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> Do you know what executives do care about? Revenue. Lost deals. This is often why engineering needs aren't covered. Things are presented as risks and expens
by indymike 5y ago
> Do you know what executives do care about? Revenue. Lost deals.
This is often why engineering needs aren't covered. Things are presented as risks and expense, instead of in terms of revenue. A $10,000 expense actually wipes out $10,000 in net profit, so you need to generate revenue sufficient to create $10,000 in net profit. Most companies have really rosy gross margins, but really tight net margins, so a $100K expense will take $2.8 Million in revenue to offset it. Finally, there is how risk frames what you present. If you come at me with "this might happen" the other side of the coin is "this might not happen", and most managers will avoid the certainty of expense for the possibility of an expense.
If you are working with a CEO, valuation is where it's at. Try to understand the swing in company valuation based on profit. Present to the CEO like this: "X is highly likely to happen within Y months, and it will impact $Z in net profits, leading to a change in company valuation of up to $N." Make sure $N is enough to matter. You just took 98% of the arguments against taking action off the table.
- an_opabinia 5y ago> Most companies have really rosy gross margins, but really tight net margins, so a $100K expense will take $2.8 Million in revenue to offset it. I don’t think you are interpreting things correctly here. This is both counterintuitive and wrong.
- indymike 5y agoI'm pretty sure I'm not wrong. Source: I own three companies. The $100k and $2.8M were just examples (very thin net profit). It's equally likely you could have $100k in expense and need $200-$400K in sales to offset it if you are in a very high margin business. Regardless, what matters is that the unexpected expense will reduce profit, every time, and by framing risk in terms of profit you will help your CEO make better decisions.
- an_opabinia 5y agoYou’re not “framing the risk in terms of profit.” You’re talking about a set of equations in your head, that only you know, that come up with weird results like “it takes way more revenue to ‘offset’ an expense” because you’re holding “net” or “gross” or whatever margin constant. Which is really confusing and surprising and not how anyone I’ve ever met talks about this stuff, and they’d be equally puzzled and I don’t think would experience an illuminating or aha moment or whatever. Personally I found it a little interesting, I get what you are going for, but it’s so strange and not really useful or true.
- indymike 5y agoI think you are looking for deep insight and the point that was being made was shallow. If I make $3000 in profit, at 30% margin, I have to have $10000 in sales. It follows that if I have an unexpected expense of $300, it will require $1000 in sales to have generate enough profit to cover the expense.
- vladvasiliu 5y ago> X is highly likely to happen within Y months How do you quantify "highly"? I think that one way or another, most people actually try to evaluate things this way. If they knew with 100% certainty that some breach would happen, they would probably invest the time and money to fix the situation. Just as if the probability for the breach to happen was known to be 0%, they would be justified in not fixing it. You frame this as CEOs being pragmatic, and I agree. But then, the other side of the coin is that if you're regularly wrong (there's a high risk of a breach happening — then nothing happens) they'll probably stop listening to you after a few times.
- ithkuil 5y agoAlso don't forget the reverse-tinkerbell effect: if you do things right and nothing bad happens for a while, they may be tempted to consider that perhaps you're being overly cautious and perhaps a doing things a little bit faster/cheaper would be ok anyway.
- kevinventullo 5y agoAnd depending on the cost of something bad happening, they may be right!
- ithkuil 5y agoWell, the idea that fools consistently occupy exec positions is a bit foolish, isn't?
- majjgepolja 5y agoGiven 90% of execs spend their entire lives doing nepotism and politics, I don't think it's as foolish as you frame it.
- ithkuil 5y agopeople can do and be two things at the same time