And on Monday, Les McKeown wrote “Living with the Pregnant Widow,” a tongue-in-cheek look at the so-called social media experts who, again, are stuck on the tactics and not on results (mostly because having a Facebook page or a Twitter account does not lead to business growth, directly).
The interesting thing about both of these letters (blog posts) is both Doug and Les run businesses and have hired PR firms. And they didn’t check with one another before writing their perspectives. This perception of our industry is pretty rampant and it’s also why mainstream media such as The Economist write articles like, “Public Relations: Rise of the Image Men.”
It’s our own fault, really. We ARE stuck on the tactics and the process and not on the results. And it’s because we’re typically not business people. We’re liberal arts people. We can skate by without ever having to take a business class or learn the difference between a P&L and a balance sheet or if revenue or income is better or how to grow the bottom line. Most of us have never walked in our client’s shoes and most of us likely won’t.
We’ve always gotten away with increased brand awareness and media impressions and advertising equivalencies. And that stuff is bogus because general accounting principles don’t value a company based on brand awareness (unless you’re Coca-Cola). It’s based on assets and income.
This is not going to be a one blog post lesson for PR professionals, but let’s begin now and continue next week.
Right now, learn the difference between the P&L and the balance sheet. Learn where equity and money invested plays into the business. Learn why profits exceeding expenses is better than a huge revenue number with huge overhead. Use Groupon as an example.
Find answers to the following questions:
- How can Google offer them $6B to sell when their revenues (not income) are somewhere in the $300-$500 million range?
- How can they raise $950MM on that kind of revenue number?
- Why are they being valued on a multiple of their revenues and not on how much money they actually make?
- How can the stock market be valuing them at $15B if they IPO?
- How have they structured the business with debt and equity to not only pay out stock holders but the public when they IPO?
Granted, Groupon (and Facebook) is being way over-valuated and we’re about to have another bubble burst, but it’s a great way to begin to understand how a business makes money and how your efforts can help.
If your company has an open book regarding financials, sit down with the CFO and have him/her explain how your business makes money and where the money goes. If your company does not have an open book policy, ask if the CFO will explain the P&L to you with $1 as an example.
For instance, if you take $1, is $0.60 of it going to payroll and $0.20 percent of it going to technology and $0.10 of it going to employee perks and $0.05 of it going to insurance and $0.04 of it going to reinvesting in growth and $0.01 of it going to bonuses and raises? I think you’ll be surprised at how it’s broken down.
Learn it. Understand it. Revel in it.
If you’re a solopreneuer or just starting your company, take some business classes. Find a mentor who has a financial mind. Join an organization like Vistage. Get yourself some help on this side of things or a) you won’t be able to counsel your clients effectively and b) you’ll never grow your business (or your income if you’re not going to hire staff).
Once you really understand how the company you work for makes money and once you’ve used examples such as Groupon to further your education, then you’ll be ready to begin having different conversations with your clients that lead to your becoming a growth generator, not an expense.