Hello Reader,
A client rang me in March, pretty pleased with himself. He'd just signed a bigger lease, taken on two more staff, and committed to a new supplier contract, all in the same fortnight. Growth, he called it. He wanted to talk it through, but really he wanted me to agree with him.
I asked him one question before we went anywhere near the detail. If none of this works the way you're expecting, how many weeks can the business absorb that before it's a real problem?
He didn't know. Not roughly, not vaguely. He genuinely had no number.
That's the one that matters more than people think. Not your profit margin, not your revenue target, not even your cash balance on the day. It's how many weeks of being wrong the business can actually survive. Call it your runway if you like, but really it's just an honest answer to a simple question: if this decision doesn't pay off, how long before it hurts?
Most owners can tell you what they made last month. Very few can tell you what they can afford to lose while they find out if this month's decision was right. That gap is where the real risk sits, and it's invisible right up until the moment it isn't.
The reason this gets missed so often is that profit and margin feel like the serious numbers.
They're the ones on the report, the ones the accountant talks about, the ones that make you feel like you're on top of things. But they don't tell you anything about tolerance. They tell you how the business performed. They don't tell you how much room you've got to make a call that doesn't work out.
Back to that client. We worked it out properly. Once the new lease and wages hit, he had about five weeks of cushion if the new supplier contract underdelivered and he had to walk away from it. Five weeks isn't nothing, but it's not what he thought either. He'd assumed it was closer to three or four months, because the business had felt strong all year. It felt strong because he was looking at profit. Not runway.
If you don't know your number, nothing changes today. The lease still gets signed, the hire still gets made, the contract still gets committed to. But you're making that decision blind, and eventually one of those calls won't go your way. When that happens without a known buffer underneath it, the business doesn't get a chance to absorb it calmly. It gets a crisis instead, at the exact moment you can least afford to be reactive.
Before you make your next meaningful decision, work out how many weeks the business could take being wrong about it. Not months from memory. An actual number, worked out from what's really sitting in the account and what's genuinely committed to go out.
If you did that for the last decision you made, would you have made it the same way?
Talk soon,
Paul Sweeney
Chartered Accountant & Business Advisor
PS — This is exactly the kind of number the Business Planning Operating System puts in front of you every week, not once a year when it's too late to matter. No pressure either way, just wanted you to know it's there.
