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Ostrich Management
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Ostrich Management
There was a business owner that I met recently. He had a successful business for a number of years – always profitable, but not too profitable. He had a relationship with a banker. He asked for a line of credit and he got it. He asked for term debt and he received it. He financed a building, and paid it back regularly so that he had plenty of equity in it.
But then the economy changed and dove. The business owner started to worry and fret. He couldn’t come to grips with the fact that the business wasn’t profitable any more. He didn’t want his long term vendors to think he didn’t have money. And most of all, he didn’t want to lose face with his banker.
So he decided that he would cut back on all of the non-core expenses. He eliminated the front office clerk. He started to file himself. He looked at the cost of the outside bookkeeper. He stopped sending her the monthly files so that she wouldn’t charge him. He kept his checking account as best he could, but then one day the banker stopped by to see how things were going.
There wasn’t a clerk to greet him. The owner was hidden behind stacks of paper that waited to be file. There were no financial statements to pickup, because the owner didn’t know how to run them. Or what adjustments might be necessary. So the banker capped the line of credit, for lack of reporting, and asked for financials. The owner now was fielding more phone calls from vendors wondering where their payments were. Customers tried to call in, but the lines were either busy or unanswered. Their service levels went down and they started to send new business to companies that weren’t so busy and that delivered on time and that communicated with their customers.
Ostrich Management happens when people don’t want to look at reality so that they can act on it. They hide behind inaction, hoping that their vendors or bankers or customers won’t notice the decline in service. But just like an ostrich, everyone can see who is hiding. Just because the head is hidden, the body is very visible.
Don’t be an ostrich. Look at your business squarely. Your CFO should keep your financials up to date, your budget timely and your focus on building the business and its cash. If you don’t have a CFO – EVERY COMPANY NEEDS A CFO! You don’t need a full-time CFO. Hire a part-time CFO and start dealing with reality. Timely and accurate financial statements drive cash availability that drives business growth through happy customers, vendors and bankers. Hire your CFO today. If you don’t have one, go to B2BCFO.com today.
