Accounting as ‘The Antidote’ to Entrepreneurial Depression

“Instead of looking for success, make a list of how to fail instead. Tell me where I’m going to die, that is, so I don’t go there.”

– Charlie Munger

I hit snooze on my alarm for the eleventeenth time that Wednesday afternoon. “Just one more hour,” I repeated to myself. I tossed and turned in my bed sheets, struggling to contain the restlessness and anxiety.

After much deliberation, I flung away the pillow I’d used to suffocate the light and noise of the outside world.

Squinting, as the afternoon sun peeked through my bedroom curtain, I grabbed my phone and cleared the dozens of missed calls and emails piling up in my inbox.

“4pm already?” I muttered to myself.

Everyone’s day had already finished. Mine hadn’t even started.

I wanted the anxiety to end. So I made a decision. Quitting my business, then and there, was the obvious remedy.

I reached for my journal and documented the steps.

• Fire our staff

• Refer our clients to another firm

• Wind up the company

• Get a real job

• Pay off my personal and business debt

One thing I do enjoy is problem solving. And closing the company I founded three years earlier would be a relieving problem to solve. I rationalized the process in my mind.

Failure is okay, right? I can always make the money back. What about all the time spent during the last three years? Well, I’ll just consider that a sunk cost. Perhaps I’m just not cut out to be an entrepreneur. I should go back to a real job. At least I’ll get paid a market salary, compared to the pittance I’ve been drawing for the last few years.

I’ll be stuck with some debt, but I could pay that back over time.

It’ll be easy just to quit.

At least I’ll be happy.

The Hard Truth

Looking back on that day, I realize that the prior six months had been especially hard. In fact, I’ve only gained the courage to revisit that time recently, as my company has crawled out of the hole that was dug.

Here were the events at play:

• We had close to no cash in the bank

• We had next to no new sales for four consecutive months

• We churned 15% of our total revenue in 6 weeks

• We let go of 2 staff members

• We had committed to employing 3 new staff

• Our burn rate and losses were increasing

• We had no line of sight for accessing additional capital

I was at a breaking point. Yes, I was working long hours. But, more importantly, I was experiencing a continual series of setbacks, disappointments, and financial problems. I was depressed, ashamed of the monster I’d built.

I wanted to quit. Not just my company, but the accounting and finance profession altogether.

I spent my entire career working with businesses owners to help them manage their finances — helping them improve and navigate the financials challenges they faced in good times and bad.

Yet, my own firm was on the verge of bankruptcy.

I’m supposed to be this fiscally responsible accountant! The financial compass for my clients. But how was I supposed to run a business that advised other business owners on how to control their finances when I couldn’t even handle my own?

I felt like an imposter. A fraud.

Accountant, Heal Thyself

Hindsight is a wonderful thing. Reflecting on that day that I hid in my bed, it’s incredible how dramatic I imagined the situation to be.

The reality was that our business wasn’t as bad as I thought. By all accounts, it was actually doing well. Indeed, we had some hiccups, but if I was to view our business journey as a marathon, that 6-month period was simply a speed bump at the third mile.

I mean to say that our situation was really small-time stuff.

Hundreds of thousands of small business owners and startups go through these challenges each and every day — most of which are ten times worse than mine. The circumstances for my company were trivial. Although, at the time, it felt like the perfect storm.

I was caught up in a spiral of negative self-talk — my version of imposter syndrome, the self-deprecating inner dialogue that becomes so real that we believe it to be true.

When we’re caught in challenging situations — scenarios where there is no easy answer — we have a tendency to think and act irrationally. We use stories to fill in the gaps of information. We over-analyze things and create a narrative that is (quite often) not a reflection of reality. Most of the time, these stories are completely ridiculous and irrational. However, in a heightened state of emotion, it’s hard to see the situation in any other way.

Remember that time you assumed your wallet was stolen because you couldn’t find it? Or the time that branded placebo cured your head-splitting migraine?

These are examples of how we use stories to help us function. They’re the brain’s coping mechanisms to deal with challenging situations, to help us make fast decisions in times of discomfort and crisis.

This technique was useful when our homo-sapien ancestors dealt with real predatory threats, like saber-tooth tigers. But in the information age, it often fails us.

I told myself that my entire business and career was a write-off.

The truth was that I was simply overreacting.

I was lying to myself.

I’m a liar. And so are you.

Numbers as The ‘Antidote’

I know, I know, it sounds weird that accounting can be used as a tool to cure depression. I’ll bet that Luca Pacioli isn’t listed in Webster’s New World Medical Dictionary.

But over that difficult time, I was able to develop a framework to help me keep that dark man at bay.

First, allow me to give a retrospective analysis of what I did to pull myself out of this state of entrepreneurial depression. Then, I’ll offer a set of practical tools you can use to prevent this from happening — using your numbers.

Also, some of you might be thinking — ‘erm, is that it? Some panzy wantrepreneur lost a few clients, had a bad day. Boo hoo! This shit happens all the time…give me a break..’

Well, yeah — that’s exactly the point. When you’re stuck in the grind and can’t separate the forest from the trees, it’s easy to blow things out of proportion. To get lost in the story you tell yourself.

Here we go.

Step 1: Detach and assess

Eventually rolling out of bed later that afternoon, I mustered the courage to look at our bank account balance. As I suspected — it was near empty.

