What Does Your Dashboard Look Like? … and Why?

It’s not about the data. It’s about what questions you have that can be answered by the data. Startups especially must ask the right questions, and ask them often, just to survive. We have seen many businesses fail because they didn’t know what questions to ask, or didn’t ask often enough, or they were paralyzed by the overwhelming volume of it all.

Why does this happen? Often, it’s a preoccupation with the business plan and securing financing. Many founders believe their business plans will get them the financing they need. If it does garner them that capital, both the founder and the financier could be in big trouble.

The founder may get the wrong idea about the importance of the business plan if it does attract an investor. They may think it has been validated and deserving of even greater status. The investor who buys into the plan by itself has oversimplified views of the revenue process and is surprised when he winds up having to throw good money after bad.

When we started our business, most of our data came from the accountant. We would constantly ask him for what he called “special reports.” Usually, by the time he got around to doing them, it was too late. We were in crisis mode …again!

He constantly chastised us for not being able to read a set of books. He would say, “Everything you want to see is already there! Just learn how to read the reports.” And “Accounting is a language.” He was right, it was a language, a foreign language designed to categorize and file past events. The only problem was that we wanted to see the future!  After a long, dangerous period of flying blind and being surprised by crisis after crisis, we finally demanded that the “special reports” become part of our regular reviews. And that saved us! We had the beginnings of an early cash flow warning system.

It wasn’t until much later that we were fortunate enough to hire a cost accountant who understood what information we needed of the data. He helped us build a proper dash board. Every month we would get a new indicator that would help us not only stay in business, but minimize our need for cash, control our inventory, and keep us from growing faster than we could afford.

Think of trying to drive your car using the rear-view mirror. That was the old “special reports.” Our cost accountant gave us a windshield, and a dashboard. Now we were driving the business with projections based on historical data as well as what we just learned.

The first report we would review was aptly named “the cliff report” because it showed us how much time we had before we went over the cliff and couldn’t pay our bills. For years, it was never more than three months away! This simple rolling cash flow projection ran our business and identified our priorities. So much for our well thought-out business plan…

Finally, with a cost accountant, we became more sophisticated and confident. We began to develop a dashboard that was relevant, critical, and timely.  We had the right data, in the right format, and got it in time to take appropriate action.

When we sold our business, we had 10 key factors we looked at every month. We never did learn how to read a set of books, but we did build a heck of a business, thanks to the cliff report!