The Budget

U.S. Federal Spending FY 2008

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I think we all know by now that politics is not a topic of conversation in this space.  However, sometimes things going on  in politics lead us to insights about business and hopefully that’s the case today.

You’re probably aware that there’s a “discussion” of sorts going on with respect to the Federal Budget (I use quotes because it often seems to be less of a discussion than a topic about which to issue press releases stressing one’s unwavering position as if that’s helping us all).    I’m kind of amused that all we seem to hear about is how we need to cut spending (we do) and not a lot about how to grow revenues.  Which of course got me thinking about it in business terms.

I’ve written before about the Cap Cities philosophy put forth by Tom Murphy and Dan Burke: spend every penny you need to spend to make your plan – not one cent more but not one cent less.  That’s always seemed brilliantly effective to me.  When revenues decrease and profits fall some managers immediately begin demanding expense cuts to maintain profitability.  The problem is that at some point the fat is gone and the organization’s ability to generate revenues is impaired.  I don’t believe that cutting by itself is a good business strategy.

When I work with clients to raise money, we talk about what problem the client’s business solves for its customers.  If you can solve a problem more efficiently or better (even if you’re more expensive than someone else), you add value.  That value is based on your customer’s needs.  That’s how you grow revenues – add value to a greater degree than your costs.  If you focus your expenses on doing that (adding the most value), you win.  If you don’t fund the things that add that value, you lose.

As I’m watching the budget “debate” (those pesky quotes again), I’m watching to see who is focused on providing maximum value to us – the people whose problems they’re supposed to be addressing.  As I work with clients, I’m trying to keep them focused on the same thing – cost, value, and not making short-term decisions with long-term implications that run contrary to their business goals.

What’s your take?

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