I am impatient.
If you ask my wife, my family, my friends or my colleagues I am impatient.
Over the past 3 months I have had to come to a realisation that the goals and targets I set myself were not going to be met. This has caused me some angst. I don’t like failing and I am impatient.
As some of you may know, we have a subscription service offering called @Work. It enables a wrap around legal, HR and advisory solution for businesses who want to grow or exit for a fixed monthly cost with no lock in contracts. Under the @Work program we facilitate board meetings and compliance meetings plus clients are able to get unlimited support across the core modules required to operate a business. For those who want to grow, we provide growth and advisory services and for those who want to sell, we prepare them for sale and/or take them to market.
We launched our @Work program in 2020 and over the past 3.5 years it has iterated, developed and grown quickly.
We have learned many lessons as we have ‘built on the run’. We have discovered that under this new type of offering, there is minimal invoicing required, almost no chasing of fees and very few disputes. It has revolutionised how we at Frank Law + Advisory operate.
As a result I set the goal to get to the “Inflection Point”. This is the point when subscription revenue received each month is greater than the costs of running the whole firm (litigation and advisory included).
We have made this our north star in terms of growth. This is the thing we are chasing.
So far we have grown 50% in 2023 which is great but for the impatient person I am it is not enough…
According to my forecast we needed to grow 100% in 2023.
This leads me to realise that either:
- My forecasts were wrong; or
- My efforts were not enough.
Looking back at my efforts I am absolutely certain that the effort is not the issue. So that means my forecast was wrong.
So what was wrong with the forecast?
Simple. The forecast didn’t account for a bunch of events and decisions which it could NEVER have accounted for and were largely unforeseen.
Forecasts are exactly that; ‘forecasts’. They are predictions that are made on assumptions which are best guesses based on certain fundamentals.
So if forecasts are largely unreliable or heavily dependent on external factors outside your control, what is their utility?
I recently listened to a podcast by Howard Marks on forecasts. His position is that forecasts are futile.
Upon review of my past forecasts and Howard’s view, I tend to think that forecasts are futile. If all assumptions were added into them with certain contingencies the entire forecast would be shrouded in uncertainty.
Furthermore I have found that ‘missing’ my forecast, although growing by 50%, became a negative in my 2023 rather than a huge positive.
This had lead me to believe that instead of forecasts we should have goals or milestones and a budget. The budget should be based around expenditure which is within your control.
The combination of an expense budget and a milestone list should enable accurate monitoring but also celebration of the wins along the way.
Whilst our milestones include growth targets, there is no strict time set in the budget for them other than ASAP. We want to achieve the milestones as soon as humanly possible. The key here is that the milestones can be small (and thereby celebrated more often) or large, whichever is suitable to the business or group.
In the end my impatience has contributed to a realisation that forecasts are futile and I have not celebrated the significant achievements along the way.
Moving forward I think we need to adopt a mindset of patience, milestones and expense budgeting rather than the traditional financial forecast models.
Source link: https://www.franklaw.com.au/blog/thursday-thoughts-for-smes-patience-and-the-futility-of-forecasts by email@example.com (James Frank) at www.franklaw.com.au