Knowing our committed revenue and costs for the following month, I did a basic cash flow projection to understand the shortfall.

The key metrics I looked at were:

  • Current cash at the bank
  • My monthly burn rate
  • Forecasted sales for next month.

These reports provided an objective assessment of the most pressing situation — how we were going to finance next month’s payroll.

I setup a call with my management team and we assessed exactly what the immediate priority was. In this case, it was access to cash. We explored options on how to fix our cash flow issue. The team also noticed a few things I’d missed in my calculations, like removing some expenses from our staff that had parted, as well as some sales that I didn’t forecast to close in that month.

We also had some debtors we needed to call in, so we made a plan to call them and collect that money asap. We figured that by calling in our debtors and pushing back a few of our supplier payments by another 30 days, we were going to be ok.

After a couple of hours, crunching the numbers…we all leaned back with a sigh of relief. The weight of the world was lifted from my shoulders, seeing that the situation wasn’t as bad as I played it up to be.

The story I told myself wasn’t reflective of reality. It was my emotive brain responsible for inventing an irrational story that I believed to be true.

Often, it takes a person a removed from a situation to see the root cause of a problem. Looking a set of objective facts and figures, coupled with a discussion with people you trust can bring an objective perspective to the situation. One that can help you see the forest from the trees.

In moments like these, detach and assess and carry a posture of ‘higher thinking’. Seek help from a friend, colleague, advisor, business partner, family member — someone you trust to talk through the things on your mind.

Step 2: Practice gratefulness

After getting a handle of our cash position, I looked back at our trendline of our KPIs to understand whether I could have predicted and prevented these confluence of events happening. Below is our actual revenue trend line.

I found something completely unexpected: a moment of clarity. Visualising my company’s revenue trend line over a two year period provided me with perspective. It allowed me to literally see the growth that we have had in the business. I felt a profound sense of gratitude, proud at what we had achieved.

Look how far we have come, I thought to myself. It would be completely ridiculous to shut it all down.

Yes, this graph is fundamentally just a set of numbers. But viewed with a different lens, it can serve as a tool for self reflection and gratitude.

As you grow your business and add more parts to your machine, it’s natural to be caught in a cycle of continually looking up at the barriers and challenges ahead of you. In moments of fear, intimidation and utter exhaustion, take a step back and take satisfaction in what you have built — like a builder handcrafting her first home.

Literally seeing how far you have come can offer a sense of satisfaction and gratitude. It’s a mental model you can lean upon in times of overwhelm and anxiety.

It’s all about perspective.

Getting a hold yourself, man!

One of the strengths and weaknesses of the human mind is that it’s very quick to establish cause and effect — a trait from our evolutionary legacy. We don’t intuitively consider the billions of variables that could lead to an problem.

In my case, the question I was asking myself was this: why did we churned 20% of our revenue within a 6 week period. Was it as a result of our service? The time of the year? That our customers simply ‘out grew’ us?

The problem with this mental ‘shortcut’ to draw immediate causation to problems is that the assumptions we make are just that — purely assumptions based on gut feel. In a heightened state of anxiety, it’s easy for us to make completely irrational decisions….decisions that are bad.

One thing Charlie Munger, repeatedly advocates is that “it’s better to limit downside by avoiding mistakes than it is to be brilliant”. In other words, as a leader faced with a decision with limited information, it’s not about knowing what to do — you’re best off understanding what not to do.

That’s worth repeating. If you don’t know what to do next, focus on what not to do.

After taking a sip of my own medicine, I quickly dismissed the idea of ‘quitting’. I realised it was just my fear taking over.

Instead, we took the much more responsible and rational approach, by going back to the numbers and putting a plan together. We pieced together the ladder to carry us out of the hole that was dug. A plan that focused us on taking action.

That action did not involve a radical pivot in our strategy. It was focusing on the little things, the actions that did most of the heavy lifting.

Numbers have helped to shielded me from myself. They also played the sword to get me back on track.

On Making Decisions

The Latin of the word ‘decision’ literally, means ‘to cut off’. How I interpret this is that decision making is not about making choices — but rather “cutting-off” choices.

Eliminating choices until you are left with one.

To you that may sound limiting, even suffocating. But to me, it’s not. It’s liberating.

Having many choices and keeping our options open is good. But if we’re serious about where we want to go, and achieve what we desire — then we need to make choices. Choices that often have trade-offs.

Numbers can play the sword. They cut-off choices that can lead us astray. Choices that can distract us from our vision.

What’s left is a path to our goals that is narrow and focused. They can act as a series of indicators that show us the path and ensure we’re keeping on track.

Accounting is not about tax. It’s not about GAAP or ratios or metrics or profits.

No. Accounting is about accountability. Used in the right way, accounting can help you achieve your goals, march towards your mission, build your legacy.

I’ve experienced first hand how your financials can play the shield and sword.

My hope is that you can use them in the same way I do.

Mental health amongst entrepreneurs is a real thing and is rarely spoken about. As founders and leaders we need to constantly wear a brave face, despite how well, or more often, how terribly things are going.

The key here is not to let those fears dwell inside of you. Be open and don’t be afraid to release and express your emotions.

If you are ever feeling down because of your business’s financial situation and you need somebody to talk to, please, don’t be afraid to shoot me message >> jason@sbo.financial

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