Tag Archives: business thinking

April 15, 2014 · 8:27 am

The Bottom Line

A business thought for Tax Day found in some dance music!  If you were following music as the punk movement hit in the late 1970’s, you were quite aware of The Clash. You might have even shed a tear when Mick Jones, one of the guitar players and a key songwriter, was kicked out of the band. This TunesDay we’ll use a song from his next project – Big Audio Dynamite – as our jumping off point to discuss business. It’s called The Bottom Line and it’s a fun listen if only for the wacky, mid-1980’s video:

This lyric raises our business thought:

A dance to the tune of economic decline
Is when you do the bottom line
Nagging questions always remain
Why did it happen and who was to blame?

It always amazes me how many smart people forget that “margin” is at least as important as “revenue.”  They spend a lot of time generating revenue from unprofitable activities while ignoring a part of the business that might have a high margin although the revenues aren’t much.  I thought we had all learned about that sort of thing in the dot-com bubble long ago (internet years are like dog years – the intervening 15 years are like a century in real-time).

It takes a fair amount of courage to abandon unprofitable customers or segments of your business which are generating decent revenue.  Revenue is always just one aspect of the business story.  Cash flow and profit are two others which are far more important.  Sure, revenue is the fuel that makes the business engine go, but a leaky gas line almost always results in disaster.

There is also the mistake some folks make in thinking about margin.  They forget that in addition to the gross margin (basically the cost to the customer minus the cost to you) there are other things that are “indirect” costs such as advertising and overhead that should be factored in to prevent the business from losing money on many sales.  Of course I see the need to scale – to build a customer base and generate cash flow – but if it’s not done in a sustainable manner, it’s just an exercise in futility.

The “gross revenue” line is where the head of sales lives.  The bottom line is where great business people reside.  Where are you?

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April 14, 2014 · 8:38 am

Why Facts Matter

I read a disturbing, though unsurprising report this morning. It’s from the Union of Concerned Scientists and has to do with climate change. Since this is a business blog we won’t get into the politics of that issue. I will, however, use my bully pulpit to remind you that unlike many of the challenges we face, money or power won’t buy you a different planet on which to live so you won’t have to deal with Earth’s climate.

Back to business.  The report looked at the three main cable news channels and the scientific accuracy of the statements they made with respect to climate change.  This is important since CNN, Fox News, and MSNBC are the most widely watched cable news networks in the United States, and their coverage of climate change is an important source of information for the public and for policy makers. Thirty-eight percent of American
adults watch cable news and cable news coverage of climate science often reflects and reinforces people’s perceptions of the science, as the report states.  What did they find?

Using specified criteria, we determined whether the individual segments identified dealt with climate science and whether the portrayal of climate science was consistent with the best available scientific evidence at the time of broadcast.  Of the CNN segments that mentioned climate science, 70 percent were entirely accurate, while 30 percent included misleading portrayals of the science.  Of the Fox segments that mentioned climate science, 28 percent were entirely accurate, while 72 percent included misleading portrayals of the science. Of MSNBC segments that mentioned climate science, 92 percent were entirely accurate, while 8 percent included misleading portrayals of the science.

My point here isn’t to promote to bash one network over another.  If you’re making business (or other) decisions based on what you hear from a particular source, you might be missing quite a bit of information.  Even worse, as this study shows, you may have quite a bit of wrong or misleading information.  If the most accurate network got a bunch of critical information right only 92% of the time, how accurate can your facts be if they come from any single source?

Facts matter.  Just because a news organization (or a bright consultant) tells you something doesn’t make it factually accurate.  When a few independent sources do so, you’re probably on solid ground.  That’s the place we need to find.  Are you coming with me?

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April 11, 2014 · 10:46 am

Sinkers Vs. Floaters

It’s Foodie Friday and this is the last food-related post before the start of Passover.

matzah ball soup

Photo credit: h-bomb)

In honor of that, I thought I’d raise one of the most important questions this time of year brings:  sinkers or floaters?   I’m talking about matzo balls, of course, and the question of whether they should float in the soup like little clouds or sink to the bottom like rocks is a matter of serious debate around the Seder table.  As it turns out, the debate contains some instructive business thinking as well.

I’ll preface what I am about to say with an acknowledgment that I am not a neutral party.  I have some definite thoughts about matzo balls.  I should also add that here in the New York area, many non-Jews eat a lot of matzo ball soup year round so the debate isn’t limited to Passover tables.

The basic recipe for matzo balls is simple.  Matzoh meal, eggs, fat of some sort, and liquid.  That’s where agreement stops.  The primary aspects of the discussion involve the following (almost Talmudic) questions:

  • Should the kneidlach (Yiddish for matzo balls) sink or float in the soup?
  • Should they contain schmaltz (chicken fat) or margarine or oil?
  • Should seltzer be used to “leaven” them?
  • Should the egg whites be separated and whipped to add lightness?
  • Should they be boiled in salted water or in the soup broth?
  • Should they be the size of golf balls or tennis balls?

There are some minor issues including the use of parsley and other seasoning but the above are the main elements.  Every family has their own answers and even within a family there is disagreement, especially if there are two grandmothers involved.  Which brings us to the business point.

There are few things more simple and yet as complex as these little dumplings.  The risk one runs when just assuming they can make them without careful thought to each of the above is that the debate rears its ugly head at the table and a familial brouhaha ensues.  The same problem happens in business.  We often look at seemingly simple issues without a fully thinking through the many complex underlying issues that can affect how well the final product fares.  That can be a huge mistake and it’s always worth a few minutes thinking through those issues before jumping into a problem.

Floaters with a nice “chew”, by the way.  Yours?

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