Assuming is losing
Article Date: Feb 14 2007Confidence in business is essential but over-confidence can lead to a crucial mistake: failing to ask the obvious. Chris Ingram, who is widely regarded as the inventor of the modern media agency, explains why it's important not to take anything for granted.
When I look at all the mistakes I’ve made in business, by far the majority have arisen because I’ve made assumptions. At decisive moments, I’ve thought ‘Well obviously he/she/they will have already done that’ and, having cheaply reassured myself, I move on to the next issue.
This is palpably not the way to proceed. The armed forces have a saying for such behaviour: ‘Assumption is the mother of all mistakes’. Combating assumption involves not being afraid to ask the obvious questions. By all means dress it up with, ‘This is probably a silly question, but…’ or ‘I know this is going to sound rude, but…’ – but still ask the question.
Some years ago I was investing in restaurants – ventures with really simple business models, but ones that are incredibly easy to get wrong.
I was sent a very well-worked business plan by two would-be entrepreneurs who were leaving a famous restaurant to start up on their own. As is so often the case, one was going to be chef, the other front of house (the maître d’ as it were). They had impeccable credentials and a good business plan, and after ‘interviewing’ them I invested quite speedily: not big bucks mind you, but enough to hurt if it went wrong.
It got off to a good start and the investors all introduced their friends to the restaurant to help. But when business slowed, the front of house manager first of all walked around with a long face, then gradually disappeared to ‘concentrate on marketing’. As we were a chain of one restaurant, this was hardly an inspired decision.
From bad to worse
It then transpired, as mind-boggling as it might seem, that the manager didn’t like the outgoing, rather extrovert, role necessary for front of house and would do everything to avoid it. This was enough to tip the fragile business over the edge.
What we needed was a manager who could smile and exude confidence and bonhomie at difficult times – a person who could keep smiling when they come in with a headache or have left a sick child at home. Initially, when at the business plan stage, this had all seemed too obvious to ask. If he was going to be the front of house manager, surely it was obvious he had these skills? How wrong I was!
Sometimes I assume that something is a ‘no brainer’, and therefore doesn’t need spelling out, because asking the obvious question insults a person’s intelligence. But I now know you should always ask anyway.
One of my narrowest escapes was when I nearly sold my business (then worth £300-400 million) for shares in a publicly quoted company that did not produce monthly management accounts. They assured me, ‘We have a formula whereby we can calculate precisely enough where we stand from just the monthly turnover figures. This saves us a lot of admin so that we can concentrate on the half-year and
year-end results.’ Since the company was five times bigger than ours, I assumed that there was method in their madness.
However, when the recession hit in 2001, which is exactly the time when you need to have steely control over the finances, they were like rabbits caught in the headlights and their share price fell like a stone and has still not recovered. A lucky escape.
The lesson is, if a company doesn’t produce regular management accounts or suddenly stops producing them, avoid it like the plague (or wait until they’re put into administration before picking over the bones).
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