Do Not Worship A False Profit
by Joe Bonura, CSP
The False Profit
In today's fickle economy, too many companies are worshipping a
false profit when they worship the "bottom-line." I have
owned and operated two successful companies in my lifetime, and
I earnestly believe that I have learned that if you focus on the
top-line (gross sales), the bottom-line will take care of itself.
Cut, Cut, Cut, Cut, Cut
In a slow economy, publicly-held companies cut budgets so that
they can please their stockholders and show an immediate profit
on the bottom-line. Most of the budget cutters look like heroes
after the first few months of the change because initially they
put a profit on the bottom-line. They do it by slashing people,
training, and advertising (PTA), usually the first three casualties.
Looking Good Versus Doing Good
They look so good that other companies begin courting the "cost-cutters"
to work for them. Leaving a temporary bottom-line profit, the "cost-cutter"
departs to go with the new company. A few months after his departure,
the former company experiences serious problems, and the blame is
placed on having lost the "cost-cutter." In reality, the
negative results are caused by the cuts he made that are just now
coming home to roost, all this while he is making his new company
look good, and the cycle continues.
Short Term Suicide
The problem is that cutting is a short-term fix to a long-term
problem. I have never seen a company cut themselves into a successful
marketing position. Sorry, but the real name of the game is the
top-line that can only be made to grow with investments in people,
training, and advertising (PTA). Lee Iacocca proved it many years
ago when he led Chrysler out of bankruptcy. He did it by coming
up with exciting new products and increasing sales by investing
in people, training, and advertising.
In 1978 my ad agency lost 70% of our business because of the loss
of one major account. I put all my eggs in one basket and watched
the basket turn over, making one ugly omelet. I was understandably
devastated because I had not focused on growing my business. I had
focused on growing one client's business. After this rude awakening,
I developed a new philosophy: focus on growth and improving gross
sales (the top-line) and everything else would take care of itself.
The strategy proved successful; the bottom-line blossomed; and we
became the second largest advertising agency in our area.
Make Your Own Recession
What makes anyone think that getting rid of people and cutting
back on training and advertising will cause a company to come out
of a recession? Does it seem logical to you? We can get out of any
enterprise that which we put in, not what we take out. When a company
cuts back on necessary resources, it begins a cycle of decline.
People, People, People
Let's talk about people first. In most businesses, it takes people
to make the product, sell the product, deliver the product, and
service the product. So, how can cutting key people help you better
service your customers? If you cut back on staff, the customer would
have to be on another planet not to see a difference in your level
Targeted, Focused, Skillful
In tough times, if you decide to keep a full staff, maximize their
potential. In good times or bad, it is important to constantly establish
new and innovative ways to do things. Train employees in new skills
that they can use to help your company grow. Sales people must make
more targeted, focused and skillful calls, and always approach the
market from a different perspective than the competition. This can
only be accomplished by teaching them new skills, training them
to perform effectively to fit the new marketing environment.
The Customer Is Waiting
I have consulted with companies that confided that sales were down,
and there was nothing they could do about it. I would then go in
the field with their sales people, and we closed on eight out of
ten calls. My ultimate goal is to teach their sales people to get
similar results. They immediately see a big difference in their
top-line. Recently, I trained a media rep, and he sold a $250,000
contract with an advertiser. In that one sale, the training paid
for itself many times over.
Out On A Limb
Sales and customer service training is the smart way of getting
more out of a slow economy. It is the rope that someone throws to
you after you have fallen from a cliff, and you are hanging on a
limb. It is the rescue that gives you something to hold on to while
Cut The Ad Budget
When I was in the advertising business and there was a slow economy,
many clients opted to scrap the ad budget. Now I ask you, does it
make any sense to eliminate your life preserver when you have fallen
into the sea? Advertising is more necessary when times are bad,
than when times are good, because advertising is a way of letting
customers know that you are still in business.
Maximize Your Investment
You may have to take a more creative approach to your advertising
investment. Your goal is to maximize every dollar you invest in
your advertising program.
Invest Or Perish
If people, training, and advertising were important to your business
before the economy ran into a crisis, does it not stand to reason
that they are even more important to you when times are bad? If
you are not going to invest, you might as well divest yourself of
your company before it is not worth selling.
Maybe it is time for your company to have a PTA meeting and talk
about people, training and advertising.
Do Not Fall Off The Stool
There are less important areas that you can cut when times are
bad, but do not cut the good areas, those that support your business.
It is like cutting one or more legs off of the three-legged
stool to mess with the PTA.
© 2008 Joe Bonura & Associates, Inc.