A note from the Daily Dot’s CEO
The nitty never gets more gritty than the financials. But the books are not a pro forma pain in the ass. They’re just as important as who you hire, and what your big idea is. They need to be constructed to serve the strategy and they need to embody your values — otherwise, both of those are just pretty words on the wall.
In my last company, we published at least four major print titles, uncounted minor titles, and an equal, if not greater number of websites — and this at a single small-town newspaper. Our rate card, summarizing all of our different advertising products, was 12 pages long. Whenever we introduced a new product, we assembled a definitive P&L showing our expectations: we’d write so much editorial, sell these types of advertising, distribute in such-and-such a way, all measured in dollars, and we would expect so much audience and so much revenue in return. The projected income statement was a clear and accurate picture of the proposed business — and that was the last we saw of it.
Our standard financial reports showed what the whole company spent on editorial, on operations, on advertising sales, etc. Individual expenses were in no way tagged to show which specific result they were intended to produce. Six months after we’d launched the publication, if you wanted to know how that new business was actually performing, you couldn’t just open the books and look. It took special research to create a one-off report. Needless to say, we didn’t do that frequently.
Most financial reports I’ve seen are arranged this way, i.e. by function. The problem with it is that then your P&Ls actually obscure the business: Financials arranged by function only tell you how effectively the effort is producing the intended result in aggregate — where it’s useless in day-to-day operations. You can’t tell, just by opening the books, just where you’re going right or going wrong. That requires extra work.
Peter Drucker had a solution: organize the books by the result area, not by department. Every effort should be connected immediately to the result it is intended to produce.
If the books accurately portray that connection, whenever they open the books people can instantly see where they’re wasting effort. They can see where efforts need to be redoubled. They can make decisions fast and on the fly, and anyone with access to the books can make them. That’s the intent anyway.
It might turn out to be a total clusterbudget. But I’m convinced Drucker had a good idea, and we’re going to try it. Innovation is a core value of ours, and you can’t be innovative if you aren’t willing to be wrong. Another value is speed, and I watched all kinds of enthusiasm sapped by a book-keeping system that acted more as a curtain than a window.
And finally, transparency is itself reason enough to do it. We are a journalism company after all. Those special reports seemed only ever to make it to the people on top. You can make an effort to make sure more people see them and have the time to read them. Or you can just bake that clarity in from the beginning. We’ll start with the latter.
— Nick White
CEO and Co-founder, the Daily Dot
Photo by NS Newsflash/Flickr