Credit: Pikes Peak Community Foundation
Thousands of miles from New York on the other side of the television screen, I felt decidedly uncomfortable for the bicycle shop owner as he was berated by Marcus Lemonis on an episode of The Profit.
“You have to know these numbers a little better.”
I don’t speak German, so it took several minutes looking up various definitions to find that what I was going through can be described in one word: fremdschämen — the feeling of embarrassment when someone has, without realization, embarrassed themselves.
All too many times I’ve stood in the room and listened to business owners, general managers and various C-suite level employees creatively deflect responsibility for knowing the effect their daily work has on their company.
Allow me to share a few actual responses to very basic financial questions with you, see how much fremdschämen you feel.
“My partner handles all the financials, I do most of the execution and decisionmaking.” — CEO
“I have no idea. My main focus is to grow the business, I let other people take care of the small details and nitty gritty like margins and cash flow.” — Part Owner
“My main job is to make sure we become cash-flow positive. It’s ____ job to tell me if we’re getting closer.” — Owner
“I’m not really a numbers person, I’m more the big-vision, big-picture leader.” — Owner
Let’s step back for a minute. Why are these such commonly heard phrases across all industries? How has it become acceptable for someone to be in a position of either ownership or leadership and not know their numbers?
The short answer is, it’s not acceptable. But numbers themselves by virtue of how much work it is to discern their value, decode their messages and attempt to interpret implementable action based off what we think they’re telling us, are scary. Ironically, it’s an author in the young adult fiction genre who said it best.
“People fear what they don’t understand and hate what they can’t conquer.”
In the world of startups and small business, numbers are very close to something we cannot conquer. Not only are they always against us, often we’re wrong about them. Ask a few people out on a date and get turned down enough… you’ll direct your energy elsewhere.
This “I don’t want to focus on the numbers” problem isn’t just completely understandable, it’s an important defense mechanism every person and most animals are wired with. I was reminded of this when I called Pilot, my small 5lb puppy dog into the kitchen yesterday having made the mistake of already started the warm sink water running. This wasn’t his first bath, so he slunk around all four corners of the room before finally approaching what he at some point previously decided is a very unpleasant experience.
The challenge with fighting numbers isn’t that the opponent is too big. It’s that every day, over and over, you have to get up and fight it again.
Take someone with you.
None of us are alone. In the small business and startup communities there are many gifted people who can help you learn exactly what you need to know. Wading into an unknown forest by yourself looking for a monster you’ve never truly faced is far more dangerous than bringing along a guide who has seen the very same creature on their own many times before.
When it comes to understanding your own business there is no grandstanding or bravado needed. It can be surprisingly difficult to face what will most likely be information that impacts your decisions negatively, but that brutal level of honesty is required if you hope to be successful. Or survive. Simply saying “someone else has it” or “I don’t focus on that” makes the person who asked you the related questions feel fremdschämen.
Take ownership and responsibility for yourself and your company instead of parading your title with a certain amount of professed ignorance when it comes to the finances. Learn your numbers inside and out. Be able to confidently know your true margins, how much available cash there actually is, and how long it’s really going to be before you are cash flow positive.
Every time you make the hard, correct decision you become a bit more courageous, and every time you make the easy, wrong decision you become a bit more cowardly. If you are CEO, these choices will lead to a courageous or cowardly company.
-Ben Horowitz