Run the Decision Through the Numbers First

There is a decision you have been carrying. I have said this before in this run and I will say it plainly now, because almost every owner I meet has one and most have been carrying it for longer than a quarter. A hire. A price rise. A step back from the day-to-day. A new offer. It is the thing that would most change the number, and it is the thing that has not happened, and the reasons it has not happened have been reasonable every single month.

Here is what fear does with that decision. It delays it, with the sentences from last week: once things calm down, once the new client has settled, once it is properly ready. It shrinks it: the hire becomes a freelancer for a few hours a week, the price rise becomes three percent, the step back becomes a Friday afternoon off. Or it hands it to someone else: the accountant will say when the business can afford it, the team will say when they are ready, the market will say when the time is right. Each of these keeps the decision alive without making it, and the year ends with the same number and the same decision in the drawer.

Here is what a plan does with the same decision. It shows you, in numbers, what the decision does to profit, cash and your own pay, month by month, before you make it. The hire goes in as a cost from March and the revenue or the recovered hours go in from May, and the model shows you the two lean months and the seven good ones. The price rise goes in from January on the customers it applies to, with two of them removed, and the model shows you the quarter it takes to land in the account and what the year looks like once it has. The step back goes in as the cost of whoever picks up the work and the value of the hours that come back, and the model shows you whether those hours earn more than they cost.

The decision does not become easy. It becomes visible, and a visible decision can be made.

The response is to take the decision out of the drawer today and run it, and I want to give you the exact order, because the order is what makes it honest.

First, write the decision as a sentence with a date. Not "hire someone" but "hire an operations manager at this salary starting in March." Not "raise prices" but "move all retainers to this figure from the first of January, with existing clients given six weeks' notice." A decision without a date is a wish.

Second, put it into the financial model as a second version, leaving the first version as the default line. Change only what the decision changes. Resist the temptation to improve other assumptions at the same time, because then you will not know what the decision did.

Third, look at the three columns. Profit by month: where it dips and where it recovers. Cash: the lowest point, and whether the business can carry it or needs to arrange something. Your own pay: what the business can pay you, and from which month, once the decision is in. These three answers are the decision, and they are usually clearer than the owner expected, in one direction or the other.

Fourth, if the numbers say yes, set the date and tell someone. The telling matters, because a decision that only you know about is a decision that can still quietly be undone. If the numbers say no, you have learnt that the decision was the wrong shape, and you can reshape it in an afternoon rather than carrying it for another year.

Run the decision through the numbers before you run it through your life. Tomorrow is the last essay of this run, and it is about why December is the month to do all of this, and what one decision made right in January is worth.

Continue reading: Know Your Numbers Before January →

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