Darwin is famous for saying that evolution is “survival of the fittest”.
That might be true for the human species, but it’s not true for business.
The businesses that are the “fittest”…
Who can “endure” the most…
They don’t necessarily survive, and their fitness correlates little with winning.
Because running for a long-time and enduring pain in the wrong direction is not a badge of honour.
It’s death by exhaustion.
So it goes without saying that in the business context, it’s survival of the most “agile”.
(See just about every business that goes into administration, and they’ll all claim they didn’t see the threats or recognise their cashflow problems… throw in changes to economic conditions and voila, their business is all of a sudden belly up)
And that there lies the problem for almost all of us.
Almost every business owner is draining resources while running in the wrong direction… even if they don’t know it. I say that with compassion because that’s been me, too, on multiple occasions (in 2018, we almost ran ourselves into the ground trying to be something for everyone).
I’ve learned my lesson and realised that the ability to run (fitness) is not the be-all and end-all… because even the fittest on the planet eventually run out of puff.
What you DO want, instead, is agility.
In the business sense, agility is the ability to know when you’re moving in a trajectory that is likely to face a threat, and avoid that threat before you run head-first into it.
It’s about seeing what lies ahead and knowing if you’re on track, or running in the wrong direction.
It’s the ability to change direction without your speed coming to a grinding halt.
And what gives us this capacity to be agile?
I can explain it in three simple steps.
- Take the language of business (the numbers on your P&L, cash flow statement and balance sheet)
- Turn those numbers into business insights through a translation framework
- Converting those insights into activities that move the needle.
Observe the results, iterate, and repeat.
So while that sounds simple, it’s not.
It’s freaking hard.
I’ve struggled with this massively, too.
That’s because, for most of us, the language of business is completely foreign.
Plus, we’re set up for failure because when we’re small, we’re told this stuff isn’t that important.
But by the time we’re bigger and need it, there is too much complexity in our business to grasp these new concepts easily.
And if that wasn’t bad enough, 99% of accountants/bookkeepers we use are numbers people (not translators), so while they talk about debits, credits, depreciation, amortisation, theoretical profits and everything else…
It doesn’t seem to make any sense in practice.
And the numbers don’t add up.
I kid you not, I was once told we made $100,000 in profit in a quarter, but in reality, we didn’t have any extra cash in our bank account (if that isn’t a mind-f*ck, I don’t know what is).
So it’s clear as day to me now that what we need is a translator.
We need to be able to translate the numbers on your balance sheet, cash flow statement and P&L and convert them into actionable insights. Then, we can take those insights and act on them to move the needle forward.
I’ve been putting together this ‘translation’ framework for my mentees and Alley-Oop subscribers behind the scenes in a course I’m calling Cashflow for Coaches.
They’ll get it for free.
It’s not done yet, but it will be soon, and this month’s edition of the Alley-Oop Newsletter will be all about it.
So if you want to get a grip on your cash flow, know how to translate the numbers into actionable insights, and track what’s working (or not) on your own scoreboard, you can subscribe to the Alley-Oop and get the inside scoop.
And in this time of economic uncertainty, it’s fair to say that those with a grip on the numbers will be at an immeasurable advantage when the tide goes out, and most businesses are stranded, stark naked (that’s a Buffett quote, and it’s brilliant).
Take from that what you will.
– Karl Goodman