Bottom Line Tales: 30 Lesser-known Ways to Build Sales, Profits, and Cash Flow
by Alastair Thomson

This book reads like practical advice from a mentor. Alastair Thomson is a board-level executive with experience as a CEO and CFO in a variety of industries. In 30 chapters, he shares his wisdom about such topics as fixing operational bottlenecks, improving customer service, and minimizing bureaucracy. He shares a story of a company that grew revenues rapidly by making unprofitable deals. In a counter example, another company turned down profitable business below an arbitrary minimum order. He observes that companies claiming to be data-driven often make decisions without understanding what the numbers mean. He also shares his views on AI and semi-skimmed milk.

FINANCE IS FORWARD LOOKING

“The best Finance Director I ever worked for—and one of the two best bosses I ever had in my life—taught me an important lesson early in my career. He said wisely in a meeting one day, ‘you have to manage your finances for the business you want to become, not the business you are today.’ I don’t know if there’s such a thing as a Damascene Conversion for accountants, but if there is, that’s what I had in that meeting.”

“The implicit assumption was this: that there is no opportunity for your business to grow in the future, so the only sensible strategy for Finance to follow is to eke out the largest possible return from an essentially fixed revenue stream.”

“But seen through that lens, why would any sane businessperson ever invest in new machinery, develop new products and services, or explore new marketing and business development strategies to increase sales revenues? Well, the answer is they wouldn’t.”

“David was another early boss of mine… When they were making a new investment… they always invested in 50% more capacity than they needed at the time they made their investment. If they needed to build a new factory on the back of winning a $10 million contract, they would build a factory which could deliver $15 million-worth of capacity.”

“Then, with the bedrock of the initial $10 million of business to limit their downside risk, they’d set about finding other things to do with the extra $5 million-worth of capacity which they could turn on with little or no extra cost.”

“I’m sure you don’t need me to tell you this, but if you can put an extra $5 million in revenue through a factory while barely moving its operating costs, that extra $5 million is astonishingly profitable.”

But wait, there’s more! “Building a factory with 50% more capacity doesn’t cost 50% more, provided you build that capacity in at the same time you build the original factory. It might cost you 10-20% more for some bricks and a larger roof, but not 50% more. All your contractors are already on site, all the cranes, diggers, and whatever else you need is already there.”

THE HIGH COST OF BEING CHEAP

“If there’s one common denominator between businesses I’ve seen in trouble over the years, it’s this. They see ‘increasing profits’ and ‘reducing costs’ as the same thing. But, in general, they aren’t… In fact, it’s not uncommon for reducing costs to also reduce profits—the exact opposite outcome the theory suggests.”

“Sometimes, spending more increases profits.”

“If you increased spending on that component to buy a higher-quality part that didn’t fail so often, you’d save the customer credits, customer service calls, re-work cost in the factory, negative impact on your company’s reputation and so much more. I did exactly that earlier in my career to turn a loss-making business into a sector leader in profitability.”

“In the same business, we had a bottleneck in production part-way through the manufacturing process which meant the factory as a whole wasn’t producing at maximum capacity. We could only produce to the maximum amount we could get through the bottleneck.”

“So we spent money on extra equipment so that all stages of the production process had a broadly similar hourly throughput. At a stroke, that increased the productive capacity of the business as a whole by 20-30%, so we could sell about 20-30% more product.”

“In a business that makes profits, increasing revenues by 5% will almost always add more to the bottom line than cutting costs by the same percentage.”

METRICS

“Optimizing everything is a fool’s errand.”

“In our data-driven world, it’s tempting to think all data is good data. But that’s not the case at all… The problem with the supposed science of measurement is that it’s really easy to measure trivialities and really difficult to measure whether or not you’re achieving the outcome you’re aiming for.”

“Beyond a sensible threshold, ‘more data’ has a very low—and often negative—ROI… It’s rarely more than 3-5 absolutely key metrics… So why not structure reporting around those factors, and only those. Nothing else is likely to move the needle enough to make a difference anyway.”

“With only a small number of things to obsess over, people spend more time on them, so they are likely to be more robust and more reliable than if people spend their attention across 40 or 50 different KPIs.”

“The learning is in the sections without hard data, things you couldn’t make into KPIs even if you wanted to. That’s where the value is. And that’s the problem in organizations who only move in response to data.”

“Lots of the individual components are in the ‘it depends’ category of decision-making, where judgment is required and a spreadsheet or an AI bot won’t be able to give you a definitive answer. Or at least not one that’s correct often enough that you should make decisions that way.”

