Relatively Solvent
Bleeding Much More Slowly
A manufacturing client had a large contracting arm that won very large jobs and, too often, lost very large amounts on one job or another. While the revenues were huge and the company’s profile soared with high-profile contracts, the service side of the business made investors just a bit skittish.
The head of the business unit developed a new plan to build both the level and consistency of profitability and presented it to the management team. Everyone seemed to be climbing on board until the new CFO added his perspective. Yes, he said, the new plan would raise profitability, if it worked. However, even in the best case presented by the unit’s chief, the returns would be lower than the company’s cost of capital.
Which brings us to the topic of swapping dollars, burning money and wasting time with no hope of real returns. Figuring out the total costs of operating any business unit, identifying the connected revenues or profits that flow from that unit’s operations and assessing the real opportunity for sustainability are much more challenging than those business school exercises would suggest.
Still, it’s worth the effort every so often to assess the real contribution of each product line or business segment to profitability and sustainability. Profitability can be tough to measure, especially when costs of capital and contributions to other segments are considered, but it is still worth doing.
Measuring sustainability—the connection between the product/service/activity and customer recruitment/retention—is a good starting point here. If the activity isn’t having a real impact on customer relationships, the other points might be irrelevant over the long term.
About Michael Rosenbaum
Quadrant Five founder Michael Rosenbaum has walked the walk when it comes to building a business, so he can be a confidant and compatriot—not just an advisor—for clients. Rosenbaum worked his way up to president of a $35 million company with 300 people and 600 clients. Along the way, he managed operations, HR, IT, and marketing, and advised CEOS and CFOs at more than 200 companies.
Beginning as a newspaper reporter, he developed a specialization in business journalism and earned an MBA on his way to a 30-year consulting career. Representing both angel-backed startups and Fortune 100 giants, Rosenbaum identified the patterns and processes that drive success across a wide range of industries and business cycles.
He is well regarded for designing each performance-improvement process around specific client needs, capabilities, and culture, rather than pushing a pre-fab set of rules for clients to follow. He brings a unique set of skills to each engagement, including experiences as a company president, financial journalist, marketer, IR advisor, non-profit founder, author, and public speaker. Items of note include:
• Received the Order of Merit of the Republic of Poland in 2015 for non-profit work
• Honored for the Best Business Biography of 2012 for his fifth book, Six Tires, No Plan
• Frequent speaker on customer relationship value
• Sales instructor for Certified Value Growth Advisor certification program.
• Regional Communications Chair, YPO Gold
• Marketing Chair, AMAA’s Mid-Market Alliance
• Former Chicago Chapter Chair, National Association of Corporate Directors
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