Keep Your Focus On Top Line To Ensure A Good Bottom Line
A successful entrepreneur quickly learns how to make the “highest and best use” of his or her unique venturing talents. The fortunes of a firm are determined by the entrepreneur’s ability to focus this proprietary energy in the areas of activity that will produce the greatest results.
Q: All business people are taught to revere the “bottom line.” This advice has prompted me to spend most of my time on managing costs, processes, and systems to make sure I’m generating a profit. I’ve gotten good at it, but I don’t feel that my company has taken off like it should have. Am I missing something?
A: Yes. You’ve overlooked the critical importance of your “top line.” It is your firm’s revenue stream - the sales that show up on the top line - that constitutes the fuel needed to propel your enterprise.
Without an adequate flow of income, you’ll never be able to get enough black ink to the bottom line to be satisfactorily profitable.
The “magic” that an entrepreneur brings to an enterprise occurs at the top of the income statement. It is because of his vision, optimism, product or service knowledge, and boundless energy that stuff gets sold in the first place.
It is his unparalleled optimism, ingenuity, and persistence that keeps the product moving. It’s an entrepreneur’s bundle of rare traits that generates an adequate and consistent revenue stream, the lifeblood of any business. His matchless marketing drive and customer contact skills keep the stream flowing.
Most of the people who work for you probably don’t have these venturing abilities to the extent you manifest them. Therefore, the best use of their talents is in the conversion of your marketplace magic into a bottom line.
They are the ones who should be using the managerial - as contrasted to entrepreneurial - skills they learned in business school on procurement, production, expense control, and systems development.
Of course, as the firm’s leader-in-residence, you can’t abandon these vital administrative processes, but the bulk of your time and creative juices should be devoted to those product, market and customer functions at which you excel.
Management skills are critical, but they are readily available in today’s workplace. A person like you is hard to find, however. Not many people are capable of turning a vision into an opportunity, and converting an opportunity into a business.
Someone once asked Henry Ford who should be the boss in an organization. Ford observed that this is like asking who should sing tenor in a quartet.
“Obviously,” he replied, “the person who can sing tenor.” Or in the words of my ol’ Uncle Ollie: “If ya got it, flaunt it.”
So don’t fuss over the administrative details of your business. You can hire a capable person to do that for you. Keep your precious entrepreneurial eye on the top line from whence all good things will eventually come.
One of our Internet correspondents is working with a potato-grower/ packer who grosses more than $25 million annually from 11,600 irrigated acres. He’s formulted a mission statement, which he posts publicly, and meets with his staff weekly to discuss goals, assess performance, and explore new opportunities.
He has provided his key managers with equity incentives. His finances are excellent. One thing he has neglected, however, is the preparation of a business plan.
Q: How do you convince an obviously successful agri-entrepreneur that he should put together a formal, written plan?
A: Who’s to say that his enterprise is as successful as it could be? To be sure, he is operating effectively. But it’s possible that he could get even greater contributions from his team - and their spread - if they had a clearer understanding of his long-term vision for the enterprise and the steps he perceived as necessary to get there.
In contrast to weekly meetings that concentrate on short-term iterative actions to keep the business moving, a plan would invite “big picture” ideas and suggestions that might improve the overall course of the venture.
Plowing through operational details is important, but it is the new hay in the silo that will nourish the firm in the future. A plan provides a description of the “destination,” without which the “best course” cannot be plotted.
Also, if his key managers help prepare the plan, they will have even more incentive to make it happen. They are already equity owners but, by being able to call some of the shots while contributing to the plan, they will also have control, the other essential element of true ownership.
As ‘ol Ollie would say: “He ain’t seen nothin’ yet!”
xxxx Paul Willax is the Sandifur Distinguished Professor of Entrepreneurship at Eastern Washington University.