THE HEALTHY SKEPTICISM OF AN AUDITOR

“Back when I was a boy auditor, we were taught to always look for corroboration (third-party proof, if you like) for all the numbers a client presented to us.”

“I want to be very sure of the provenance of any numbers presented to me… Nearly always, you have to go beyond the numbers to find the truth. You can’t take them at face value.”

“It’s natural for people with an interest in a particular outcome to want to find plenty of evidence to support their proposal. Usually, those same people tend not to be quite so diligent at finding any data which suggests they might be mad to attempt it.”

“Much more dangerous, in my experience, are people who think they understand numbers because they were good at maths as a kid or can do rapid-fire mental arithmetic in their head. Those people are generally easy to persuade if the maths of the dataset they’re presented with is good, even if the underlying premise makes no sense… But the biggest danger of all, though, is people who take every number at face value and don’t dig any deeper.”

“Be particularly skeptical of a business which reports profits just a few £000s higher than last year. With rare exceptions, they’ve strained every sinew in their bodies to achieve that.”

“Almost every set of numbers you get presented with has an in-built presupposition—sometimes several of them… A presupposition is usually the weakest point in the argument being presented to you.”

“I find if you get people off the numbers and make them explain their proposal to you in words a moderately smart teenager could understand, some of the holes in their thinking become a lot easier to spot.”

EXPONENTIAL COST CURVE

“What we want is an output that makes economic sense in the context of the input, a sentiment I’ve put into a rule I call my Exponential Cost Curve rule… Why [this] matters is that the last few percent of perfection on any project can often cost more than the preceding 95% of the project.”

“Taken to extremes, organizations burn through cash in this zone and end up with a worse project in almost every way than they would have had if they hadn’t been quite so keen on achieving some sort of mythical perfection.”

“The place I’ve found the Exponential Cost Curve kicking in the most in recent years is in large tech projects…  The software developer has bundled everything up together in a single package and you’ve generally only got a choice between buying all of it or none of it… So you pay for the 90% you don’t want or need as well.”

TOO MUCH CONTROL

“It’s very hard to run a successful business in an environment of complete anarchy. But you can have too much structure and control in your business.”

“To give a real-world example, in my days running a large call center, we had (as most cell centers do, both then and now) a call scripting system, which prompts call center agents with the questions they need to ask the customer in the order whoever programmed the software thought they should be asked.”

“Customers tended not to call up primed to answer questions in the order the software prompted the call center agents to ask them… So he re-engineered our call center agents’ desktops so they could skip from one question to another easily. You could think of this like tabs on an Excel spreadsheet, where clicking a tab instantly takes you to a different part of the spreadsheet.”

“Now, if a customer started at question 10, it didn’t matter. While they were giving us the answer to question 10, the agent would key in all the details needed for that question… Rather than the conversation being directed and controlled by the call center agent (or, more accurately, being dictated by the software running their desktop), it was being directed and controlled by the customer.”

“But get this—on average, calls were much shorter because there was less backtracking… Thanks to this realization, our average call duration went down almost 20%.”

“Flipping that concept around, that means implementing the call scripting software to ‘improve efficiency’ and ‘introduce better control’ cost the business 20% more to run than not having that software.”

“When you have an annual salary bill running into the tens of millions each year, a 20% savings on that is not to be sniffed at.”

“For the business I ran, there was a very real hidden benefit in switching off the rigid approach to customer service—customers enjoyed their interactions with us a lot more.”

CONTEXT

“I’m always amused—and more than a little disconcerted—by people who claim to ‘manage by the numbers.’ Numbers without context mean very little.”

“Part of the problem is that a lot of business education and training in recent years has focused around running businesses like a painting-by-numbers kit. It’s all about extracting and manipulating numbers, loading up spreadsheets, cranking up Power BI, and making pretty charts.  There’s a role for that, of course. But mostly charts and graphs strip away nuance, they don’t add to it.”

“Thousands of data points are turned into a single line on a graph, but that line is probably the least useful of any piece of management information: ‘the average.’ Knowing just the average of any data set is of very little help, and it can be dangerous because so many sub-optimal decisions are made on the back of that single number.”

“In a lab, everything is rational. In the real world, almost everything is irrational. That’s why context matters… Because you’ll get an insight, a perspective, a sense of likely intention from that context which will help you make better decisions using the (necessarily imperfect) information you have available. And that’s true no matter how much data you have.”

“Sometimes the context-shift you need is to shift up a couple of levels from the ‘right at the coalface’ level of data to the ‘helicopter view’ level.”

