See Your Business as It Really Is

Part of the ten principles series. Principle three: see it as it is, then get to work.

For years I ran an award-winning building company and could not have told you, on any given Tuesday, whether we were actually making money. I knew we were busy. I knew the work was good, the trophies said so. I assumed the rest. And when the bank balance occasionally said otherwise, I had a story ready: big invoice coming, quiet month, timing.

That’s not running a business. That’s driving at night with the headlights off and calling every pole you miss good management.

The two ways to lie to yourself

Most people think seeing reality means facing the bad news, and that’s half of it. But there are two ways to get reality wrong, and I’ve done both.

You can see things as worse than they are: everything’s a crisis, the market’s finished, we’re stuffed. Fear thinking. It leads to panic decisions, slashed prices, and taking rubbish jobs out of imagined desperation.

And you can see things as better than they are: she’ll be right, we’re flat out so we must be profitable, that problem job will come good. Hope thinking. It’s more comfortable and more expensive, because problems you won’t look at compound quietly until they’re big enough to look at you.

The principle is to see it exactly as it is. Not worse, not better. Then, and only then, decide what to change. You can’t navigate from a position you won’t admit you’re in.

The numbers are where reality lives

Here’s the uncomfortable truth about our industry: most builders are brilliant on the tools and uncomfortable with their numbers. Most can’t tell you their true break-even hourly rate, and charging a rate that doesn’t recover your overheads is the number one way building companies quietly go broke while busy.

And here’s the layer under that one, which took me years to see: even when builders have the reports, the reports lie, because the data underneath is a mess. Miscoded accounts, jobs never reconciled, costs in the wrong buckets. I’ve said it before: a decade of dashboards has been useless because the data going in was useless. Pretty charts on top of rubbish data is hope thinking with graphics.

So embracing reality in a building business is a physical act, not an attitude. It means fixing the bookkeeping. Reconciling the periods. Getting job costs against jobs. Working out your actual cost of an hour, your actual margin on the last three jobs, your actual overhead recovery. Not the versions you quote at barbecues. The real ones.

Every builder I’ve watched do this honestly has the same reaction: it stings for a fortnight, and then it’s the most powerful thing they’ve ever done, because for the first time every decision has ground under it.

Reality first, then change it

The principle has two halves and the order is everything. See it as it is, THEN change it. People who skip the first half pour energy into fixing the wrong things, and I’ve written about what fixing the wrong thing costs. People who stop after the first half just become well-informed and miserable. Reality isn’t the destination, it’s the starting line, and it’s the only starting line from which change actually works.

That’s why every real improvement in my businesses started with a moment of honest measurement I didn’t enjoy. The measurement is what tells you where the one constraint actually is, rather than where it feels like it is, and feelings are wrong about this more often than they’re right.

This week: answer three questions with real numbers, not gut feel. What does one hour of your business actually cost to run? What margin did your last completed job actually make? How much cash would be left if you stopped winning work today and just finished what’s on? If you can’t answer them, that’s the finding, and getting those answers is your next fortnight. If you want to know how to build the answers, start with knowing your numbers.

The numbers don’t care about your feelings. That’s exactly what makes them the best friend your business has.