to get this strat­e­gy off the ground and you are in the sme place you started.

You are angry. You want to shoot the mes­sen­ger. That is an option. It is easy and if you do, for a brief time, you will feel better.

A more coura­geous option, is to look in the mir­ror and learn some­thing. Your CFO had a point.  If you had test­ed the pro­gram, the results would have clear­ly demon­strat­ed the strat­e­gy would not work.  More impor­tant­ly, you’d still have most of the cap­i­tal need­ed to get the niche pro­gram work­ing. While this les­son is painful now, by learn­ing from it, you’ll avoid repeat­ing it and more pain in the future.  The choice is yours.

What is the mag­ic for­mu­la?  How do you gar­ner the ener­gy of opti­mism to move your busi­ness to new heights while respect­ing the real­i­ty of finan­cial data?  Here are three keys:

  1. Slow down and ask ques­tions. Yes, CFOs can be Deb­bie Down­ers. It is their job to keep your bal­ance sheet healthy.  If you run out of cash the game is over, and your CFO wants you to stay in the game! When you find your­self resist­ing your CFO’s advice, slow down. Sit down one-on-one with your CFO and have a dia­log.  Ask as many ques­tions as it takes to real­ly under­stand what they are telling you.  Don’t shoot the mes­sen­ger, learn from them.
  2. Use graph­i­cal data with clear goals. Look­ing at columns of num­bers can be bor­ing! Ask your CFO to com­pile your key finan­cial data into graphs with goals built into the graph.  That will make it eas­i­er for you and your team to visu­al­ly see where you are.  When you are off track, cre­ate a pop-up team to address the issue and come back to you with a rec­om­men­da­tion for improvement.
  3. Know your­self, your strengths, weak­ness­es and relat­ed blind spots. There are lots of tools to help you learn more about your inner self, the ennea­gram, Myers Brig­gs, Emo­tion­al Intel­li­gence to name a few.  Find a sys­tem that you find help­ful and use it to be more self-aware.

At Mack­ey Advi­sors, we love help­ing entre­pre­neurs pros­per.  If you’d like to know more about how we can help you, reach out to us at 859–331-7755 or email Mackey@MackeyAdvisors.com