How Far Ahead Do You Need to Look?

There’s a trick to driving in heavy traffic that quickly bounces back and forth between, say, 40 mph and 5 mph. I’m not talking about slow-moving stuff where you can safely switch from a cooking show podcast to 2Bobs, but the more unpredictable changes in speed that often lead to accidents.

The trick is to not focus on the car right in front of you, but on the car ahead of the one right in front of you. Watch the string of brake lights and you’ll frequently notice them before the driver right in front of you, and that way you can anticipate what they’ll do next.

That’s the illustration I was thinking of when I decided to write about how far ahead you should look at things. Not far enough and you won’t have sufficient times to react; too far and you’ll miss what’s happening right in front of your face.

And the truth is that the answer isn’t the same for every element. By definition, thinking about your new facility lease has a longer arc than tweaking your marketing plan. So let’s look at a few factors. Maybe one or more of these will land and give you something to ponder:

• Principal’s Engagement Level: When you find your interest waning, it could very well be heavily influenced by something happening in your personal life (death, divorce, ailing family member, and a million other reasons), but if it’s business related at its core, it’s time to slap yourself in the face and wake up. Some of the time it’s fixable by dissolving a partnership or getting rid of a troublesome employee/client, but most of the time it’s a big and unignorable sign. Fix it…or start planning for the next stage. This is especially true if you are bored.
• Cash Cushion: We all have different standards for this. Personally, I usually want a year or two of personal expenses sitting somewhere, and three or four months in the business. Your cash level is a weird signal because it varies so widely, but it’s like the blood circulating through your body. I would pay more attention to accrual-based profit than cash (that’s the one two cars ahead), but I’d keep your cash in mind, too (the car right in front of you).
• Moving to New Facility: This requires no less than 18 months of planning, and preferably 24. You want to leave yourself the room to manage a buildout, but you also don’t want to be held hostage by the need to move.
• Length of Facility Lease: As recently as a decade ago, some firms in NYC were signing 15 year leases. I’ve always considered that wildly unwise. Personally, five years is the longest lease I would ever sign, and then only if there’s a reasonable sublease option that “will not unreasonably be withheld.”
• Internal Succession Plan: This’ll depend entirely on how it’s funded. If it’s outside funding with seller-friendly terms, go for it quickly. If you are carrying the note, plan to stay around long enough to preserve your investment while the transition unfolds. So if you find that your engagement is waning, and if someone is pressing for a total succession plan, don’t push it off.
• Planning for Sabbatical: A proper sabbatical takes at least three months to prepare for, and maybe longer, if this is your first. So book that AirBNB on the Amalfi coast for October through December now, and start planning!
• Selling the Firm: How far ahead depends on recent results. Do you need to build a better financial trajectory and let 2022 fall off the three-year valuation? Do you need to fix profitability or a client concentration problem? Or are you closer and maybe it makes sense to do a valuation and start factoring in how much money you’re likely to actually take home in a transaction? And how long you’ll need to stick around?

The balance you’re trying to achieve is this:

“Plan ahead while still retaining resilience.”

But as you manage your firm, you want it to be so solid that you can leap at opportunity that just popped into your field of view:

• Pounce on a once in a decade hire to snag the right person you’ve been dreaming about.
• Respond to a suddenly entrepreneurial offer from a key employee while your engagement has unexpectedly dropped due to some life changing event for you.

If you think for a minute about where you’ll land if you get that balance wrong, here’s what either extreme might look like:

• Looking four cars ahead and losing sight of the car right in front of you: planning for and assuming rapid growth, and then over-hiring too many high-priced people so that you’ll be ready to attack the work when it comes, right around the corner. But it doesn’t come, and it’s been hard to find these great people, and so you just hang on and your cash dwindles. And then you have a layoff, but you eat away at the lower end of people you deem expendable because you’re more emotionally attached to people who more closely resemble your approach and abilities. (Similar to this would be borrowing money to fund that growth…and then the growth dissipates.)
• Staring into the car right in front of you, and neither you nor the driver right ahead of you notices that all the traffic is stopping: reading too much into first quarter results without noticing that the first quarter has historically been slow for you, or missing the fact that there’s lots of opportunity in the pipeline, some of which is going to break soon.

So keep the right things in your field of view and don’t camp on any one place too long. Think of the long-term (nobody else at your firm will do that like you will), but retain enough resilience to allow yourself the flexibility that will be necessary when things inevitably take a different turn. Business is full of ups and downs: don’t fight them; just plan for them.