What’s your story?
“The most powerful person in the world is the storyteller. The storyteller sets the vision, values and agenda of an entire generation that is to come.” — Steve Jobs
What I love about financial statements (and numbers in general) are the intricate stories they weave about a business.
- Revenue falling over the last 4-5 years? Maybe an industry problem, maybe competition, or maybe marketing efforts are running dry.
- Gross margins declining? Sounds like pricing and efficiency are going the wrong way.
- Interest expense ballooning? The company must’ve borrowed more money, what did they spend it on?
Behind every single number (output) in your business, is a story about something happening (input). Finance & accounting are just outputs from all of your operational inputs.
Why is storytelling important?
Have you ever struggled to articulate what’s going on at your company or where you’re headed next? It’s because you don’t have a firm grasp of the story.
The best use cases for your story:
- Banking — when it comes time to get a new loan, refinance, or simply update your lender for the year
- Raising money — let’s say you’re starting a new business and need to raise money from friends & family (doesn’t matter if it’s a loan or equity)
- Rallying your team — if you want your team motivated and rowing in the right direction
- Figuring out what to do next — this is a big challenge as an owner, no one is there to tell you what to focus on; if you have a sense for the story, it becomes much easier to steer the ship
How do I find my story?
Let’s break it down using the core elements of storytelling:
- Plot (where you’ve been) — What are the chain of events or “where you’ve been.” Ex: we were growing quickly for several years until 2 new competitors came into market; since then, things have slowed down quite a bit.
- Character (the hero) — This is your adventure, goals, dreams, ambitions. No one starts a business without a dream or goal of some kind, it’s the essence of the hero’s journey.
- Conflict (the problem) — All stories have a problem. Even if things are going well in your business, the problem might be simply continuing to make progress.
- Change (the transformation) — We need to change or transform in order to overcome our conflict. Revenue declining? We install a kickass sales system and hire a team to execute it.
- Setting (where things take place) — Which markets, niches, product lines, channels, etc. are we going after? Don’t overlook the subtle details and minutia of this aspect, get granular with it.
- Theme (the meaning) — This is your “why.” It’s hard to win in business without purpose and/or passion. You don’t have to be conquering world hunger; it’s perfectly fine to want to work with people you like to build something cool.
Much of this feels “fluffy” or intangible, but I promise it will help you connect the dots between your business and the underlying numbers.
So how do you use this from a practical standpoint?
- You’ll need both a long-run and short-run view of the numbers. Think: 5-7+ years for the long-run and ~18 months for the short-run. Business cycles span multiple years, we need enough history to see the ebbs & flows.
- With that, I’m looking at revenue trends, margin trends, and earnings trends on my P&L. And cash, total asset, debt, and equity trends on my balance sheet.
- From there, start connecting the dots with the tangible activities.
Think of this process as similar to defining your financial situation, something we’ve previously discussed.
Example
How about some live ammunition here…
I’ve been following media stocks for years and with Netflix set to acquire Warner Bros., I’m intrigued by companies in the industry, namely: Comcast.
Below is a 10-year snapshot of Comcast financials from 2016-2025 with select “key events” highlighted for reference:
Let’s build the story here..
Thanks to growing broadband and theme parks businesses, revenue grew steadily from 2016-2021 (8% per year).
Things slowed (almost stopped) from 2022-2025; why? Competition started to enter the market via AT&T and Verizon, plus a continued slowdown in cable TV.
We see a big acquisition in 2018 which contributed to higher debt, but they repaid a good chunk of that from 2018-2023. And right as the business was slowing down in 2022, they started distributing more cash to equity owners (while borrowing to do so!).
Comcast seems at a crossroads… growth is slowing/falling but cash flow is still very healthy. But perhaps the shift to heavy dividends is leading to underinvestment (capex), furthering the growth slowdown.
Hmm…