Your company is a mess.
Doesn't matter if you're a LinkedInfluencer, ex-McKinsey, or a serial entrepreneur on your eighth rodeo. Your business probably feels like a disaster.
I’m here after looking at the finances and operations of hundreds of businesses to tell you one important truth:
So does everyone else's.
And it makes sense, right?
You spend 98% of your attention on the 2–20% of the business that's on fire. You start every morning with momentum — big plans, massive opportunity, carpe-ing the absolute sh*t out of the diem.
By noon though you’ve had your face rubbed in every mess in the business. It’s feeling less Manifest Destiny and more Harold and Kumar Go to Whitecastle.
That feeling is real. But businesses aren’t valued on feelings… ok MOST businesses aren’t valued on feelings[1]...
Set the emotions and daily tasks causing stress aside. Let's look at your business through the cold, f*ck your feelings, blue-blockers of an investment banker. You won’t find any therapy here. You just might find value though.
Here are the seven things that actually tell you what kind of business you have.
1. Profitability
Yeah, you knew this one.
A business exists to generate profit. So the first thing we're looking at is: does it? And if so, how much, how consistently, and is it trending up or down?
The catch is you need your actual accounting profits. Not the good-enough, add up deposits, subtract money spent “books” that provide less information than your bank statement. We're talking proper accrual-based accounting, fixed asset schedules, detailed allocations — real financials. All those technical terms you've been hand-waving past, they're not bureaucratic noise. They exist to give you a standardized, honest picture of what's actually happening.
Get two, maybe three years of financials, trended by month, using proper accrual accounting, fully reconciled, with a chart of accounts that fits your business.
Then let's talk about how profitable you are.
We’re looking for strong, reliable, growing profitability.
Worry about that before stressing if your tax strategy is properly optimized.
2. Assets & Liabilities
The balance sheet is the most underrated report in the financial stack.
Everyone nods when you say it's important. Almost no one can tell you what it actually says.
Here's the short version: the balance sheet is the overall health of your business.
At a quick glance, start here:
How much cash is in the business?
How much AR?
What other assets are there — equipment, IP, prepaid expenses?
How much of the cash and receivables are already spoken for — payables, credit cards, deferred work, debt?
And what's actually left for shareholders once you net it all out?
If your business is actually a mess without you realizing it, it’s probably hiding on the balance sheet.
Fix your balance sheet before stressing travel rewards or cash back on your business card.
3. Cash Flow
Cash flow seems obvious but most people are assuming it’s closely related to, if not the same as, profitability. It isn’t and cash flow weighs heavily on all three items - risk, assets, and potential.
Easiest to show an example.
Say you do $10M in revenue at 30% margins. $3M profit. Great business, right? Sure. But what if every year you need to replace $1.5M in equipment? And to keep growing, you need to build a new facility — call it another $2M? Profitable business. But you're putting more cash into the business than you're pulling out.
And to be clear, those are investments into the business that get spread out over time (depreciation & amortization). Not expenses that lower profits. So profit looks good but you didn’t actually keep those profits.
On the other hand, you can have a business that collects a lot of payments up front, that are not recognized as revenue until earned, which looks just ‘ok’ on profitability but is loaded with cash.
A business that produces a lot of cash is far more valuable than one that requires a lot of it even though they might be similarly profitable. Great cash flow businesses can self fund their own growth (potential), are more resilient (risk), and of course let’s not forget that cash stacking up (assets).
Dial in your cash cycle before worrying about ways to lower credit card fees.
4. Product Strength
How good is the thing you sell? Let's be specific about what "good" actually means here.
Is the quality/experience/story or some other attribute so strong you can charge a premium above competitors?
How complicated or easy is it to explain and sell?
How essential is it on a spectrum of public utility to NFT?
How volatile, cyclical, or predictable are sales?
On a scale of buying a home once every 30 years to a monthly subscription how durable or consumable is it?
What is the satisfaction level with customers? How likely are they to recommend? How likely to repurchase?
Does this have add-ons or complimentary products that benefit from this? Is this reliant on the purchase of another product?
How dependent is the product on a platform or asset owned by someone else?
Do you have patents or IP associated with it?
Lots of angles to take on building a great product. Lock this in before obsessing over sales funnel platforms.