“Imagine your profits went up by 10% last year. That’s a cause for celebration, right? Well, not if everyone else in your sector doubled their profits. What about if your profits fell by 10%? Terrible news, surely? Well, not if the rest of your sector plunged into billion-dollar losses. You see, shorn of context, no number, no set of words, no ‘fact’ means anything.”

UNPROFITABLE SALES – SCENARIO 1

“I have rarely found anything other than a compelling financial case to stop problems from happening instead of just keeping on fixing problems when trouble strikes and customers complain. And it’s not always because your product or service is ‘broken.’ It can be something as simple as a misalignment of customer expectations relative to your offer… The solution here is to make sure your marketing and sales processes highlight those situations where whatever your customer might be wanting or expecting isn’t a feature of your product.”

“That way, you put people off buying a product that they will ultimately end up complaining about before they’ve bought it. That’s by far the cheapest way to deal with that sort of problem, even though it means you’ve ‘lost a sale’ as some people will describe it… You haven’t lost a sale though. You’ve stopped a customer complaint coming a couple of months in the future, a complaint which might well cost more to handle than you made in gross margin on the original sale. Rather than losing a sale, you’ve really averted a loss.”

UNPROFITABLE SALES – SCENARIO 2

“I can’t tell you the number of times I’ve found that the numbers being presented to me are, at the most charitable interpretation possible, only a partial version of the truth. Often what they don’t say is more important than what they do say… So I spend a lot of my time in meetings wondering what I’m not being told.”

“It isn’t the company’s objective to make a sale. The company’s objective is to make a profit.”

“Years ago, I worked with a salesperson who was seen as very successful, but that’s only because, every time his customers asked for a price reduction, he always gave it to them. The customer showed their appreciation for this by giving him more of their business.”

“The only issue here was that all the work we did for this client lost us money. And every time this sales rep increased sales to his mega-client, not only did we lose more money, but we also took up space on our production line which could have been used to produce profitable work instead.”

“Why the company was losing money before I joined them was a mystery to everyone involved because, until I asked a few awkward questions, they only had some of the information they needed to make good business decisions, not all of it.”

UNDERSTANDING FIXED COSTS

“Another time I went to work for a business with a number of financial difficulties. (Yup, I love a challenge!) This business had mixed up two important—but entirely separate—financial concepts: the profitability of an individual job or project, and the overall profitability of the business.”

“This particular organization had a high fixed cost base, but beyond a threshold we could produce two or three times the sales volume with only a tiny increase in cost. Past the threshold, each incremental sale produced about 99% gross margin.”

“However, supposedly in the name of ‘rigorous financial control.’ This organization had decided that if a project wasn’t going to achieve a margin of at least £X they weren’t going to do the project at all…. And because £X was an arbitrary limit, if your project was achieving 95% of X, we didn’t take it on, whereas if it achieved 101% of X we did.”

“Except the person making these decisions—an engineer by trade, as it happens, who valued precision above all—had forgotten that, against a fixed cost base, the best way to turn around the organization’s fortunes in the short term was to take every project which delivered a positive return over our ‘hard’ costs.”

“It won’t surprise you to learn that this organization lost £millions in revenues due to this policy, couldn’t cover its fixed costs, and ended up in severe financial difficulties. Mercifully, I was long gone by then. I realized this organization would never be able to shift their thinking while that individual remained in charge.”

CUSTOMER RETENTION

“Two parts of your business give you the most valuable information about how well your company is performing—your call center and your credit control department… Spend an hour listening to calls in either of those places and you’ll quickly discover all the ways your business lets your customers down. However, on the plus side, you will also discover why these are problems from customer’s point of view, and what you can do about them, in order to prevent those issues in the future.”

“Great customer service, done right, is one of the highest ROI activities you can do within your business.”

“If you believe Forbes that it costs 5-7 times more to find a new customer than to keep an existing one, that means for every $100 you spend finding new customers, you would only spend $15-20 to keep the ones you already have… Yet many businesses carry significantly more cost than they needed to because they’re so focused on (expensive) customer acquisition they forget about (much cheaper) customer retention… But if I can bring you a customer for $20 instead of $100, and you can’t be bothered to answer the phone… to sort out their service queries, then you’ve automatically locked in a high-cost business model.”

THERE’S AN (ANNOYING) APP FOR THAT

“Don’t make it hard for customers to buy.”

“Thanks to the world’s determination to make everything about clicks and online tracking ‘for efficiency’ we seem to have spawned more inconvenient and costly solutions than the simpler solutions we had before.”

