Book Review - Spin Selling

Happy Friday!

I'm going to share my thoughts on a book I read a while ago called Profit First.

"Whoa, you read books? How many pictures do they have?"

Well, they're business books, so a few.

I can't recall how I bumped into this book, but it was either mentioned on a call or a post somewhere, and it sounded interesting.

The book's premise is straightforward enough—take profit first. This is a financial book, so it gets into the basics of accounting for your business, about how to organize money and where it needs to go, and healthy allocations towards things like taxes and such, but you take your profit first.

The reason for this approach is that it compels start-ups and small businesses to succeed. Only successful businesses have a profit.

You see, new products, small businesses, and start-ups struggle with this. As they get customers and revenue, they think about where that money needs to go, and it is always right back into the business. Maybe it's to grow more, or to squirrel away in case something happens, or improve operations, etc.

There is a serious hesitance to take money out.

This can happen for years, even if the business is successful, folks keep finding excuses and fears to justify never taking a profit.

Products within companies can do the same. There is always more scope, more fixes, more things to do that come out of revenue. There is always an excuse to add more instead of profiting.

By forcing yourself into a financial approach of taking your profit first, you have to deal with an insidious issue that all that re-investment isn't a sign of health—it's a sign of failure.

Healthy businesses are profitable. If you cannot take a profit, your business is failing. If you force yourself to take a profit, you now have to see the reality of your business, product, or start-up.

If you take a profit, will your business succeed or fail? If it fails, you never had a successful business, and you have to make it run better.

The book gets into numerous examples of this, where you take your profit and then realize you can't afford to pay rent or buy more inventory. This forces you to evolve or die.

So in corporate product development, folks love roadmaps. Folks love mock-ups and scope. But what if part of the conversation was that we only evaluate our product health after you allocate its profit? Will spending more on another design refresh, more scope, and more modernization make sense? Do the 4 teams you have working on it cost so much that your business model is underwater?

Profit-first accounting is about forcing yourself to be successful and dealing with the reality that comes with it. It isn't saying someday if you work hard you'll earn a profit, it is a declaration that you must be today. If you can't, you have to change.

Sincerely,
Ryan

PS: At one of my clients, I was asked to create profitable software products, and I operated with this approach. It led to some very difficult conversations with departments that loved to talk about efficiency, but not the actual cost of it.