5. Customer Concentration
I see a lot of founders spend the early years working so hard to win and retain clients, one by one, day after day. Eventually though they have hundreds of clients, many of whom they’ve never met. But on any given day when you’re called in to recover a struggling relationship it feels like everything is barely held together.
But is it?
How concentrated are you clients? How reliant are you on any individual one?
Maybe it is very stacked on a few. Or maybe it just feels like it.
Run the numbers yourself and look at how revenue the top 10 customers are responsible for? How much is the top 20%? Top 50%?
Maybe you sleep better at night knowing you’re more resilient than you thought… or maybe you get to work tomorrow building a wider base of customers.
Build a healthy base of clients before hand-wringing over CRMs.
6. Talent
Your team is simultaneously your biggest asset and one of your biggest risks.
A strong leadership team, people who are genuinely great at what they do, a culture that attracts talent — all of that adds real value. But too much concentrated in too few people creates exposure you may not see coming.
What happens when your best salesperson takes a call from a recruiter with a better offer? Do they own the client relationships? Can you replace them?
The goal isn't just to have great people. It's to build a business that develops great people — with systems strong enough that it doesn't collapse when someone leaves. Great talent inside a great system is an asset. Great talent as the system is a liability wearing a very convincing disguise.
Land those game changing new hires and document systems before over analyzing which Notion template to build playbooks in.
7. Owner Reliance
Does this one sting a little bit?
We’ve already established at the top you’re probably getting called in for a lot of the fires.
Big question is, do you have to be?
How much of the business — the growth, the relationships, the product, the culture — depends on you being there?
You do it today, but could you hand it off? Do you have the team and systems to step away? Are you working on things that make the business better or are you spending time keeping it afloat?
We all know we should be stepping away, but it’s a lot harder than it seems despite what the influencers selling “patented proprietary founder systems” say.
If you can't take a two-week vacation without your phone blowing up, you're not the owner. You're the bottleneck. Most of the value of the business falls apart the minute you’re removed.
Remove yourself from the day to day before picking out and photographing all laid out your perfect nomadic work setup.
So What Does Your Business Actually Look Like?
It’s not a question of “is your business actually a mess” — it is. Even most of the successful ones are.
But the “messiness” isn’t really a good gauge of how proud you should be of your business. It’s like having a gorgeous architectural gem for a home… but feeling frustrated because the laundry isn’t done.
Yeah, so what. Join the club. Life is messy. People are messy. Businesses are messy.
That house is still a great house, that person is a delightful human, and your business is a valuable asset.
The question is, are you spending time picking up laundry when there is water flooding the basement?
Ignore the thing that feels messy because social media showed you a hundred examples of people with super clean, organized versions of it in an effort to sell you their software, template, book, newsletter, podcast, course, or whatever else promises peace of mind from having things sorted out.
Sit in the mess and work on products, profitability, cash flow, and talent.
These 7 things are what really matter. Assess those honestly and prioritize accordingly.
Get after it.
Chase “books and laundry - keep ‘em clean” Spenst
Not sure where it lands?
Maybe you’re spinning because THAT is the mess. You don’t know your profitability, the actual state of your balance sheet, how concentrated you are, or if you’re pricing your product correctly.
Let us run a quick diagnostics test on your business.
We’re going to analyze a handful of businesses and we’d love to do yours. We’re limited in how many we can do each month based on our bandwidth so grab a spot — you can always decline once we get to you.
Reply to this email to get on our waitlist and we’ll reach out.
Milestones & Watches
Last week I wrote about the emphasis I put on milestones in my business and why I chose watches as a reward.
From the piece:
“It feels appropriate that the thing that keeps time is also the thing I use to mark it.
They’re both instruments and symbols of time. It’s a really strange concept when you think about this tool that measures such an ambiguous concept — movement through time — by translating it into a concrete one: movement through space.”
Give it a follow for more this weekend.
Where to find more
A Good Operator Life
A Substack Journal dedicated to the lifestyle behind the Lifestyle Business
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Antagonistic posts, unnecessary rants, and the occasional gem of insight
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A visual journal documenting the life of a cash flow operator
Work with Good Operator
We obsess over financials, systems, workflows, and cash all day everyday - let us obsess over yours.