Business is an intellectual sport, that might sound odd to compare business to sports but the point is the fewer emotionally impulsive decisions you make, the fewer bad choices you’ll make. The riskiest moments are when you think you are right.
All problems in business start out as a good idea and they were most probably emotionally justifiable at the time. “Optimism is deadly – the enemy of the rational investor” Warren Buffet.
To excel in sport and business, from time to time we need a coach or a trusted advisor to help us do better. And we do better because we get better. In the absence of a trusted advisor, such as a virtual finance director we’ve got some pointers to help you figure out a business problem that you might be facing at the moment.
When we get stuck on a problem, we often think it’s because we don’t have the right answer. That’s rarely the problem – it’s not asking the right questions. A problem is simply an unanswered question and if you frame a problem in the right way, you can get clarity.
Think about changing your language, “how might I ___ so that I can ___”. You might find your solution-searching-brain start to change gear.
Here’s what to do to get clarity
- Reframe what the actual problem is to gain insight
- Simplify the problem so that it’s solvable
- Expand your thinking into possibilities to improve the situation
You might like Peter Drucker’s 5 Important Questions for more on this to help you ask better questions.
Find the drip, fix the leak
Separate your problems from the symptoms. Why? Because we can often mistakenly identify a ‘problem’ and stay frustrated by not being able to find a solution that works. It’s important to find the root problem and find the obstacle or blocker. If we build a machine to fix a perceived problem, you’re going to waste money and resources to fix a problem that isn’t.
Write down the top three biggest problems in your business right now – what did you write down?
Sales, customers, not enough cash, low profit, can’t find staff, can’t afford resources? These are a description of the gap of where you are now and where you want to be and they are symptoms that indicate a problem. They’re obviously problems but these are not the root cause. You can tackle each one of them but you’re only going to alleviate the discomfort of the symptom for a short while.
A lack of sales could be a symptom of something else, if you don’t identity the real problem you can miss the solution. In reality, is a lack of sales could be a drop in repeat business or a change in your marketplace or needing to reframe your offering. Poor profit performance could be a symptom of lack of sales but it could also be a problem with your margins.
Find out more about Margin Monsters here.
So, don’t confuse activity with productivity. Here are some questions to ask yourself.
- What are the possible reasons I am noticing these symptoms?
- What isn’t happening that should be to narrow the gap?
- What is happening that if it stopped it would ease the symptoms?
If you’re finding that you’ve started noticing symptoms in your business and your accountant or advisor isn’t asking the right questions, it’s time to reassess. In the meantime, read more about what a financial director is supposed to do anyway.