Business

Is Your Next Business Decision “All In”? Should It Be?

Posted at March 6, 2014 | By : | Categories : Business | 0 Comment

next business decisionsImagine you’re in an iconic movie scene.  You’re at a poker table in Las Vegas.  Rich tapestry, smooth green felt and fancy drinks.  A stack of chips sits on the table in front of you.  As the cards are dealt your hand looks good.  You feel the adrenaline rush as the moment of truth arrives.  Do you peel off a few from the top and throw them down in front of you or do you push the whole stack forward.  Do you hedge your best or and go “all in”? Poker players go “all in” because they’re either: Daring Stupid “All in” is a dramatic move, that’s why it makes for good movies.  But what makes for a great movie scene often makes for a terrible life.   All 3 Hangover movies have taught us that in spades.

Business owners go “all in” because they’re either:

Stupidly Daring OR Dangerously Under-Informed  [Tweet This]

In your mind, move yourself from the Vegas table to the table of business, your desk.  In front of you sit all your chips: your time, your money, other people’s money, your career, your future, your childrens’ futures.  No matter how great your cards look, how does it feel to go “all in”?  Does it feel wise or incredibly reckless? A lot of business owners are “all in” and they don’t realize it.  Because they believe so strongly in their product, service or mission, they can be “all in” financially, risking everything on this on flip of the card without ever actually deciding that’s a good idea.

- A business owner adds staff without projecting out the cash flow to be sure the business can support the extra overhead.  The business is a bit slow to ramp up to the next level, runs out of cash and closes.  New staff member = “all in”.

- A new business owner who takes out a second on the family house to fund the business.  If the business stumbles or falls, they lose their home.  “All in”.

- An exciting new marketing plan is begun and all other avenues shut off.  Projected returns are overly optimistic.  There’s no fallback plan.  This has to work or else.  “All in”.

These are all true stories I’ve witness first-hand.  A secret:  I’d much rather see them as a coach then as a bankruptcy attorney, because as a coach we can pivot and manage the risk.  When these scenarios walk into a bankruptcy attorney’s office, the damage has been done.

“All in” is leaving nothing for the next phase.  This scheme MUST work or the business is done.  Yikes.  After years of planning, hard work, and sacrifice are you ready to risk it all on one move?

Most business owners don’t want to take an “all in” move.  They’re taking a risk, but they don’t realize the magnitude of the risk because they’re dangerously under-informed.  They don’t know because they’re shooting from the hip.  They have some rough numbers in their head, they have bank account balances, they have a P&L, but they’re really just guessing.

Here’s how to prevent the accidental “all in” decision:

 

Cash Flow Projection.

I know that sounds very MBA and completely un-fun, but stick with me.  You can use a simple spreadsheet to project out the financial health of your business for the next 12 months.  Using that very same spreadsheet, you can change up the numbers and see the net effect.

 

Remember yourself as a kid in a candy store – literally.  With your allowance you stood calculating – I can have 3 jawbreakers or 1 jawbreaker and 2 pieces of licorice.  Same concept.  It’s all candy and you can have some, but maybe not all.  Your cash flow projection is your allowance.  It tells you how much you have to spend and you get to allocate it according to what’s most important to you.

 

Can you imagine yourself at that original poker table in Vegas.  You pushed all the chips in front of you forward and lost.  You reach into your pocket to replenish them only to discover those were your last chips.  Tragedy.  That’s what happens when you don’t know how cash is flowing through your business.  You make a game-ending move without even realizing it.

 

If cash flow projection is Greek to you, not to worry, it’s well covered in my 4-week course.  You can see more here. https://emilychasesmith.leadpages.net/untangling-money-spaghetti-course/

 

Delay the Decision

We entrepreneurs are movers and shakers.  Give us a decision to make and we’ll make it before you can get your morning cup of coffee.  Interestingly, quick decision-making can be a detriment.

 

There was a German study using the Ultimatum Game.  In the Ultimatum Game Player A is given $10.  He can offer Player B any amount of the $10 he wishes.  If Player B accepts his offer, both get their portion of the $10.  If Player B rejects it, no one gets anything.  As it goes, if Player A offers Player B a really low amount, like $1-2, the offer is almost always rejected – even thought it means that Player B will receive nothing.  $1-2 is better than nothing, but Player B will act out of her best interest because she’s so cheesed off at the low offer.

 

What the crafty Germans did is play the Ultimatum Game, but instead of letting Player B make a decision on the low offers right away, they made her take 10 minutes out to complete a questionnaire.  The purpose of the questionnaire was solely to delay Player B’s decision.  The rate of acceptance of the lowball offers when from almost 0 to 75%.  That means that when given a little time to make a decision, we more often make a better decision.  Just the process of slowing down is a game changer.

 

Convene the Council of 3

I don’t want to burst your bubble, but no matter who you are, you don’t know everything.  It’s not your fault, you’re just one person.  The good news is there are a lot of other people around you who are happy to help.  I’ve found no other community that is willing to help as much as the entrepreneurial community.  It’s a bit like being in a foxhole together.  We have an uncommon bond and we’re a generous people by nature.

When you have a decision to make that’s a biggie, convene a Council of 3.  These are 3 people you know, maybe not well, that have made the decision you now face.  It’s great if you can get a mix of people who have different backgrounds and perspectives.

 

I was considering launching a series of events for therapists across California teaching them financially savvy principles for their practices.  I saw a great need.  My council of 3 included my business coach, Susan Baroncini-Moe because she’s awesome and has put on a Guinness World Record event.  It also included a Marriage and Family Therapist, Kristie Cain, who happens to be my BFF and a good friend Karl Stenske because he is also awesome and regularly puts on events for therapists around adoption.  I got so much information it was almost like cheating.  Nowhere could I go to learn about or read about what these 3 offered me in terms of advice and strategy.

 

Final Thought

As entrepreneurs we are “all in” with our business in so many ways.  We dedicate our creativity, our best ideas, our energy, enthusiasm and even our reputation to our businesses.  That is as it should be.  We are true believers.  If we are clear on cash flow, give ourselves time to make decisions and consult the Council of 3, we don’t have to commit our very last dollar too.









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About Emily Chase Smith

I’m an experienced attorney and entrepreneur. With my background in bankruptcy, I’ve seen the end of the business lifecycle and use that knowledge as a lighthouse to help others avoid the rocks. I counsel with entrepreneurs to provide custom solutions to help you get back in the game. You can contact me at (949) 391-6063, Google+ Twitter emily@emilychasesmith.com

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