People. Product. Profit.
Those were the elements we used for the annual business planning process in the advertising agency where I spent a good many years of my career.
Whether it was because I was part of the finance organization or just the reality of being part of a large, publicly traded entity with quarterly SEC reporting, our planning meeting always ended up being more about profit than anything else. But, profit doesn’t happen without focusing on people and product.
In a creative business, there is no product without the people who think up the concepts, then build the ads and other communication pieces to communicate them.
But, product might come first in a company where technology is changing rapidly and competition is fierce.
Regardless of the order, I find myself often coming back to those three words when I am thinking about my clients’ businesses and what they need to change to take their company to the next level.
The notion of hiring the best you can is hardly a new concept. Over the years it’s taken the form of “hire people smarter than you” or “get the right people on the bus.” As businesses grow and founders move further and further away from the daily work that made them successful, the people they hire are their true legacy.
There are two concepts about hiring and firing the right people that stick with me. First, the dual elements of competence and culture. As a finance professional, all too often I have accepted competence in a position when the person was a poor fit for the company. I’ve been slow to accept the importance of cultural fit, but recently faced two situations where we had to make changes in a key financial role even though the person was technically competent. It was only after the change that I truly understood the effect that the bad fit had on the whole organization.
The second concept related to the people aspect of business I have come to appreciate is “Hire Slowly. Fire Fast” I don’t know the origins of that little gem, but have learned the hard way that no one wins if you delay the inevitable termination of a poor fit.
Analyzing the quality and quantity of staffing is a key part of business planning at any size or level.
The business world is full of examples of companies that didn’t embrace the idea of “what have you done for me lately” and find themselves playing catch-up, sometimes hopelessly. There are also plenty of examples where the best product marketing wins out over the better product.
While losing track of the competition can be disastrous, it is often by simply defining the product and not losing focus that spells success. All too often, the same entrepreneurial spirit that drives an owner to set up shop can pull them into pursuing too many different lines of business, products or services.
It can be tempting to chase after the next big thing, but when it comes to the product piece of the planning process, “Know the business you’re in.”
And, don’t forget your customers. It is far easier and less costly to grow the existing sales base than to bring on new ones. Know your customers, never stop marketing to them and show them you care about their business.
Finally. This is where we come in.
When I first start working with a business owner, they often have no idea what their gross profit margins are or how to structure their internal reporting to understand the differences between their direct costs, variable costs and fixed overhead costs. Often, sales are good, but they don’t have the available cash they want or need.
Developing good reporting and metrics gives owners the confidence they need to make decisions and move the business forward. A CFO will take on the responsibility of reporting and analyzing complex information so the business owner can better understand what action is needed to grow the bottom line, beyond just more sales.
Back in my advertising agency days we used the motto, “Sales are good, but profit sets you free.”
People. Product. Profit.
It’s more than just a catchy phrase that some advertising agency dreamed up.
They are words that work.