Masking Your Metrics

Templates promise a shortcut. Then you spend three hours bending your actual business into someone else's boxes and rows. Congrats, you've saved like zero time!

Abacum's new AI Spaces skips that bad trade. Prompt it, or pick a starting point - either way you get a full board-ready dashboard or planning workspace in minutes, built on your model. Your variables. Your versions. Your dimensions. Not a generic template you then have to rewire.

It's not just about doing things "faster." (Although it is nice to not let formatting eat your afternoon.) It’s so when the board asks for a new cut on the spot, you're spending your time on the variance story and the recommendation.

That's the job they're actually paying you for.

I was helping my daughter make these paper masks over the weekend.

They’re a replica of something you’d see at a Catalan ball (not the Catalina wine mixer, which is more my speed).

She likes to trace them on construction paper, poke holes for the eyes, and bedazzle them with sticker jewels.

By the sixth one I noticed she had stopped using the original mask outline, which had the sharpest curves and most symmetrical measurements, and was now using whatever mask she’d just finished.

While they were all technically masks, with each iteration the contours drifted further and further from the original shape.

What was once a sleek Victorian era mask with pronounced curves was now a set of wide rimmed ski googles. Or something you’d wear to rob a bank.

The ground truth beneath her replica drifted.

In many ways this is what we see happen when companies communicate the progress of their business. They drift away from the metrics they are actually using to run the company internally, opting for a set of proxy metrics they think smart people who hold their stock want to hear.

And it’s not just a public company problem. I’ve been guilty of doing this when presenting to my board (and even my boss internally) at private companies.

You feel the pull of a narrative that looks sexier with a slightly upgraded set of characters. You stop talking about customer activations on a quarterly cohorted basis (which is what the sales team is comp’d on) and begin publicly pontificating on enterprise customers above a certain dollar threshold (where you have only two reps working).

Aurelien Nolf, CFO of Navan and former SVP of IR at Lyft reinforced my observation:

For a while, maybe a couple of quarters, companies can get away with kinda sorta hiding the ball. But eventually whatever they are using as a proxy shifts out from where the business really sits.

A proxy, in my simple mind, means a “stand in” or “representative” for someone or something else. In this case, the metric is a representative for an underlying theme in the business - like keeping customers happy… or expanding wallet share… or making sure employees like working for you.

So it’s very important that the management team aligns on the metrics they’ll disclose externally. Because those metrics will go south at some point… as there’s no such thing as a business without an issue.

All good finance leaders will need to communicate bad news. And what’s important is less how you say it on the day of the bad news but in all the quarters before, educating people on your business and bringing them along for the ride. If investors can understand why things can go wrong in your business, then when that thing happens they won’t be as surprised.

And more importantly everyone knows what the team is doing to fix it.

BTW - people really hate surprises when it comes to their money. Investors have unlimited options as to where they deploy it. If they are going to select your company, whether it’s in the private or public markets, they want to understand what the risks and opportunities are, which means they need the right metrics to inform their world view so they’re brought along on that journey.

This type of transparent and aligned communication around metrics allows them to understand your business model so they can believe that whatever went wrong is fixable (or on the positive side, whatever is going right will keep going right).

But if they don’t have the right handles to understand what’s in the black box, then they’ll make up their own narrative… And it’s human nature - if you don’t give someone the tools to figure it out, they’ll make up their own narrative in their head, which is rarely a generous interpretation.

While you want your business to look as good as possible, resist the urge to put a mask on it.

Wishing you trade at a high revenue and EBITDA multiple,

CJ