May 2016

After the Horse Has Bolted

I once visited a friend at the stables where he boards his prized horses. When we finished riding and led the horses to the stables, we found ourselves lost in a conversation (as old friends tend to do). Suddenly, a loud bang sounded ­­ someone had dropped a bucket. One of my friend’s horses, spooked by the noise, took off at a gallop. We, being lost in conversation, had forgotten to shut the gate on his pen. The horse stampeded out the gate and nearly knocked us over in the process. As the horse took off, I raced to shut the gate. My friend looked at me and yelled, “why are you shutting it now? The damn horse has already bolted!”

We eventually corralled the horse and everything went back to normal. But what my friend said stuck with me. Shutting the gate seemed like a very natural response at the time, but at by that time, it served no purpose. The horse had escaped. I then thought about all the times I had seen this same reaction play out in business-­­this urge to fix a problem after the damage has already been done.

An entrepreneur, Julie H., once came to me after her first business had failed. She was looking for coaching, for training to help her so that her next business would succeed. She explained to me that her firm, an IT company working in security industry, hemorrhaged money on just about everything from software to employees. However, Julie was so focused on the day­-to-­day operations of her company that she didn’t realize the financial issues plaguing her company until it was too late. She tried to respond by downsizing and renegotiating her vendor contracts, but the damage was already done. The horse had bolted and Julie was forced to call it quits.

From there, Julie and I worked together on a comprehensive, internal auditing plan that she would instate with her new company. She would create daily interim invoices that would track all of her expenses and break them down into daily amounts. These expenses would be compiled into a spreadsheet that would show how much Julie gained or lost on a given day. From these reports, she could correct problems before they became too serious. In essence, Julie would be making sure the gate was locked before the horse even tried to escape.

A few months passed before I heard from Julie again. One day, I opened my email and read the following:

Dear Rajesh,

My apologies for taking so long to follow up with you. The past few months, having started a new security business, have been hectic. But I wanted to write you and thank you for helping with my audit plan. It has saved my company a hundred times already. We are growing steadily and already seeing profits. Using the spreadsheet, I’m able to diagnose problems quickly and keep things on track. I finally have peace of mind.

Thanks again for all of your help and I’ll speak with you again soon.

Best wishes,

Julie

How well do you know the day-­to­-day financial health of your business? When was the last time you looked at everything line­-by-­line? I would recommend checking the lock on your own gate, because you don’t want to wake up one morning and be greeted by an empty stable.