This article is a simple reminder about the artificial and arbitrary deadlines we all set ourselves as business leaders and founders.
This musing came about following a regular catch up with one of my clients.
This client had – it’s fair to say – had an absolute belter of a year in 2020, bolstered by an incredible couple of months and a big client win. The balance sheet was healthier than it had ever been, and when comparing it to 2019 – they were seriously on the up. Joy and jubilation in a year where many struggled to make ends meet.
This boost in income allowed my client to enter an investment cycle, taking on key members of staff and building the infrastructure of the company.
Sounds good (brilliant, actually), until your financial year end looms and the balance sheet is looking meagre following the heady heights of the same period in 2020.
But here’s the thing about financial years, they’re artificial. Whilst they provide a stretch target, they are often negative in their impact, especially if you choose to interpret your balance sheet data without looking at the bigger picture.
Deadlines driven by a financial bonus, a need to meet a year-end or even a commitment made in a board meeting can (not always) serve no purpose other than provide a false measure against which to potentially fail.
We all love a good story arc, a sea of green numbers and upward arrows which show an ever-bigger balance sheet as each financial year goes by. But the truth Is that business isn’t won, or lost (mostly) on a single, defined 12-month run. It isn’t a single upward line on a graph to millionairedom – rather it’s bumpy; squiggly, and full of different periods of growth, investment and spending – all of which can see green arrows turn to red when finances are compared side by side, YoY.
My client hit mild panic mode as he realised that the balance sheet numbers were now down on last year, and perhaps even on the year before – but the fact is that the business is now in a better position than ever before. The engine driving it (the people, processes and infrastructure – all of which cost money to put in place), have made winning the big clients – the kind which caused the incredible positive anomaly in 2020 – more likely and entirely possible.
So, when you’re next looking at your balance sheet, likely sweating slightly and predicting the worst, and comparing period to period, make sure you’re not kidding yourself by simply looking at the red and green arrows. Ask yourself:
- Are we / have we been in a period of investment?
- Are we preparing ourselves to win bigger, more valuable clients?
- Is the team the best it has ever been?
- Are we moving in the direction we have set ourselves for the bigger 5 year or ten year plan?
Simply remind yourself that your financial year does not really exist (except for the purpose of HMRC and your accountant) and that your story arch is ongoing – there are great things still to come.