What would you do if you heard these 3 words?
More importantly, what can you do to make sure you never hear them at all?
What You Can’t See CAN Hurt You.
You probably remember the chilling three-word statement issued by Captain Chesley “Sully” Sullenberger, memorialized in the movie starting Tom Hanks which re-enacts the incredible 2009 successful emergency landing of an Airbus A320 full of passengers on the Hudson River:
Prepare For Impact
On another level, the recent movie, Jackie, which centers around the period immediately following the assassination of President John F. Kennedy in 1963, reminded me of different airplane tragedy that turned out differently, claiming the life of Jackie’s beloved son, JFK Jr.
He wasn’t a professional pilot like Captain Sullenberger, and unfortunately, overreached his capability as a private pilot when he met his death in inclement weather on the way to Martha’s Vineyard with his wife and her sister in the summer of 1999.
What Could JFK, Jr. Have Done Differently?
The official investigation by the National Transportation Safety Board (NTSB) concluded that JFK Jr. fell victim to spatial disorientation while descending at night over water, consequently losing control of the aircraft. Kennedy did not hold an instrument rating and was only certified to fly under a “VFR”, Visual Flight Rules license.
At the time of the accident, however, the weather and light conditions were such that all basic landmarks were obscured. It may have made all the difference if he was IFR (“Instrument Flight Rules”) qualified.
You may remember a recent post, When In Doubt, Ignore the Darkness. Fly Toward the Light.
Why don’t we follow that advice?
What drives us into the storm clouds when we can’t see a clear path ahead?
What’s visible is only a small part of the story
Vision is the art of seeing the invisible.” ~ Jonathan Swift
Flights operating under VFR are flown solely by reference to what is visible.
What you can see serves as your cue for navigation, orientation, and separation from terrain and other traffic for safe operations during all phases of flight.
Essentially, it means navigating around only the things you can see, while IFR requires instruments to see the things you can’t see.
“I’ll believe it when I see it” … but if you don’t?
Most of us are pretty good at dealing with what’s in front of us, but it’s more natural and much easier to deal with what we can see, isn’t it?
Don’t we often find ourselves saying something like, “I’ll believe it when I see it”, or “seeing is believing”?
Even utilizing all of our five senses, we are primarily attuned to only what is in our current space.
We might hear or see distant objects, but our perception is severely limited by focusing only on what is within our “field of vision”. We’re convinced that if we can have full command of what’s in our field of perception, our powerful senses can guide us with great precision and understanding.
We’re good at that, so if we see it, we can handle it.
How Do We Avoid the Storm Clouds We Can’t See?
No one can blame us for not taking action on something we can’t see, right?
Or … NOT right because it might be something we SHOULD HAVE seen.
In a business context, there are many instruments that give us IFR capability so we can see what isn’t obvious.
For your business, it’s critical you take some quality time to develop your skills to understand and refine the tools that do belong on your IFR dashboard.
These tools can range from simple sales reports to more sophisticated business intelligence that captures and tracks information from multiple sources to help us understand what’s happening outside our field of vision.
What kind of aircraft are you flying? Solo? Passengers?
If you’re a solopreneur, VFR skills may take you a long way.
But if you’re building an organization, you’ll need not only basic IFR capability, but you’ll need to revise and upgrade your skills depending on the type of aircraft you’re flying.
Are you piloting a blimp or a helicopter?
Is it a singe engine plane or a multi-engine aircraft?
And, as your team grows, you may even need a further upgrade to an Airline Transport Pilot certificate that allows you to bring other people along with you.
What are you doing to develop your IFR skills?
If you want to protect and preserve your business even when there are storm clouds around, you need to get to work on the IFR upgrade that will allow you to navigate safely through those clouds.
A good place to start is to adopt the 5 Mission Critical Instruments To Keep Your Business Airborne.
1. Cash Flow Forecast
The cash flow forecast is the #1 Instrument that must be created and regularly updated.
While it is highly dependent upon a reliable sales forecast (see below), it is the MOST CRITICAL INSTRUMENT you have to navigate through the clouds.
Without this tool, you could easily wake up broke one morning and not even know it.
We’ll say more about this invaluable tool in the coming weeks.
2. An Always Up-To-Date Sales Forecast
The sales forecast is the heart of a cash flow forecast and the company budget and is, by far, the greatest reason that cash flow expectations are off the mark. Unfortunately, sales estimates are often overly optimistic and create false expectations that can cripple a business.
You must demand a thoughtful, detailed and even tedious sales forecast that is updated not less than quarterly and preferably monthly.
I know you’re thinking a monthly update is overkill, but it isn’t. Market conditions and customer needs can change quickly and if you want a cash flow forecast that’s reliable, this is the Achilles heel on which you must be laser-focused.
The more you hold everyone accountable for the sales forecast, constantly updating it based on the most recent information, the more you’ll be able to rely on your critical cash flow forecast.
3. Capital Expenditure Plans
Capital expenditures represent the core of your decisions about the creation of your future infrastructure.
It stands to reason that if your future plans change in accordance with your forecast, the more important your capital expenditure plans become. Sometimes, certain plans can be deferred; “discretion is the better part of valor” here when sales forecasts fail to meet expectations.
Don’t take your eyes off of this ball just because you have a plan you like.
Your CapX plans must be continually evaluated based on current conditions and short-term forecasts as well as long-term expectations.
4. Fixed vs. Variable Expenses
It is also important to distinguish between fixed and variable expenses so you can quickly adapt and adjust as sales and cash flow forecasts change.
Revising fixed expenses when sales are falling is like trying to change tires on a moving car. Extensive changes to your core business and infrastructure are not easily changed and are usually unrelated to the growth or decline in sales.
It’s the variable expenses that are more easily adjusted. A lot of it is payroll and related expenses, but when changes need to be quickly made, you need to be able to act swiftly and know where to focus your energy that will have the greatest impact.
Knowing the difference, and having that information immediately at hand, will allow you to act with both insight and alacrity.
5. Bank Covenants
Monitoring financial compliance also requires an instrument to make sure you’re not in violation of your covenants.
You should tattoo this on your office wall:
“Banks Don’t Like Surprises!”
You don’t either, I presume, which is why all of these 5 Mission Critical Instruments To Keep Your Business Airborne are invaluable tools in your arsenal.
If business starts to decline … and you see it coming by having these instruments in place … continual monitoring of your bank covenants, every month and in your forecast, can save your bacon.
When you see that you may miss a covenant several months away, call your banker and explain it.
It’s okay to say it’s based on your most recent updated forecast, but if you have an action plan to make the necessary adjustments to keep your business strong and make sure you meet the covenant, your banker will appreciate your candor and your insight.
If you don’t think you can meet it the covenant by any changes you’re making, it’s also okay to open the conversation about how changes in the covenant might be accommodated to help you get through a temporary rough patch of air.
There are many other instruments you can deploy across your organization to get you an IFR rating … but these 5 Mission Critical Instruments To Keep Your Business Airborne will keep you solvent and capable of making other adjustments and developing additional tools to build a successful business.
- Cash Flow Forecast
- A Current, Rolling Sales Forecast
- Capital Expenditures
- Fixed vs. Variable Expenses
- Bank Covenants
Remember one more thing as you create and build your business:
Takeoffs are optional; landings are mandatory.
Make sure you have these 5 Mission Critical Instruments To Keep Your Business Airborne locked in place … regularly consulted … and updated.
If you can do that, you should never hear those words: Brace For Impact.
Question: What’s the most important tool in your arsenal to keep your business airborne?
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