Strategy of Finance Rohit Agarwal

Rocky Lalvani, an advisor to small and medium-sized businesses, shares his insights on the Profit First method and how it can be applied to businesses of all sizes. He emphasizes the importance of focusing on profitability and making profit a driver rather than an afterthought. Lalvani explains that Profit First involves allocating money for specific purposes, such as profit, owner's pay, taxes, and operating expenses. By doing so, businesses can ensure that they have the cash flow to support growth and make informed investment decisions. He also highlights the need to measure and track the return on investments and the importance of understanding the cash flow implications of scaling a business. Lalvani also highlights the need for entrepreneurs to make hard choices and let go of employees or projects that are not driving profit. He explains how these principles can be applied in different business situations, including during market dislocations or crises. Additionally, Lalvani discusses the intersection of spirituality and business, emphasizing the importance of living in alignment with one's beliefs and values.
Takeaways
- Profit should be a driver in business, not an afterthought
- Allocate money for profit, owner's pay, taxes, and operating expenses
- Measure and track the return on investments - Understand the cash flow implications of scaling a business Focus on profit from the start and manage cash flow effectively
- Make hard choices and let go of employees or projects that are not driving profit
- Apply profit first principles in different business situations, including during market dislocations or crises
- Explore the intersection of spirituality and business and live in alignment with one's beliefs and values
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Quotes
“I think in many cultures, people don't talk about money. It's a taboo subject. People don't ask questions about money.”
“I was shocked to learn that business owners were really bad with money.”
“I don't believe in grinding it out.”
“As a kid, I just knew I wanted to be wealthy. And so I would read and learn and figure stuff out.”
“Why don't we do sales minus profit equals expenses. Now, profit is the driver and we constrain our expenses.”
"Profit First makes sure that the taxes are there, the profits there, your pay is there, and that you're appropriately taking the right amount of money out of the company."
"Growth requires cash. And if you don't know how much cash you need to grow your business, you can grow your business and quadruple it and run out of cash."
“Most bookkeeping is not up to date. It's always behind... So this bank account shows you how much cash came in. And at the end of the day, that's what matters.”
“Business owners are resourceful. The problem is they're also lazy.”
“The problem is the P&L doesn't equal cash.”
“Wealth is built on the balance sheet and it's an area nobody talks about.”
“Hoping and dreaming are not profit levers.”
“One of the top reasons for bankruptcy is scaling and growth.”
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In this engaging conversation, Tim Smith, a renowned expert in pricing, delves into the critical role of pricing as a strategic imperative for companies. He shares his personal journey into the field, highlighting key milestones that have shaped his distinguished career. Tim addresses common pitfalls that companies encounter in their pricing strategies and underscores the necessity of strong leadership in making pricing decisions.
Throughout the discussion, Tim introduces the frameworks he employs to assess and improve pricing strategies, including the value-based pricing framework and the SpinoMeter. He underscores the crucial importance of understanding customer perception of value, using compelling examples from companies like Southwest Airlines and AutoCAD to illustrate successful value-based pricing.
Tim also explores various pricing structures and their practical applications, discussing how technology is transforming the landscape of pricing. Looking ahead, he envisions a future where pricing is recognized as a strategic function, emphasizing the need for greater professionalization in the field. This conversation offers valuable insights into the principles and challenges of pricing, providing a roadmap for companies to enhance their pricing strategies and drive business success.
Takeaways
- Pricing is a strategic imperative that requires leadership and should be championed at the highest levels of the organization.
- Companies often make mistakes in pricing, such as allowing salespeople to discount excessively or relying on pricing to fix marketing or targeting problems.
- The value-based pricing framework and the SpinoMeter are useful tools for evaluating and improving pricing strategies.
- Successful pricing is based on understanding how customers perceive value, not just the cost of production or margin.
- Value-based pricing can lead to higher margins by aligning prices with the perceived value of the product or service. Understanding the customer's alternative and whether they care about the difference in value is crucial for pricing decisions.
- Value-based pricing can lead to higher margins if the customer perceives a higher value.
- Different pricing structures, such as two-part tariff, tying arrangements, unit pricing, versioning, price segmentation, revenue management, subscription-based pricing, and fully dynamic pricing, can be applied depending on the situation.
- Pricing is becoming a strategic function and organizations are recognizing its impact.
- Technology, including AI and data analysis, is being used to improve pricing decisions.
- The future of pricing lies in professionalization and treating pricing as a discipline.
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Quotes
“Pricing is a quantitative field. If you can't do the math, you kind of don't belong here.”
“(Strategy) is both a statement of where you want to go and a statement of where you will not play.”
“Organizations that treat pricing decisions slowly and methodically, not quick, which is completely opposite to what a sales wants, but slowly and methodically outperform in the long term, have higher return on assets, are more profitable in the long term than those that just treat it as a political football.”
“One of the common refrains I hear from CEOs and CFOs is that price is just a result of market dynamics. We've got supply, you've got demand, they come to equilibrium, there's nothing I can do about that.”
“So that was one where they didn't let salespeople do any discounting. The more common mistake is they let the salespeople

