Boats, Beacons & Running Out of Steam

Tuesday, May 19th, 2009

In the last few weeks, I have come across a number of instances where businesses are really struggling, yet, in spite of the fact that their owners are working very hard and trying everything they can think of, they seem to be going nowhere. It seems especially hard these days!

Then, the other day, while talking to a friend about something completely different, it got me thinking about a possible solution to the problem. He was saying that if you want to find out where you’re going, you have to first of all know where you are, and in order to do that, you need to have beacons to plot your position. Once you know where you are, you will still need to have beacons along the way to ensure that you maintain course.

As I thought about that, I imagined a boat on the sea, lost, – yet desperate to find land.

Imagine it’s a rowing boat, for example, and let’s assume its way out to sea, full of very willing rowers. Without knowing their position, it is quite likely they will row and row and go around in circles. They will all work very hard, as long as they have the energy and until their food and water runs out, and then slowly they will become more and more listless, lose interest and eventually die. Without the means to plot their position, and then maintain course, their efforts will more than likely prove to be in vain.

The same applies to a motorboat. In this case, it will eventually run out of fuel and then drift aimlessly around the ocean, carried here and there by the strongest prevailing current. A Yacht won’t be too different either. In this instance, fuel won’t be the problem but like the rowing boat, the lack of food and water will prove the undoing of its pilot and crew.

All three of these vessels need the means to plot their position, chart a course and stick to it.

Running a business is much the same. In order to keep it going, it needs resources, – people, equipment and finance (or working capital). Those resources, of course, have their limits. They are affected by a number of things – consistent losses (will eventually erode all the capital), extraordinary growth (will require increased resources of inventory and cash), poor collections (will use up much-needed cash), amongst others.

It is vital, therefore, that you know exactly how your business is performing, right now, and that you know how to take it from strength to strength.

This can only be done if you have accurate, up-to-date financial information, and access to someone who can interpret this information in such a way that it will enable you to make informed financial decisions. You can only manage what you can measure.

This leads me to a few examples of businesses I have been working with over the past few years.

The first one is a small manufacturing concern. It’s a bit like the rowing boat. The boat is manned by a small group of willing, hard-working people. They are rowing like crazy hoping to get to land. For a long time, they had no real means of either establishing their position, or plotting their future course. They had an old-fashioned sextant, but no-one who knew how to use it. Everyone had an idea of where they were and how to sort their problems out. They tried one idea after the other, but each one led down a blind alley. They were still rowing, but their combined energy was giving out because resources had all but dried up. They could actually see land in the remote distance but it was going to be pure luck, or a miracle, that would enable them to reach it. Then someone found another sextant, and for some strange reason, the skipper decided to throw out the old one, along with the person who had learned to use it. This held up the rowing for a while and took their collective eye off the land that lay ahead. They started to drift off the course they were following. (If your system of financial recording and reporting is up to date and reasonably accurate – and if your employees have become accustomed to using it in its present format – and if its enabled you to know where you are and where you are going – and if it is imperative that you focus on your target and reach it as soon as possible – then DON’T allow anything to take your eye off that goal! You may not have enough reserve left to finish the trip!)

The second one is a medium sized national distributor. It is probably more like the motorboat because it has access to more technology. They actually have a basic tracking device but its not being properly used because they still don’t really know where they are. They are managing to follow a specific course, of sorts, but in the absence of an initial departure point, they could be headed anywhere. The skipper is quite a democratic fellow and allows various people to take the helm from time to time, and even get involved in plotting their course. It does lead to slight deviations from time-to-time but at least there is momentum. The skipper feels some of the crew are not really pulling their weight; he complains about them a lot but doesn’t really do anything about it. Tensions are high and the resolve of some of the crew is flagging. They had come across a few drums of fuel floating out at sea which had lifted their spirits and seemed to promise they would make land after all. In spite of this, reserves are still being depleted because they have still not established exactly where they are, and from there, the shortest route to safety. (If you have a sound financial reporting system, and the expertise available to derive the maximum benefit from it, then use it for all its worth. If you’re the business owner, make decisions decisively! If you’re in a crisis situation, there is no time for democratic elections and universal consensus. Take the information that is available, find out where you are, determine where you’re going and then plot the shortest possible course to get there. Make sure that the employees you have are capable of doing what you NEED, then encourage and envision them and set them some goals. Then, set your face like flint, grit your teeth – and go for it!)

The last example is a medium sized national manufacturer. I have likened this to a ultra-modern, ocean-going yacht. It has a small, well-trained and focused crew. There are two skippers. They compliment one another in terms of skill but they also stand in for each other from time-to-time. This enables them to progress at maximum speed all the time. They have a good tracking system, someone who is constantly checking their co-ordinates and keeping them up-to-date, and enabling them to make the subtle changes in course that would coax a few extra knots out of the vessel. In its class, it’s getting to the stage where its way out in front. The skippers are fully aware, however, that they have to be alert because the weather can change at any time and they have to balance their reserves against the elements and the distance still to be covered. They have no illusions about the way ahead – they know they will get there, when they are there!
(The emphasis in this example is really on the importance of “teamwork” and maximising all your resources to achieve a common goal. I am reminded of John Maxwell’s book, “The 17 Indisputable Laws of Teamwork” and a few of these laws which are relevant:

  • THE LAW OF SIGNIFICANCE (One is too small a Number to Achieve Greatness – OR, you may be good-but you’re not that good!);
  • THE LAW OF THE BIG PICTURE (The Goal Is More Important Than the Role, OR, when you see the big picture correctly, you serve the team more quickly.)
  • THE LAW OF THE NICHE (All Players have a Place Where They Add The Most Value, OR, you are most valuable where you add the most value.)
  • THE LAW Of MOUNT EVEREST (As the Challenge Escalates, the Need for Teamwork Elevates, OR, the size of your dream should determine the size of your team.)
  • THE LAW OF THE COMPASS (Vision Gives Team Members Direction and Confidence, OR, when you see it, you can seize it.)
  • THE LAW OF COUNTABILITY (Team-mates Must Be Able to Count on Each Other When It Counts, OR, the greatest compliment you can receive is being counted on.)
  • THE LAW OF THE SCOREBOARD (The Team Can Make Adjustments When It Knows Where It Stands, OR, when you know what to do, then you can do what you know. You can only manage what you can measure!)

Don’t stint on the cost of highly-qualified and experienced financial management to assist you in this process. It doesn’t have to be an in-house cost, and it doesn’t have to be an ongoing fixed cost overhead. It may save your business (and a lot more money) in the long run!