Driving with a model

You could drive your car by facing backwards and steer it by observing the road changes directly behind you. When the road is fairly straight with only gentle bends you could drive this way, as long as you are not going too fast. This is of course a stupid way to drive, but that is how we tend to drive our businesses, with an “accountant” as a co-driver!

In the current financial climate the road ahead for business is far from straight and gentle, even forward visibility is very poor, almost like driving in a narrow tunnel where you can not see the surrounding landscape to anticipate the bends, hills, potholes and weather hazards.

You can go a fair way with the analogy of driving a car and driving a business. Before starting a long journey you will consult a map, you may check the road reports and even the weather. In fact you plan the journey and often create a model knowing how long each stage should take. Driving a business is not really that different.

No one can just jump into a car and drive, they have to learn, they have to pass a test to show they are proficient (to a level), but they do not have to prove they can use a map. Owners of small businesses are driving their businesses every day; unfortunately we do not have a map or model unless we create it ourselves.

In turbulent times we need to review our own business models (maps), we need to understand the inputs and outputs, know what we can influence and change and identify risks (the things that are beyond our control). In fact if you could not do this you would not be in business for long, but now is the time to get better and attempt to look ahead.

If you know the route you can adjust it and your destination when things do not go to plan. So get out your IT Tools, spreadsheets, accounts programs, sales and CRM databases to see what information you have to create your models.

What patterns can you see? What can you predict? What should you measure? What are significant risks? Work out how stable you really are and create a model to help anticipate and forecast the future.

For any business this is not the time to hold back, we all need to create our own business and financial models; we have most of the information, if not we can work it out.