I was at a business lunch recently, and inevitably someone began to discuss the challenges that come with business; I was instantly reminded of a core business truism... something fundamental to all that is defined as business and very complex. It goes like this -
Profit = Revenue - Cost*
- Revenue: money generating from the products or services you sell.
- Cost: the money needed to run your business (tangible and intangible)
- Success is defined as profit moves towards, and ultimately above zero.
Reflecting back on my salad and our conversations around the table, this is what I walked away with.
Business is a people activity
No single person can run a business alone... it's simply too complex to have all the skills and knowledge needed, let alone the time. This is where building strong business relationships are important with trusted, smart and reliable people. As the old saying goes, "If you want to go fast go alone, but if you want to go far go together".
Asking the right question is more important than having the right answer
Asking the right question that uncovers the answer to a better "line of sight" or understanding of a situation is key. It is much better to say, "I don't have the answer, but will find it", than not know what question to ask and in turn not get the answer you need. The old adage of "You don't know, what you don't know" rings true here, and remembering that business is a people activity, will help. The more good people involved in the discussion, the better chance you will ask the "right questions".
Listening is much more important than talking
Sharing thoughts, perspectives, knowledge and insight are important for you when tackling this truism. Let someone else have a turn sharing their thoughts. It will serve you well.
If your business lunch doesn't include talking about the customer, then what you are having is just a lunch. Customers are -
- The people who will buy your product and/or service contributing to revenue generation.
- The employee who will implement activities that either generate revenue, or help pull cost out of your business activities.
- The community where your business operates and is involved... this indirectly generates revenue and reduces costs, as well as supports sustainability.
- The shareholder who looks for profit and good governance.
Revenue is not easy to generate
Great ideas lead to great products... however, contrary to that popular saying, "great products sell themselves", they in fact don't. Generating revenue involves a large amount of work to develop customer relationships, communicate the value of your product, overcome aggressive competitors, and offer a service proposition that will have the customer purchase from you again. It is hard work.
Just because you want it really, really badly, doesn't mean others do; it takes time to communicate ideas, change perspectives and influence behavior. Endurance, persistence, risk tolerance and dedication are also other characteristics that will serve you well when dealing with this truism.
In the end, it is your decision
Depending on your position in an organization, your decisions may or may not have direct ramifications on revenue or costs (or both). But we all have a part to play and responsible for the decisions we make; stand by them, and make them work.
Revenue versus Cost
There is an attractive "bunny hole of a discussion" with regard to whether revenue generation is more important than effective cost management and governance. This is a pointless debate and is analogous to arguing that the heart is more important than the lungs in terms of keeping the body alive. It's best to focus on what you need to do and be as effective as you can be.
One of the stories around the table involved someone working through a complex situation and they metaphorically said, " It just seems like every time we turn over a new stone we find a 'squiggly'"**. I laughed and laughed... not because of the problem they were dealing with, but because a very accomplished individual used a word like "squiggly". And this is why I like business.
Business is not easy and the truism of "Profit = revenue - cost" can take a lifetime to solve. But as you work through it, you are challenged, rewarded, learn something new everyday, meet amazing people who use the word "squiggly" - When you look back on it all, you will more often than not be proud of what you have accomplished, had fun and laughed.
* If you believe this truism doesn't apply to you, then you are either not in business or you have "some" work ahead of you.
** Saying squiggly instead of worm as a metaphor for a "problem" just struck me very funny and also illustrates that they weren't necessarily nice looking problems (with all due respect to worms).