As stocks have tumbled over the past few weeks, we find ourselves potentially in a financial market reckoning. A reckoning for those companies that operate without concern for what I’ll term business basics: PROFIT.
It has forever blown my mind that companies continue to be created based on the latest trends – members, platform users, likes, and “engagement” (whatever that means). Where is the business model that shows a sustainable company? Where does it show a profit for shareholders? Is profit a dirty word?
The fundamentals of business do not change with industries – they are fundamentals for a reason.
- Have a product/service that solves a problem
- Sell it for an amount that customers/clients will pay
- Sell to customers that have the need and money to pay for your product/services
- Have enough customers/clients to sustain and grow your business
- Sell it for less than it cost to produce the product/service
- Revenue (sales) minus your costs = profit
- Adapt to the market conditions
- And my opinion: reinvest the profits to continue to grow
These fundamentals seem like such a basic part of running a business, yet so many seem to ignore or lose sight of them. What is it about the basics that seem to make them so easy to gloss over or take for granted? Why do we always feel like they’re somehow already being taken care of?
And yes, we all know that we make business decisions to win the work (we’ll take a loss on this labor category but take more on this one, we’ll do the work at cost to get the past performance). But take these decisions as one-offs that have a high threshold of justification, not the everyday status quo in your capture and operational decisions.
Where I believe GovCon has an advantage over Silicon Valley is that, when working with the govt, you already have a long game in mind. There is nothing quick about GovCon. We are driven to build companies of value, not the latest consumer trend that can evaporate in days. We are driven to meet our customers’ mission (at least most of us are). We know there are inherent flaws in our industry, but fundamentally, we all are trying to make it a better place.
And with that, we aren’t as driven to watch the stock market. Keep doing your thing GovCons…let the Silicon Valley players go up in flames (where appropriate). It may not be sexy over here, but it’s sustainable and incorporates the fundamentals.