And could potentially save you some years of mistake ahead.
I started working in Finance in a tech company that made 2M a year, and I had the opportunity to see that company grow to a holding 50x bigger.
Working with some money is not very much different than working with a lot of money. Mainly because numbers are never about the numbers. Numbers are about the people and how they make decisions about the numbers.
The bigger a company gets, the more strategic Taxes become
You may not like taxes. That’s okay, most people don’t. It is usually a confusing matter, especially in Brazil — where I work. But it is a huge part of your business because taxes have everything to do with business models and how your company could be the most profitable possible amongst all the options.
So you must have an accountant you trust and understands your business enough to talk about your business model. And — sorry — you must understand enough about takes to make this conversation happen.
Having method will save you big time
As companies grow and scale it is common for teams to become more distant. Other teams such as marketing, sales or customer success may even a budget of their own and have more autonomy.
But more people getting involved in processes and decisions means a huge mess if they all make decisions 100% their way. There’s got to be a company method, some sort of process to be followed. For spending, for investing, for all the decisions that involve money. Otherwise you’ll have different treatments for the same decisions in different teams, and that doesn’t help you at all.
People must understand why they are doing things
It is a little about the culture and a little about leadership. Decisions usually come from the board — for medium and big corporations at least — and there is a sense that rules just must be followed. But people are not wired to just follow rules, there’s gotta be a why — which is something Simon Sinek develops deeply in the amazing book Start with why.
So to get things done — a new project, a change in a process, launching a new product, anything — you have to share with people the reason the company is doing that. There’s no successful finance decision without the why.
There’s a lot more gambling than it looks
I’m a huge fan of the scientific method. Taking a Masters in Science was one of the best professional decisions I have ever made.
But daily life in business requires way more skills than just analytical thinking. Some decisions are taken based on feelings and there’s a lot more guessing than you’d hope to be.
Products can be kept in the portfolio only because they are a statement, even when they don’t bring enough revenue. Investments can be made based on political scenarios and how they may play out.
We gamble because we sell the future, and there’s no amount of numbers in the world to forecast the future.
Forget about the no error vibe
There’s a vibe. We learn about innovation in college and graduate school, we simulate what new things look like. And some companies amazingly embrace errors, but most companies don’t. Because most people working in them still have a no-error-mindset. Most people still believe any mistake is punishable — so they avoid them no matter what.
But you must forget about this. For real. I’ve made plenty of mistakes in my career and watched several mistakes be made by people I admire and look up to. And it is freeing to be able to work with less fear of errors.
No major decision must be made on a large scale first
Always a pilot first. Always a pilot first. Always. A. Pilot. First.
Whatever you’re trying, try it at a small scale first. Few people. Faster. Only if it works then you go on changing all of it. It’s not only because it’s less expensive, but because you create a test-and-validate mindset, which is soooooooo useful. Teams working in this mindset are more agile and more prepared not only for the mistakes they’ll make but even more for finding solutions for these mistakes. Which is all we want anyway.
How and how much you sell for account more for profit than the product itself
The product must be good. Period. But how much you are selling for and what is your revenue generation strategy accounts for the maximization of profit. A good product will do okay. There are always customers for good products.
But only well-positioned products with the right price and the right strategy have the potential to take over the market. I’ve seen good products fail and others succeed and it all comes back to strategic pricing and positioning.
Numbers will tell you anything you want
Understand and interpret data is one of the most important skills you need to have. Mostly because companies now have lots of data in any form they want. The thing is: data will tell you anything, it all depends on your bias(es).
So something I learned when it comes to looking at data and understanding tendencies is: don’t do it alone. Having other people from other areas and with other backgrounds help you interpret scenarios. This is at the root of the importance of diversity in organizations: diversity of background, the field of study, culture, values, etc. It won’t guarantee you won’t get blindsided, but it will considerably reduce the risk.
Finance is all about…power
As much as anything else in businesses. I learned a lot by working in Finance for the last 10 years, but all the other lessons connect to only one: it is all about power.
Budget control, pricing strategy, cost reduction, growth strategy, taxes… all the decisions and all the aspects of financial management are related to finding, using, and maintaining power.
Every organization has its way of doing things. Or better: organizations have their way of distributing and maintaining power. Understand how the power works, and you’ll understand how the company works.
#pricingstrategy #business #finance
Larissa Sielichoff is a consultant and mentor in Pricing Strategy, holds an M.SC degree in Business and Innovation, and developed a pricing methodology focused on digital solutions based on her dissertation — Why Pricing Matters.