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I was listening to a podcast by Gary Vaynerchuk this morning as he was giving a keynote speech and he mentioned the term “fake math” to define a concept related to marketing and advertising but it stuck me as being completely appropriate for entrepreneurs and business owners. #fakemath tends to be a real problem for businesses that generate less than $25,000,000 in gross revenue. What I mean by #fakemath is the difference between what a business expects to make or achieve and what they are actually making and achieving.
Some businesses will put a plan together that basically says “next year we are going to do $20,000,000 in sales and make $5,000,000” without the plan relating to anything the business has done historically. It can be really difficult to move a business from its historical levels to new levels in a single year without a specific plan (or some luck). Using #fakemath can also set you up for disappointment when results don’t match expectations. This can be tough on a team or anyone that is working in your business to try and help meet the business plan.
Why does this matter?
It doesn’t if you don’t care to grow your business or work out of a problem. There is a fine line between having vision and having your head in the sand (at least that’s been my personal experience running a business). I have fallen victim to #fakemath myself thinking my business could achieve something that was simply uninformed and stupid 😳
To avoid #fakemath make sure that your assumptions can stand up to criticism even if you are the only critic. Make sure you can explain how your business plan for the future can be reconciled back to your historical revenue, costs and net profit. If at any point you find yourself talking way off in left field that should be a sign that you may need to revisit your plan OR revisit the things that need to come together to meet the goals laid out in your plan.
My goal is to get up every day and contribute to the lives of business owners and entrepreneurs who need someone that can ask tough questions but also provide guidance based on 20 years of experience. Let’s chat if you (or someone you know) needs some help with their business.