Often times being too passionate about your business or an idea can cause you to ignore reality. Business owners and start up entrepreneurs will sometimes let their passion for their business lead them astray.
I have seen entrepreneurs take their business down a road that they can't recover from. Often the reason is that they are overly passionate and not paying attention to what is actually going on. Partners, consultants and other advisors may see the writing on the wall and plead with the owner that they are making a mistake. However, in the owner's eyes they can't fail and won't fail. This is their business, their baby, and their gut has to be right. They will rise above all challenges. Sometimes they do, but often an overly passionate owner may ignore the reality of the situation they are in and head down the path driven strictly by a gut feeling.
The reality of the situation is that the numbers don't lie. However, a passionate owner may put the numbers aside and ignore them because they are painting a picture they don't want to see. They only see the end result of where they want to be and they know moving forward with their plan is the only way to get there. The problem is passion and gut feelings are driving the direction, not financial results that are based on fact.
Having a good financial reporting process in place is important even for small businesses. The mistake many small business owners make is to look backwards but never forwards. Comparing actual results to expected results (budget vs actual) allows you to see variances. However, the mistake many businesses make it that they don't re-forecast for the future based on what they now know. How will our actual performance affect the future? Have our expectations changed? Does our growth plan still make sense or do we need to modify our approach and strategy?
By taking an approach where you look at past results to better predict the future you are going to make better financial decisions. Financial analysis can help you pivot in your small business to get the results you desire.
Some business owners can let their personal passions outside of their business get in the way of success. Most owners have a burning passion for something outside of their business that can blind them from what is going on. Let's take myself as an example. Many of you know I am very passionate about outdoor sports; particularly skiing and fly fishing. It's hard for me to go a week without either going for a quick ski or a short fishing expedition. It's hard not to feel guilty going for a few ski laps on a Tuesday afternoon when it dumps, but it's also why we do what we do. It is important to keep a good balance between following your personal passions and time devoted to your business.
Passion is a necessity if you want to run a successful business. However, passion can be blinding so make sure you are taking a reality check every now and again.