“The time before I needed my car serviced, all it took was a 2-3 minute phone call involving very little technology. Yet some tech genius at the dealer and/or manufacturer thought it would be more efficient to replace a 2-3 minute phone call with a boatload of human-unfriendly technology and a 10-minute phone call to iron out all the kinks… That’s a hell of a lot of cost to end up with a worse result than the dealer had before.”

DEFAULT SETTING

“A default setting is where you set out a course of action which will be the right answer >99% of the time, but which leaves open the possibility that very occasionally it won’t be the right answer, so builds in an ‘override switch’ in case it’s needed.”

“Here’s how they work. You set a desirable outcome, then make sure as few things as possible—especially bureaucracy—get in the way of delivering that desirable outcome for your customers and your people.”

“Naturally we needed the factory to run at maximum efficiency for as much of each 24-hour period as possible. But our utilization wasn’t as good as it might have been… Digging into the reasons, I found that was often because the people running the machines were waiting for parts or repairs after something had broken.”

“Nearly all of them were for something trivial. A bolt, a washer, or a belt needed replacing. The value of this sort of repair was mostly under £20… So I adapted the ‘default setting’ to give the machine operators authority to spend anything up to £250 direct with our approved suppliers without needing to get their manager or procurement involved.”

QUALITY IS FREE

“Fixing the root cause of any problem is nearly always vastly cheaper than handling the fallout from the problem after it hits Ground Zero… A business that makes a 5% operating margin, but spends 10% of its time in the factory fixing things that originally went out wrong, is likely to be struggling to break even.”

BUREAUCRACY

“When processes are put in place purely as a mechanism of control, I can virtually guarantee your business is operating at a much higher cost than it needs to, and that it’s also achieving sub-optimal results. This ‘high cost/worse results’ scenario isn’t one I usually recommend.”

“A rigid process also hard-wires in a timescale. You can’t do anything by the end of the week anymore because you’ve designed a process that, by definition, will take weeks or months to run through.”

“The worst bit is that the more people you involve in doing anything, the more likely it is you’ll end up with some grey, average result.”

STRATEGY

“Strategy is a term reserved for the small subset of activities which move the needle in your business. Frankly, there are very few of these. If you’ve got 40 or 50 strategies, you’ve almost certainly just got a set of procedure manuals… A strategy should be taking you from wherever you are now to somewhere else.”

“One of the most powerful concepts Harvard Business School professor Michael Porter wrote about was that ‘the essence of strategy is in choosing what not to do.’ … Strategy is about choices. What you decide to do—and often what you either decide not to do, or ignore completely—ends up determining what sort of business you end up with.”

ARTICIFICIAL INTELLIGENCE

“When I’ve worked with deeply troubled businesses in the past, it’s almost always because they had complete faith in a set of numbers which turned out to be garbage. Not garbage mathematically—the numbers always added up. But garbage in the sense that they measured the wrong things in the wrong way, and so reached the wrong conclusions because no-one in the business really understood what was going on.”

“AI shows all the signs of operating like all the worst people I’ve ever worked with. They all had blind faith in numbers they never really understood too. They all drew the wrong conclusions from the data because they lacked the full contextual understanding of the problem they were trying to solve.”

“For a start, AI systems are all proprietary models which means we never know how they reach their conclusions, which factors they weigh more highly than others, how they decide which sources to use for their answers, and so on.”

“The secrecy and opacity built into AI systems is a feature (for their investors) not a bug… And that’s why AI is ripe territory for the long con. Not necessarily outright fraud, although that’s certainly possible too, but just manipulating the truth in ways that aren’t obvious.”

“Even something apparently as trivial as compiling a report from a set of data can be problematic. From 30-odd years of doing this, I know there are usually dozens of ways to present the same information. If you let some tech solution choose, you’ve given up your editorial control and increased the risk of coming to a sub-optimal conclusion.”

SEMI-SKIMMED MILK

“Most of the vitamins in milk are of the fat-soluble type which you find in… take a wild guess… about double the quantity in whole milk compared to semi-skimmed milk… So, whatever the original well-intentioned purpose might have been, the widespread introduction of semi-skimmed milk has not only been an arguable-at-best solution to a problem we may not even have had originally, but it also introduced a whole new range of problems we didn’t have before. But, like all of the half-assed metrics deployed inside many organizations, we persist with persuading people to drink semi-skimmed milk anyway.”

Thomson, Alastair. Bottom Line Tales: 30 Lesser-Known Ways to Build Sales, Profits, and Cash Flow. s.p., 2025. Buy from Amazon.com

Disclosure: As an Amazon Associate I earn from qualifying purchases.

Note: I have modified the spelling to appease my American spellchecker.

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Published by andreweverett360