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

Opti­mism is essen­tial for an entre­pre­neur.  Your abil­i­ty to see pos­si­bil­i­ty pro­pels you into busi­ness. In tough times, it is what keeps you in the game.

As an opti­mist your atten­tion is on tomor­row, on the next oppor­tu­ni­ty, on the next win.  When real­i­ty con­flicts with your opti­mist view of the world, you choose your view.

Unchecked opti­mism is poten­tial­ly destruc­tive.  With­out a counter bal­ance, it can lead an entre­pre­neur down the path of your great­est fear, los­ing everything.

Data is essen­tial to every CFO.  There is no way to hide from the real­i­ty of data. Real is real.  When used appro­pri­ate­ly, finan­cial data is very ground­ing.  When used to excess, it is paralyzing.

Opti­mism and data are both dou­ble edge swords.  Too much of either is a slip­pery slope.  But when you bring opti­mism and data togeth­er, mag­ic hap­pens.  It cre­ates clear bound­aries for your deci­sions, expo­nen­tial­ly increas­ing your odds of a finan­cial win.

Here are two exam­ples of how finan­cial data and opti­mism in part­ner­ship cre­ate win­ning decisions.

The Next Big Score

Type of busi­ness | Spe­cial­ty Contractor

Sit­u­a­tion | You have your eye a job that is big­ger than any­thing you’ve ever done.  The mar­gin is paper thin.  There is over­whelm­ing com­pe­ti­tion and if you don’t com­pete on price, you will most cer­tain­ly lose. If you get this job, it will lead to so much more. It will put you in a new league, you’ll become an “A” play­er.  It’s like a dream come true.

In a few days you have your finan­cial review meet­ing with your Out­sourced CFO. Your fear is they will focus on the low mar­gin job and try to get you to walk away.

How finan­cial tools help | In the sales fore­cast review, the CFO brings up the low mar­gin job you are pitch­ing.  She built a tool to help you see clear­ly the impact of tak­ing on a low mar­gin job to gain mar­ket share.  She already pop­u­lat­ed the spread­sheet with your cur­rent and fore­cast­ed job data.

As you work with the new tool, it becomes clear that the com­pa­ny can afford to take on one new, big, low mar­gin job.  If you take on two, your net income mar­gin gets too thin and puts you at risk of los­ing everything.

The win | Your take one last look at this dream job to make sure it will indeed open the right doors to the great­est vol­ume of new, good mar­gin work.  You com­pete and you win the job.  The busi­ness goes on to grow 25% in rev­enue with a healthy prof­it.  The fol­low­ing year, new doors are opened and bet­ter mar­gin jobs flow in, cre­at­ing a record net income for the business.

Hir­ing Your Way Out

Type of busi­ness | Job shop manufacturer

Sit­u­a­tion | Net income is ane­mic because sales aren’t where they should be. An own­er, whose pri­ma­ry role is sell­ing, is con­stant­ly dis­tract­ed by admin­is­tra­tive issues.   In addi­tion, the cur­rent sales team isn’t meet­ing their goals, but they are sell­ing enough that you wouldn’t let them go.

You deter­mine the only path to suc­cess is a new sales per­son.  In your mind, the cash reg­is­ter is already ring­ing, and you are well on your way to the busi­ness of your dreams. The lead time to get a sales per­son prof­itable isn’t in your line of sight.

How finan­cial tools help | The Finan­cial Oper­at­ing Sys­tem™ your Out­sourced CFO installed includes an annu­al finan­cial plan.

As you, your man­age­ment team and your CFO work through your finan­cial plan, it becomes clear that the new sales hire is going to wipe out your net income.  To make mat­ters worse, there is poten­tial for sig­nif­i­cant loss if the new sales per­son fails to meet real­is­tic first year goals.  Your retained earn­ings can’t han­dle this kind of impact. Not yet anyway.

As you looked more deeply at your options, you come face to face with the hard real­i­ty you are avoid­ing.  Your way out is to get your cur­rent sales team on goal and to remove the admin­is­tra­tive obsta­cles in the way of the owner/sales per­son.  The answer is to ful­ly uti­lize cur­rent resources.

The win | You do the chal­leng­ing work of get­ting your sales team on goal and hold­ing your fel­low own­er account­able for their role.  The busi­ness has its best year ever. His­to­ry val­i­dates your deci­sion.  The process of build­ing a finan­cial plan for the year, guid­ed you to a very prof­itable decision.

For most busi­ness own­ers, finan­cial data isn’t your first love.  Used wise­ly, it can become your best bud.

At Mack­ey Advi­sors, we delight in help­ing entre­pre­neurs pros­per.  Call us if we can help you.