The First Rule of Business (Revenue)

Here is a video on the First Rule of Business… “In business, revenue solves all problems.”

VIDEO SUMMARY

I am going to share with you the most important rule of business. To be honest, this is less of a rule and more like a guiding principle mixed in with a little bit of my opinion. But I feel like it is a very powerful idea, so I wanted to share it with you. I feel very lucky because I learned this rule very early on in my career. And when you understand this concept, it will really help you to make strategic choices in your business. Here it is… In business, revenue solves all problems. I will say it again, revenue solves all problems.

If you stop and think about it, this is a really profound insight. It doesn’t matter what problem you are facing, more revenue can fix it. So if you took any business, and doubled their revenue, you would be swimming in money and your problems would just melt away. Revenue may not necessarily be the true solution to your problem, but it will provide you the resources to solve it. So when somebody comes to me with a business problem, the first question I ask is “what are you doing to increase your revenue?” This is not an obvious direction for a lot of business people, because they want to tackle the problem head on. But if you don’t fix your revenue problems first, you are not going to be able to do anything else.

Let me give you an example. Let’s say you have a manufacturing plant, and you are having a quality problem with one of your products. Well the solution is more revenue. What you really need is to fix the quality problem, but more revenue allows you to go out and hire quality experts to come in and solve the quality problem. If you don’t have the revenue, you don’t have the resources to fix the problem. The worst case scenario is when you are not making enough revenue and you are unable to deliver for your customers. This rule not only works for businesses, it works for any organization, including non-profits and government. If you don’t have funding coming in, you cannot solve your problems.

The reason it works this way is that revenue to a business is incredibly important. When you think of a company’s income statement, it reads Revenue – Expenses – Taxes = Net Income. Revenue is the first thing. If you don’t have revenue, you have nothing to pay the expenses with. If you don’t have sales coming in on a regular basis, it doesn’t matter if you have the best staff in the world, because you won’t be able to pay their salaries. So revenue is really important.

So now you know the number one rule of business “Revenue solves all problems.” What do you do with that information? This tells us that everyone in your company is in Sales. Sales is not just up to the people in your sales department. Sales is the responsibility of everyone in your organization. Everyone is in sales. So what you want to do is look at your business, and create a Sales oriented organization. If you think about it, every department in your company has touch points with the customer. At each one of those touch points, you should be delivering value for your customer and bringing them back for more sales.

So let’s look at an example of your accounting department. Now this is one of those departments that nobody thinks has anything to do with sales. But accounting has one of the most important touch points with the customer: Collections. Collections is in the accounting department and there is a wall between the collections department and sales. And there is many good reasons for this separation to exist. But what if your collections phone call was a continuation of the sales process. There is no reason why you can’t use that phone call with your customer to get customer feedback and generate more leads you can send back to your Sales department.

But collections is just the most direct way accounting impacts sales. The truth is that all aspects of accounting impact your customer’s experience. Accountant’s have a tendency to create massive bureaucratic systems. But if you have an easy, quick, agile accounting system, your customers can feel that. Those kind of systems throughout your business, is what makes it easy for your customers to do business with you. So accounting can have a huge impact on Sales. So I always encourage accounting departments to have a sales focused attitude on strategically thinking about ways to improve the customer experience.

I want to end with the big picture perspective. The reason why this rule is so useful is that it focuses everyone in your organization on one problem: generating more revenue. What often happens in an organization is everyone thinks their own department’s problems is the most important. And this is natural. So Accounting thinks their problem is the most important. Operations thinks their problem is the most important. Sales thinks their problem is the most important. So this rule focuses everyone on this one central problem, which is generating more value for your customers in a way that leads to them giving you more money. Just think of how powerful it is, if every person in your organization wakes up every day thinking “How can I generate value for my customers.” Your customers are happier. You are happier. It is a win-win situation, and that is what business is all about.

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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.