How do you tell an entrepreneur that their business sucks?

Other Category: General Info & Updates

June 7, 2017
Dan
customers, entrepreneur, leadership, profitable

Your business sucks…

How does that make you feel? Probably upset, maybe a little defensive. But what if it’s the truth? Many entrepreneurs generate new ideas as if it were a bodily function. As you have likely seen, not all ideas result in a multimillion dollar venture. Some of those ideas will fail to even bring a penny in!

In the business world, no one will outright tell you idea or business sucks because of business etiquette. However, that doesn’t mean that people don’t think it. After working with CFOs and Controllers for the past 25 years, I have learned that the majority of financial leaders will not tell their entrepreneur (or boss) that their business sucks, even when it does. Unfortunately, the truth needs to be told.

Before we go into how to give them the bad news, it’s critical to identify if there really is bad news to give.

[box] As the financial leader of your company, it’s your duty to vet new ideas. This is part of the responsibility of being a wingman to your CEO. If you’re interested in learning how you can elevate your status, download the free How to be a Wingman guide by clicking here. [/box]

How To Identify If Your Business Sucks

Have you ever seen an ugly baby? Most of us have, yet no one thinks that their baby is ugly. In much the same way, entrepreneurs think that all of their ideas are home runs and most people won’t tell them that their idea baby is ugly.
Unfortunately, all entrepreneurs are going to make at least one wrong call. Because you are their wingman, you should be guiding your entrepreneur to take financially sound risks. But before you tell your entrepreneur their business sucks, there are a couple things to look at when identifying whether an idea or business is worth investing in.

Is it profitable?

If the idea or business is not profitable, you should not pursue it. This is the easiest way for a financial leader to identify that the business is not going to be successful. As the financial leader, you should be able to steer your executive team to a more successful and profitable road.

Are customers leaving?

Churn. If your customers are leaving quicker than you are bringing new ones in, your business probably sucks. Churn is one of the KPIs that we use to indicate the success of our business. If you are not able to reduce that number in your business, then your business will likely fail. A business cannot survive without its customers, so this is a telltale sign that your business sucks.
If customers are leaving quicker than they are coming in, look at your current strategy and pivot. This may mean that your entire business strategy is not working or just a small sliver of it. The product may not match your audience. As a financial leader, it is important for you to understand both the sales and operational legs of your company. Finance doesn’t have to be simply a cost center. You can only cut so many costs in the business before you need to turn your focus on how to improve the business itself.

No Buy-In From the Team

If you, the entrepreneur, or the person who came up with this new idea or business strategy is left all alone without any support from the team, that’s a problem. An idea cannot successfully come to fruition without buy-in from the team. Why? Because the team’s support and belief that this idea will be a winner is critical to its success.
Have you ever been told to do something that you truly didn’t believe in or want to do? Most likely, you didn’t put your best effort into that task. Other tasks took priority in your book so that you would not have to bring that idea to life. You may have spread your negative attitude towards “it” to other employees, essentially building a coalition against “it”.
I have been there. My clients have been there. You have probably been there (either on the ideation side or the fulfillment side). That is why it is essential to have a strong buy-in from the team when deciding to pursue a new business venture, idea, or strategy.

The Numbers Don’t Add Up

Oftentimes when someone isn’t in the day-to-day financials and doesn’t understand how an idea impacts the company, it’s easy to punch a few numbers in the calculator. This habit is what leads to people being calculator rich. Even if the person operating the calculator knows their economics, it’s easy to be blind to the bigger picture when you have a shiny idea sitting on your desk.
But after the dust has settled, it is important to nail the numbers down out to see if it is really viable to pursue. In my business, I consistently have to reevaluate whether the numbers actually add up after I have had a couple hours or days to sit on it.

How To Let the Entrepreneur Down Easy

Naturally, entrepreneurs are bold, risk takers. If you outright tell them that their idea isn’t the best thing since sliced bread, it’s going to hurt their ego (and potentially more). They are all excited about this new idea, and they are great at convincing you and making it incredibly difficult to disagree with them. You want to let the captain of your ship down easy, but how do you do that when the truth is… Their baby is just plain ugly.

[box]HINT: You have to be a trusted advisor to your entrepreneur. (Download the How to be a Wingman guide to start letting your entrepreneur down easily, while still moving forward.)[/box]

Your Baby is Ugly

Several years ago, I had a client who wanted to get out of a lengthy banking relationship. Red flag #1. This client had broken several debt covenants and were out of compliance. The bank was telling my client that their baby was ugly. They were put into a work out group, where it was the bank’s decision to either work them back into compliance or kick them out of the bank. Why was my client’s business so ugly? It started with their financials.
Instead of going through the process of fixing the ugliness of the financials, my client wanted to break up a long-standing and generally successful relationship. The owner was hurt and felt defeated. When I started working with the owner, I explained that there was an opportunity to fix the financials, get back into compliance, and grow like crazy. It wasn’t like they had severely strayed off of the pathway to success, but they were riding on the backroads. My job was to let the entrepreneur down easy.

“If it were my company…”

The way to do this is to go back to your pre-marital counseling. One of my team members just recently got married, and we were joking about some of the things she learned in pre-marital counseling were the same things I heard 30+ years ago. To prevent any blaming or hard feelings, it’s important to fight with feelings. No one can argue with your feelings. “I felt _____ when you did ______.”

The same methodology happens in business. Start by saying, “if it were my company, I would do this…” A) No one can argue with how you feel you would do something differently. B) You’re not telling them their business sucks but rather having a conversation. C) There are no hard feelings.

For example, if one of my team members suggests ideas to better my business, I’m going to be more open to those suggestions. However, if she starts telling me that I’ve screwed up and my business sucks, I’m going to get defensive. Create a dialogue, rather than an argument. An idea is just an idea in the beginning. Even if the idea becomes a reality in the end, I, as the entrepreneur of my company, have the final say so.

Guide your CEO or entrepreneur effectively as their wingman. This ability to be the trusted advisor your CEO needs will elevate your status, increase the amount of trust, and steer your company to success. Download our free How to be a Wingman guide today!

[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]

ARTICLES YOU MIGHT LIKE

Quotes Every Financial Leader Needs to Read

February 7, 2019

A few weeks ago, I started another series of our Financial Leadership Workshop, and in Day 1, we discuss that paradigm shift that needs to take place to go from accounting to financial leadership. So, I compiled all the quotes from all of my curriculum that make me think… How can I lead my company differently? What can I

The Future of the Accounting Workforce

October 16, 2018

See Also: Accounting Income vs Economic Income Accounting Fraud Prevention using Quickbooks Accrual based Accounting American Institute of Certified Public Accountants Auditor The Future of the Accounting Workforce Firms who are hiring new accountants or accounting majors have to understand where the newer generations are “coming from,” as a Boomer (born 1946-1964) might say, to target a style that will bring out the next

Why Valuation Matters

February 14, 2018

The other day, a client asked why valuation matters. It seems like a lengthy process that is complex and differs in each case. You see, I didn’t respond in an elaborate explanation of the different methods of valuation. Instead, I start off by saying that life is very unpredictable. Have you ever experienced a life-altering