I was on a call with four other agency owners this morning and it was interesting to see how different our businesses were. Agencies should be similar, but there were real differences in how we priced and delivered work. What roles were needed in one business and weren’t in the next. What systems worked for one agency and didn’t make any sense for the next.
Mike Michalowicz has a line in one of his books where he says all businesses are the same.
All businesses are the same in that they have to provide value, earn revenue, and keep some of it. Regardless of how gigantic a business is, you can still reduce it to an income statement.
When I was in the infantry, my company commander emphasized that he wanted us to be, “brilliant in the basics.” This was because combat is chaotic and complex things collapse in that environment. A fancy coordinated maneuver won’t work when people are dying in an ambush, but every grunt knowing that they just need to “shoot, move, and communicate” would save lives.
The basics are what actually make the difference. Everything else is relevant only in its relationship to the basics.
As it relates to business, the “shoot, move, and communicate,” equivalent is deliberately monitoring and managing your profit margin.
We all know that we’re in business to make money and that we need to turn a profit. But in trying to achieve our vision or grow, it’s easy to de-emphasize the importance of margin. Your business may have strategic objectives or a “north star,” but achieving whatever change you seek will only be viable if you maintain profitability.
All five agencies on this morning’s call were distinct, but the differences all boiled down to alternate strategies to generate revenue and capture profit.
Managing margin isn’t fancy, but it’s what makes the biggest difference. As a friend put it, “Profit is the oxygen of your business.“
Featured image is of a Yupana calculating device used by Incans. Photo by Scarton – Self-photographed, Public Domain, https://commons.wikimedia.org/w/index.php?curid=42475393