The most honest test is to go through seven questions and notice how long you spend answering. People who can answer all seven quickly are rarely in denial. The person who hesitates on one or two has often already answered through the hesitation.
The seven questions
- What explanation have you used for the same number missing budget for more than two quarters in a row?
- Which number in the business are you avoiding because you know what it will show?
- What would an outside board chair ask about if she read your last quarterly report?
- Which difficult decision has been sitting on your list for more than three months?
- Do you have a concrete plan for what you do if revenue falls 15 percent over 12 months?
- When did you last sit with someone outside the business and talk about its weak points — without having to sell or defend anything?
- How many months of operations does your liquidity cover right now?
What hesitation means
You don't need the "right" answers to be in good shape. You need to be able to answer directly. Within a few minutes. Without looking anything up first.
If you hesitate on question 2, it means there's a number you've been avoiding. If you hesitate on question 5, it usually means you haven't worked through the downside scenario. If you hesitate on question 6, it means you've been talking to yourself about the difficult questions for too long.
One hesitation on its own doesn't necessarily mean much. Two or more taken together is usually a sign that you've started explaining something away.
What to do with the answer
If you hesitated on three or more questions, the strategy is rarely the first thing to change. The first thing is to find one outsider who's allowed to challenge you, and go through the questions again together with them. That's often where the real problems become visible.