TORONTO--(BUSINESS WIRE)--Chartered Professional Accountant, Rodney Davis of GreySuits Inc., a strategic accounting firm, was interviewed about the folly of many entrepreneurs and their temptation of pursuing new business ideas without a clear plan and how they can work with finance to set up clear metrics.
Q: What do you say to entrepreneurs who have a ton of ideas, but an inability to execute on them?
Rodney Davis: A business is the implementation of ideas into an operating model, and the marrying of sales opportunities around that model. A good idea is just that, an idea. If you can’t quite translate those ideas into effective operating models for the business, then no matter how good that idea is, it’s not a business. So what I try to tell entrepreneurs is that you can only do so much with the resources you have at your disposal. It’s important to have access to good reporting, as it focuses the entrepreneur on the most effective throttles within their business. What I try to do for entrepreneurs is build them a framework within which we can discuss the business in a way that keeps them focused.
Q: When an entrepreneur comes with what they believe is a million dollar idea, how can they bring it to life in a way that’s not completely risky?
Rodney Davis: I operate on a principle of minimum worst outcome. First I look to see whether the business has surpluses that can be applied towards implementing that idea. We model out the cash flow to determine the maximum we can expose the business to the idea in case it fails. In other words, you're giving them play-around money: You can risk this amount without causing long-term damage to the business. It's really important that they actually have resources to spare. If that idea requires even more, then you have to work with the entrepreneur to figure out how they’re going to pay for it and advising them where the risk point is.
I've seen entrepreneurs who bet the farm every time. If it's a big business, you have to be extra careful about making those decisions, because they’re affecting a lot more people than you. You’ve got your staff to think about, stakeholders and of course legal obligations. It’s our job to make the entrepreneur aware of what they're putting at stake when they're making those decisions, so that they can go ahead and be entrepreneurs.
Q: How do you assess whether an idea is good?
Rodney Davis: Looking at KPIs is so fundamental. First you identify the metrics needed to evaluate that idea. Going in, you need to at least have a perspective on cause and effect, and a willingness to change that perspective if the cause and effects don't behave the way you expected them to. Especially when you start executing, and it becomes embedded in your organization, you have to continue measuring regularly, whether daily, weekly or even monthly, so that you don't go too far down the wrong direction before you can course correct.
Rodney Davis, CA, CPA is a partner and practice leader at GreySuits Advisors Inc. He has been working with private and public organizations since 1990 in change management.
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Full video available upon request.