Is That Dashboard Enough?

“You’ve got to be very careful if you don’t know where you are going because you might not get there.” – Yogi Berra

Over the years, I have been amazed as to the number of entrepreneurs I encounter that use shortcut methods to get a feel for how their business is doing financially. Many today explain they have a “dashboard”. I believe a well-designed dashboard can be an invaluable tool for an owner but it should not be an excuse for not having timely, complete and accurate information. Without that, you can end up like Yogi said. A quick story.

Years ago, I was auditing a small but well known public company. The chairman was a sharp businessman, but the market had gotten away from his company and for the first time in years, they lost money and were in debt. I had my typical closing meeting with him and was told in no uncertain terms, the numbers were wrong. He asked, “If we lost $1 million, why do we have cash in the bank?” Though taken aback, I quickly showed him the balance sheet with $2 million of debt. He looked at it, thanked me and gave his “blessing” to the numbers.

Recently, I had the same experience where an owner of a business I knew asked me to visit because his numbers did not seem right. He had cash but his CFO indicated he was losing money. I quickly looked at his financials and did a back of the envelope calculation showing how the changes in receivables, inventory and payables had actually generated cash though he was in fact losing money.

Both had used a version of dashboard reporting (in this case, cash on hand) to assess their financial results. These shortcuts have their drawbacks. The other issue is that in an early-stage company today, there are non-financial type measures that an owner must manage. Unique visitors to a site, return visitors and costs to acquire customers are not in the financial records but can be a solid indicator of the health or future health of an enterprise.

So some simple advice. You should work with your internal or external financial staff to determine what data works best for you to run your business. If you are a more mature business, you need a balance sheet and cash flow statement (they are easy to create) to go along with your income statement to better understand your financial workings. Just using cash balances or average order size (another client used this) is not enough and can be short sighted.

If you are emerging and pre- or early-revenue, develop those metrics that provide the right insight into your business. Those who are in this space can help you and while that data is important, keeping track of how your cash is used (your “burn rate”) is also a critical piece of information.

You may hear from colleagues that they do not waste time on such mundane matters and getting a “quick read” on your results is the path you should follow. While I agree that timely information is paramount, insufficient information is not acceptable. And if your competitor is doing a better job of obtaining and acting on solid information, you may lose in the end. So don’t just settle for dashboard reporting because it is fast and easy; make sure it really can tell you what road you are on.

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The Perfect Pitch Works

“He cared; more than Harvey Ramos” – quote from this blog’s author.

I know what you are thinking – he has run out of quotes so now he is quoting himself. So before you get the wrong impression, let me explain.

As part of instructor training at EY, we were told at cocktails when we arrived that the next day, we would be asked to introduce ourselves with the proviso that our presentation had to end with what we wanted scripted on our tombstone. (BTW I suggest you try this sometime.) Well I tossed and turned that night and after trying what I felt were thousands of iterations, I finally settled on “he cared.”

The next day we are going through our presentations and preceding me is Harvey. He comes to the end and announces that his tombstone will read “he cared.” The instructor thanks Harvey and immediately calls on me. My readers are pretty smart so you know how this concluded. So why the long lead in?

If nothing else, this exercise caused me to reflect deeply on what I really wanted to say about my life in simple terms and owners do the same for their company each time they make a pitch for investment. Lately, I have been through a couple of failed funding attempts and I wanted to better understand why investors said “no.” I reached out to some of the investors that passed and also saw a couple of recent articles on the subject. Always searching for a new angle, I gathered about a dozen or so different reasons but was disappointed to find they really had not changed in the last four decades. Some common culprits:

  • Barriers to entry not highlighted
  • KPI failure – either don’t know them, they are poorly defined or poorly measured
  • Shallow knowledge of competition – and the always fatal “we have no competition”
  • Economics – not clear how investment will be used or no “paying” sales channel presented
  • All OPM – where was founders’ buy-in?

I then looked at our “Perfect Pitch” guidelines (available @ withum.com) and realized all these points would have been addressed had the founders done a deep dive into what they were presenting. To draw the analogy, had they invested the same level of thought into what their pitch “said” as I had in doing the simple tombstone exercise, all of these points would have been addressed.

Your “pitch” is your chance to show your best. I really do not care if you use what has worked for us over the years or another guide, when you are preparing it, invest the time to completely address what is suggested – – there is a reason for it. This is not the same as being at a New Jersey diner and spending the time figuring out what you want from the hundreds of items on the menu. This is not a checklist; it is a starting point for you to shape the future of the economic life of your company.

So please when you put the meat on the bones of your pitch, think about what it says about you and your company; what it stands for and what it represents. Don’t get turned down just because you did not do your homework. Think about how an investor sees it, because properly prepared, the Perfect Pitch does work. Good luck.