I often remind our sales team that when we compete for business, we actually do need to make a profit; we don’t need the practice. It can be a tough lesson.
Recently, we lost a $250,000 project with a well-known organization. We knew the costs because we have been serving the customer for three years and bid accordingly. We lost out to a competitor that came in 30 percent below our proposed price. Of course, our sales team was disappointed; I’m not so sure I was.
We can always win on price, but it does not mean it will help our business. It is our job to responsibly return a profit and that does not mean doing more for less.
It is rare for leaders to have formal financial training before assuming their positions. In most cases “finance or economics degrees” are earned on the job. Last time, I shared some of the key financial metrics for business leaders as I began to answer the question:
Many employees just don't seem to get it; “how do I help them better understand how we make and lose money?”
Leaders at all levels need to be able to execute on not just a business plan as it relates to products and services, but also the financial plan. In this blog, I share some concepts we use to help new leaders understand, interpret and apply the figures that matter most to our business:
1. Identify the metrics they need to know.
There are some core financial reports that virtually every organization uses to monitor and measure the bottom line. No matter what titles leaders hold in the company, they need to understand the core metrics in the income statement, balance sheet and their industry. But often, the key to success is helping managers understand a series of detailed metrics connected to the area they are responsible for – and can influence the outcome of. Get my full list of must-have metrics.
2. Schedule regular one-on-one mentoring meetings.
I don’t think it’s fair to hand new managers a finance report at a meeting and hope they get it. The quicker they understand, the better they can perform. That’s why our executive team is committed to mentoring each new manager to focus on the income statement and the metrics needed to effectively run his or her part of the business.
3. Create and distribute easy-to-read financial reports by region and division.
The right information is critical here. We spend a significant amount of time at Marco developing reports that contain key metrics that reflect our monthly overall performance as well as the specifics for each of our business units – by product category and location. At a glance, I want leaders to be able to see how our year-to-date performance compares to our budget and last year. That’s where issues can be raised, trends can be identified and conversations can start at the leadership level.
4. Review company financials with leadership team.
This should extend beyond the C-level leaders to include all directors or managers of key areas of the business. Every month, directors and managers at Marco receive – and review in detail – the company’s financials. It’s a practice we started long before we became employee-owned. Leaders should know how the company is doing and, more importantly, have the figures they need to make effective decisions.
I’ve written about a lot of topics in this blog. But as I shared last time, it really is about the bottom line. What are you doing to help your new leaders understand how your company makes money?