Sailing into the abyss ⛵

If People magazine published a list of the 100 Sexiest Business Ownership Tasks, do you know what would land waaaaaay at the end? Bookkeeping. There are countless examples of the glorified parts of business ownership, but can you think of ONE depiction of bookkeeping that made it look hot? No one ever says, damn, that Jason Momoa can really read a balance sheet! Well I think that’s a real shame, because in business, financial control and making money is peak desirability. So here’s my appeal to start thinking of bookkeeping as the Timothée Chalamet of tasks — awkward until you really get it. XO, Sheila

Imagine sailing a boat on the ocean for 30 days. Sailing, sailing, sailing…and over those 30 days you think “Ooh we’re rowing so fast! We’re picking up speed! We’re definitely heading in the right direction!” Then after those 30 days, you pull out the map, compass and sextant, look up at the stars and say “Okay, let’s see where we are.”

Ridiculous, right? Who would just keep sailing for an entire month before they even checked to see if they were headed in the right direction? What kind of silly seaman would do that? Surely not the captain of a ship!

Well hold onto your hardtack, sailors, because on the stormy seas of retail business, there are many captains attempting to navigate with this futile approach. 

So many startup and early-stage retailers embark on their business journey with overflowing passion, beautiful new ships, abundant supplies, and clear visions of where they are going and why; but for a variety of reasons, they offload the financial management to a contract bookkeeper like it’s a mundane administrative task — like keeping rats out of the rum. They mistakenly think that paying close attention to all the money coming in and out of the business is a task that needs doing instead of what it really is: the single most important activity of business management — assessing financial performance and making myriad small adjustments.

To clarify — outsourced bookkeeping is an immensely valuable service, one that we encourage Pedal Retailers at all stages to use; however, a bookkeeper’s job is to support the business owner’s financial management work…not to do the work for them. 

Effective business management requires a basic understanding of financial accounting, a friendly relationship with bookkeeping software, and a willingness to get eyeball-deep in the numbers. “Knowing your numbers” is not a party trick. It’s absolutely critical, and it’s the only way to make decisions today for results tomorrow.

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Over countless engagements with indie retailers of all sizes and stages, we’ve identified a clear pattern:

🚩 Most of the time, businesses in distress have messy books, and the owners aren’t in them regularly or using the reporting features to make decisions. At the end of each month, their hired bookkeeper pulls sales from the POS and expenses from bank statements, categorizes them, then 10-20 days later, emails the owner PDFs of last month's P&L and Balance Sheet.

This is about as useful as the sea captain receiving a PDF of the ship’s coordinates from two weeks prior. Already pretty useless.

✅  All of the time, successful businesses have organized books, and owners actively engaging in them on a regular, if not daily basis. The books and the reports they generate are the truth, the basis for real-time decision-making, and they are maintained with care. At the end of each month, a hired bookkeeper will clean up and reconcile loose ends — like a housekeeper who cleans a house you already keep tidy. 

This is what a sea captain with control of a ship looks like.

Now to be fair, I don’t think that anyone starts a business and intends to do a bad job at keeping their books. 

🤷🏻‍♀️ Sometimes retailers have messy books because they don’t know what clean books look like or how to get them. Unlike most other professions where a lot of money is on the line, there’s no formal training or mastery exams required to open a business — no one has to score an 84 or above on a QuickBooks test to get a loan or pass an HR quiz before hiring staff.

🙈 Sometimes retailers know that they should be more involved in their finances, but they’re scared…which is totally natural. Most of us know how it feels to hold your breath while the bank balance loads. When you know the accounts are not going to be pretty, ignoring them is a form of self defense. Out of sight, out of mind. 

Regardless, there is one core truth in business:

If you can’t measure it, you can’t manage it.

Being an effective retailer requires an active, attentive relationship with the books. (No judgment, but I definitely know business owners who know their chart of accounts better than they know their own spouses.) And fortunately, understanding the books is not hard. Business math is third grade math: addition, subtraction, multiplication and division. Okay, fourth grade, if you count decimals and percentages.

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For those of us who have the privilege of working with retailers — especially first timers — part of setting them up for success is expecting them to have (or develop) critical survival skills. Understanding how to read a Balance Sheet and knowing how and why it’s completely different from a P&L is a hell of a lot more important than knowing how to optimize an Instagram grid. 

In Dream Space we make Pedal Retailers get really, really close with their numbers. The relationship is uncomfortable at first — unfamiliar and stressful. But the more time we spend looking at them, manipulating them, and understanding how the pieces fit together, what is foreign becomes familiar. 

When you expect someone to learn to navigate before they set out, there’s a much better chance they won’t get lost at sea.