How much do you weigh? How old are you? How are your finances? Three questions which can lead to major faux pas in most conversations. Most of us would never dream of asking these of people we have just met – and most of us won’t even discuss it with our closest friends! Money is closely associated with status, power, success, expertise, and knowledge. We attribute great power to numbers, but at the same time, go to extreme lengths to avoid discussing them. This is fine at a casual dinner party, but in business, failure to discuss, understand and act on the numbers can lead to disaster.
Can – and has. As long ago as 2005, insiders at both Merrill Lynch and AIG worried about overexposure to the US mortgage market, which imploded in 2008. According to The Economist, “The Cassandras in these companies were ignored, sidelined or fired, not because their bosses were corrupt, but because they didn’t believe the warnings. Joe Cassano [of AIG]…worried about credit losses, but apparently not about the possibility of multiple, massive collateral calls, which proved the firm’s undoing…Goldman Sachs was spared the fate of those companies largely because its managers listened to its naysayers.”
The lesson though, is that failure to acknowledge financial issues can lead to catastrophe, no matter the scale your business operates on. But the willingness to establish firm financial metrics and follow them or to get the help you need to accomplish this, can lead to a stronger foundation from which to take advantage of future opportunities or to wait out storms.
My experience in the financial industry has proven this time and again, and I continue to see it through my work as a business consultant. Too often, financials, numbers, money, is left by the wayside because the business owner is not comfortable discussing it or sharing that data. Understandable? Yes. Acceptable. No! These data and metrics need to be in place; it is essential. Our job, then, is to help put the financials in comfortable terms and find manageable measurement techniques and key performance metrics that managers can use to track and direct their goals.
That’s a lot of consultant-speak for helping you get a grasp on numbers and develop a plan for identifying, tracking and achieving your short and long-term goals. We work to meet the metrics with the managers. It may well be out of their comfort zone. But it is wholly necessary.
Implementing some of the ideas mentioned here can be challenging. If you would like to discuss them in the context of your own specific business please contact us. We’d be glad to help.
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