Busting 3 Common Myths About Running a Consulting Company

A big challenge of starting and running a business is adapting all the advice and knowledge of those who have done it before and figuring out what works best for your company.

Over time, we have adapted our business approach through trial and error to collect and manage data and analyze financials and projections efficiently.

We’ve learned firsthand that it’s frustrating to have tools that don’t streamline data management, and it’s hard to gather data after the fact, especially during a crisis, to make a decision. If regular data management (daily, weekly, and monthly cadences) isn’t built into the business's standard processes, it may get lost in day-to-day management.

As a result, there won’t be an organized data management system showing a real-time representation of your business's performance. Messy data spread out between multiple systems becomes a snowball that can affect the accuracy of your projections and lead to less informed decisions.

There are three common data and metrics management myths that many new business owners follow that we believe are not the most efficient, and there’s a better way to do it.

Myth #1: The Best Data Is 30 Days Old and Audited

Traditionally, financial, staffing, profit, etc., data is gathered, audited, and then analyzed for the previous month. Accounting data will show how much money your business made last month and may be accurate, but it isn’t necessarily the best data to use to plan today or for the future.

Think about it like driving a car and using the rearview mirror. That is not an effective or safe way to operate a vehicle to see where you’re moving forward.

The same goes for financials, projections, utilization, and any other data in your business; you can’t look forward by looking backward. You need a system that gives you forward-looking visibility instead that will provide a more accurate representation of the future and potential roadblocks.

We need to break the myth that we are striving for perfect data—we’re aiming for the best understanding of the current reality at this moment in time.

The insights we get from the data (guidance on what action to take) could change tomorrow. However, it still gives you the best real-time understanding of where the business is, the ability to analyze trends over time, and better understand how your decisions today impact the future.

Myth #2: Data Can Be Gathered After the Fact

Many data management practices are only done on a need-to-use basis if there is a problem to solve or after the close of the month. But, because decisions are made daily, you need the most accurate data at your fingertips.

Data should be collected daily as a part of how the business is run, analyzed, and discussed with leaders and team members on a regular cadence. The more involved everyone is in data collection and management, the more they will understand how their decisions impact it.

When the information you need to look at to make decisions is always up to date and easily understood, you’ll make the best-informed decisions for your business.

Myth #3: Only Finance Uses the P&L

Overall, the P&L shows how everything in your business fits together. It’s a report card of the health of your business, but it can be used for more than just looking at the previous month's performance.

Typically, the P&L is an accounting tool that only finance or leaders pay attention to, but that doesn’t have to be the case. Anyone accountable for running the business or making decisions should use the P&L to understand how their choices impact the business.

With this accountability and knowledge, you have more eyes to keep track of things and bring things to your attention if they aren’t looking right. Also, if you are a business owner and think the P&L is just one person’s job and you don’t need to know it, it will be hard to run your business sustainably.

The P&L can also be used as a forward-looking projection tool. Like the GPS on a car, it tells you where you’re going and how to get there. Because it shows the comparison between projects, employees, budgets, salaries, etc., it can be used to get ahead of problems proactively. If you see that next month is in the red based on projections and what projects you have lined up, you can focus on selling or scheduling some new projects to cover it.

Bust These Myths & Improve Your Business

People certainly run businesses by following these three myths. Still, the most effective way to run your business is to have visibility of the future, share the responsibility of data management, and use traditional tools more effectively.

Building data management systems into your business's normal processes will always put you a step ahead in decision-making. It will give you the advantage of making faster decisions during times of crisis and allow you to be proactive in predicting the future.

The ability to look forward in your business will keep you ahead of decision-making and give you the time to change things today that will positively affect your numbers for the future. If you’re only looking at old data, you can’t influence it and will always live in your business's past instead of the present and future.