Financial Metrics and Why They Matter to Marketers

What We Discussed with Rob:

On this episode, host Eric Dickmann interviews Rob te Braake about financial metrics and why they matter to marketers. Here are some highlights of our conversation:

• [00:04:48] The issue that most entrepreneurs face- Rob te Braake believes that the most common problem that entrepreneurs face lie on two parts. One is that the data quality of their business is usually subpar. The second is that the data might be so overwhelming or so scattered that it becomes hard to identify the numbers that really should be tracked. Rob emphasizes that the things you've got to look at and the meaning of the numbers are entirely different. He then reminds entrepreneurs that before anything else, they should recognize the goals they are trying to achieve and how they will reach them.
• [00:06:34] Do businesses have a hard time adjust in spending when they get to profitability?- Yes, businesses encounter problems whenever they face profitability. Rob believes that there is a massive gap between the source of funding and utilizing profit. There's is often a massive disconnect between the amount of money on the balance sheet (the runway, the operational cash flow, etc.) and projected profits. 
• [00:08:09] The overinvestment trend of businesses- According to Rob, there is one consistent trend among marketers, and that is companies overinvest in background area of their founder or CEO. For instance, if the founder is skilled with products, there is a higher probability of over-investing in products and product development. However, if the founder has a marketing background, it is more likely that his company will direct its effort towards strengthening its marketing program. Most of the time, founders over invest in areas where they are most familiar, confident, and comfortable, rather than focusing on the business' weaker points.
• [00:08:58] How does the human capital side of business play out nowadays?– On the hiring aspect, Rob doesn't see a clear trend for companies. Due to the pandemic, industries have considered shifting to remote work and opened themselves to engaging freelance talent. Like the investment option of many businesses, Rob explains that the recruiting decision often ties back to the founder's personality. He further advises businesses that if they have the cash and the capacity, it should be their top priority to recruit people to free up more time and grow faster.  
• [00:15:07] How can businesses maintain their cash flow better?– First of all, if you are a service business, you have to be strict with your receivables. Having an organized payment system for your customers should be established so customers can pay faster and limit the risk of loss for the business. However, if the business is working with new clients, your system may depend on the market and its performance. Rob points out that it would always be best for clients to pay upfront first because this lessens the chance of people not paying after the product or service is delivered. 
• [00:17:43] Making cash transactions as easy as possible- Some businesses disagree with credit card payments for small cash transactions because of all the hassle, time, and additional costs they incur before receiving the payments. However, Rob believes it is better to collect money up front than to chase it down later. It is shocking that many businesses still have not yet adopted a "payment first policy" to minimize their profit loss risks.
• [00:19:22] Are the tools that can monitor analytical capability good enough?- Rob commends analytical tools such as QuickBooks, Xero, and other similar platforms since they have steadily increased in their analytical capabilities over the years. Sites such as QuickBooks give users a fairly decent dashboard to easily monitor progress and changes. However, these platforms cannot interpret the numbers and explain them to business owners who don't have experience in bookkeeping and data interpretation. Understanding the data can help businesses recognize if their current processes are good or bad and shine light on what's working and not. 
• [00:24:14] How can businesses identify if it's a bad quarter or a beginning of a big downward spiral?- Rob shares that for businesses to identify whether or not they are experiencing a fluctuation or a long-term downturn, it would be beneficial to check the historical patterns and identify if the current trend has also happened in the past. Business owners can also check how other companies are doing and recognize the measures others are taking. If you're in the service industry, the business can observe customer behaviour. If they are happy and optimistic, then probably things are going well. However, if people get jittery and are almost in panic mode, it is perhaps a good time to see what is going on. These indicators may not be foolproof indicators, but they are basic rules of thumb.