Living within your means
A friend of mine is being pursued for a job at the moment. And I mean really pursued. They want her.
What would your P&L look like if you were to live within your means, right now?
As well they should.
She is amazing and will work wonders for them.
And she is tempted.
“Have you talked numbers?” I asked her. “Not yet,” was the predictable response.
Predictable because it is common: we go through hiring processes and usually talk about the only really binary thing last… namely, “Is what I am willing or able to pay you in any way commensurate with what you will accept?”
And there is an undeniable power move at play here. If done well, the recruitment process whets your appetite. You get excited. Emotionally, you may have committed already even though you haven’t said “I do,” so to speak.
But money is what we work for, and no I don’t buy into the ‘if you didn’t need to work you would still work’ argument. No, I would not. I would spend my time doing a million things – some of which may look like labour and some of which may look like what I do now. But if I didn’t get paid, I wouldn’t turn up in your office five days a week. No sir.
It’s funny because we all accept that money is how we recognise and acknowledge value in the market.
Someone getting paid a lot must be good.
A company valued highly must be good.
And yet every time we hire someone, we try to beat them down to the lowest amount we can get away with. Every time we want to engage an expert advisor, we try to barter rather than pay. We strive for freebies and deferred payments. We promise future returns and lucrative contracts in a poorly specified future.
And maybe the bootstrapped start-up offering sweat equity in lieu of pay for the expertise they need is making ends meet anyway it can… but that is not who I am talking about.
I am talking about the well-capitalised start-ups… and the funds… and the banks… who are constantly angling for a freebie, a discount or a delayed payment even when they have the money. They still try for a freebie in the clearly insinuated hope that they won’t end up having to pay at all…
And while we scrimp the thousands, we burn the millions.
The same funds that approach folks to be advisors and growth partners for infinitely dilutable future carry write tickets with minimal due diligence done on the vapourware and magic numbers they were shown… and then drive the teams hard to show growth. Not traction. Growth.
The same start-up that tried to get an industry leader to sit on their board for free has had a huge stand at every industry event and trade show around the globe, handing out expensively made swag nobody ever wears or uses. (And seriously guys… what’s with the plastic piggy bank trend you are all falling for? Stop that. Nobody is using cash. We don’t want them. Nobody wants them.) Or they take out ads on TV and on buses and all over the underground in seven major capitals.
The same bank that spends hundreds of millions on patching old systems to avoid having to make a decision about their future will ask for a free POC from a tech partner and service credits from an advisory firm in order to proceed with some new work.
The money we scrimp over is always, ironically, less than the money we sign away without even blinking, let alone flinching (which would be a more appropriate response).
And the reason for that is obvious, but I will say it anyway: in our industry, we spend money habitually. Budgets and fund allocations, amortised cost and known operating expenses. No matter how eyewatering the amount, if it has been spent before, spending it again is A-OK.
But spending a new penny is a different matter.
It comes, as we have all heard ad infinitum and said ad infinitum… so all together now... FROM A DIFFERENT POT.
And we all nod like that makes sense. Because of course it makes sense. But that does not mean it is sensible.
There are three kinds of money in any business. In fact, scrap that. There are three kinds of money in life.
The real kind (the money you have, really have). The speculative kind (think invoice financing and balance sheet lending… it’s almost real though not quite yet, but at least we know where it’s coming from). And the expensive kind (loans or equity investment). If you were balancing your household budget, you would rely on the former, dipping into the second kind to tide you over. And you’d try to avoid the latter because… well… because it creates problems for your future self.
This is not so inside our organisations.
And that should be because we understand the mechanics of lending, investment and Big Boy Trade-offs. But it isn’t. It’s because we are so immersed in our ways of working that we categorise money in terms of ‘easy to get approval for’ and ‘hard to get approval for’.
Budgets roll over year on year. VCs invest year on year. Even in this current climate, cheques are being written.
We have all had the ridiculous task of running around in Q4 trying to spend some leftover budget so that we could get that money again the following year, right?
And some of us may have had the amazing windfall of a project getting a last-minute approval exactly because there was money to burn… so our sponsors could get it again next year.
We know the game, so we play it. And that is fine. Only it isn’t.
For people in the money business, we are not very good at talking about money. Or treating money like we understand it. And it works. Of course it works, in that it functions and it keeps moving forward. And while that keeps being the case, nothing will change, really.
But indulge me for a second… and imagine… what would your P&L look like if you were to live within your means, right now?
If you were to remember that external investment and loans come at a price.
That spend, even if committed and approved, comes at a price of other things not being done with that money since, axiomatically, money spent on something is money not spent on something else.
That the idea of balancing your books is a thing.
That you should pay for the services you consume like a good lad. On time and at market rates. Since that is how you expect to be paid.
What would it look like, if you did all that, no matter who you are in this industry of ours that deals with nothing but money and still doesn’t seem to be very good at it?
#LedaWrites
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem.
Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!
Follow Leda on Twitter @LedaGlyptis and LinkedIn.
