"Revenue is vanity . . . margin is sanity . . . cash is king."
Unknown
There's an old sales joke about "losing a dollar on every item we sell, but making it up in increased volume."
I would imagine some CFO's reading this blog are not laughing at this, finding it all too common in their organizations.
They're right to be concerned.
Too much emphasis is placed on how much is sold, too little on how much is earned, and to make matters worse, many managers don't understand the difference between the two.
Do you?
There's an old sales joke about "losing a dollar on every item we sell, but making it up in increased volume."
I would imagine some CFO's reading this blog are not laughing at this, finding it all too common in their organizations.
They're right to be concerned.
Too much emphasis is placed on how much is sold, too little on how much is earned, and to make matters worse, many managers don't understand the difference between the two.
Do you?
OMG, you should be a CFO (are you?), or better still, a CEO who makes his staff learn this important lesson.
ReplyDeletemy experience is that the problem is not with the manager knowing this but the company or sr. mgmt pushing sales at all costs - irrespective of whether those represent PROFITABLE sales. "Gotta hit the forecast..."
ReplyDeleteAnd I often see that happen because of compensation packages. If all you charge me with is driving the top line, let someone else worry about the bottom line.
ReplyDeleteI heard it as "Turnover is vanity, profit is sanity, cash is reality"
ReplyDeleteEither way, great thought. We took a £1.7bn writedown last year due to exactly this behavious - chasing revenue instead of margin.