The Limits of Accounting

Not everything that can be counted counts, and not everything that counts can be counted.

Most of my blog posts are about business and money: how to raise funding, how to manage cash better, how to be more profitable.

There’s some irony in that focus. I happen to believe strongly that money is a means to an end. And I firmly believe that business can be about so much more than returns on capital.

That’s why this quote, often misattributed to Albert Einstein, resonates so much as I write about it this holiday season.

Not everything that can be counted counts, and not everything that counts can be counted.

This actually was written by social scientist William Bruce Cameron in his 1963 text Informal Sociology: A Casual Introduction to Sociological Thinking. But since it’s got much more gravitas if Albert Einstein said it, internet memes bend the attribution.

Not everything in your business, or your life, that you end up keeping track of – counting – actually makes a big difference.

There is a pragmatic reading of this truism. When you look at all of the numbers your accounting software spits out, only a few of them are really important. And deeply understanding your Key Performance Indicators, or KPIs, often requires analyzing ratios and trend lines through spreadsheet crunching.

But that’s not really what this quote is about.

Return on equity doesn’t measure whether your business is making you happier.

Debt to equity ratios don’t measure how much value you are delivering to customers.

Revenue per employee doesn’t measure how those employees feel about their job.

It’s easy to be swept away by numbers and lose track of what’s really important. To you.

For example, in my a cappella music business I wanted to increase awareness of and participation in singing harmony without instruments. And, as brother of three sisters and father of two daughters, I wanted a business that equally honored men and women employees.

Not everything that counts can be counted.

In this holiday season my intangible profit is uncountable as Pitch Perfect 3 is released in theaters. How do I measure the ratio of joy and impact created versus my own indirect investment that helped make it possible? (Chapter 12 of the original book is about me)

And the woman I sold the student a cappella competition to for a very reasonable price is running a thriving enterprise that makes tens of thousands of people happy every year. Which is more important – my exit price, or the satisfaction of seeing my entrepreneurial venture thriving a decade later?

Not everyone shares my attitude towards non-monetary returns. But many fellow entrepreneurs I’ve met along the way have a passion that drives them.

It’s hard to balance those passions with financial realities. Just another hard thing about being an entrepreneur.

But it’s important to keep in mind as your business consumes much of your life. Make sure you remember what counts.

Sunrise at Moose Pond
Sunrise at Moose Pond

Don Gooding

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