Summary
In this episode, we are joined by Per Sjöfors, also known as "The Price Whisperer," who discusses the pivotal role that pricing plays in business profitability. Per explains that pricing has the highest leverage on profitability, exemplified by his "1% challenge," which shows that a mere 1% increase in price can lead to an 11.3% increase in profit. With over 15 years of experience in pricing strategy, Per has worked with companies across various industries, refining their approaches to maximize profitability. Per emphasizes the importance of understanding cultural differences in pricing and the necessity for companies to adapt their strategies when entering new markets. He discusses his book, "The Price Whisperer," which aims to educate people on the science of pricing and provide practical insights that go beyond academic theories. During our conversation, Per highlights common pricing mistakes, such as the reliance on cost-plus pricing and ignoring market segmentation. He explains that true pricing power comes from differentiation and the ability to increase prices without losing sales volume. Per stresses the importance of leveraging consumer perception and effective marketing strategies to create this pricing power. He also discusses the process of finding the right price for a product, which involves conducting thorough pricing research and understanding the various factors that influence pricing decisions. Per advocates for a holistic approach to pricing that encompasses the entire company, suggesting that a dedicated pricing function should guide marketing, product development, and price presentation. Looking towards the future, Per shares insights on dynamic pricing and the significance of understanding buyer behavior and psychology. He calls for businesses to move away from flawed pricing strategies, such as cost-plus or competitor-based pricing, and to focus on delivering value to customers through strategic differentiation.
Takeaways
- Pricing has the highest leverage on profitability, and a 1% increase in price can lead to an 11.3% increase in profit.
- Understanding cultural differences is crucial when it comes to pricing and entering new markets.
- Common pricing mistakes include relying on cost-plus pricing, not considering market segmentation, and viewing the market as homogeneous.
- Pricing power comes from differentiation and the ability to increase prices without losing sales volume.
- Leveraging consumer perception and marketing strategies can significantly impact pricing.
- Finding the right price involves conducting pricing research and considering various factors that influence pricing decisions. Move away from flawed pricing strategies and focus on differentiation and delivering value to customers.
- Price sets expectations and can influence customer satisfaction.
- Establish a dedicated pricing function within the company to guide pricing decisions, marketing, and product development.
- Understand buyer behavior and psychology to make informed pricing decisions.
- Consider the potential impact of dynamic pricing and the importance of price presentation.
- The future of pricing may involve advancements in technology such as AI and data analytics.
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Quotes
“Pricing is not art. It's really science.”
“Pricing has the highest leverage on profitability.”
“For the average company, if you can increase sales volume with 1%, profit goes up 3.5%, because cost also goes up. If you can reduce your cost with 1%, profitability goes up 5.5%. But if you can increase your price or decrease your discounting, which of course is the same thing with 1%, profit goes up wit

Murali Sundararajan, a seasoned procurement leader, shares his extensive experience and insights in the field of procurement. Initially transitioning from an engineering background, Murali faced challenges that emphasized the importance of technical knowledge and strategic thinking in procurement. He highlights the transformation of procurement over the past two decades from a transactional function to a specialized, technology-driven aspect of business that significantly impacts cost management, process efficiency, and overall value addition.
Murali discusses the essential elements of procurement including sourcing, supply chain management, and vendor management, underscoring the need for a robust team led by a skilled head of procurement. Key traits for procurement professionals, as Murali notes, include communication skills, passion, technical expertise, and negotiation capabilities. He outlines annual goals for a procurement team which focus on cost reduction, process enhancement, team development, and aligning with business objectives.
Effective sourcing practices, according to Murali, involve networking, thorough research, and leveraging technology to identify and evaluate potential suppliers. He delves into risk management during vendor selection, addressing geopolitical, financial, and logistical considerations. The procurement process itself, as described by Murali, involves an RFI to gather initial data, followed by RFPs and RFQs to finalize supplier selection, emphasizing the importance of detailed contractual requirements and competitive pricing strategies.
Murali also touches on the significance of involving the procurement team early in the purchase process to optimize value and minimize risks. He discusses advanced topics such as the impact of automation, AI, and RPA on the future of procurement, and offers career advice for aspiring leaders in the field, reflecting on his own professional journey and the dynamic nature of procurement.
Takeaways

Procurement plays a strategic role in reducing costs, improving processes, and bringing value to the company.
Sourcing involves identifying the right partners, integrating technology, and reducing costs through automation.
Supply chain management encompasses logistics, overseeing, and delivery of goods and services.
Vendor management involves developing and empowering suppliers, promoting sustainability, and reducing costs.
Hiring an experienced head of procurement is crucial to create a strong procurement team and develop a strategic procurement culture.
Startups should prioritize hiring a procurement expert early on to avoid future challenges and ensure compliance. Procurement has shifted from a transactional approach to a specialized and technology-driven function.
When hiring for procurement, consider communication skills, passion, technical expertise, and negotiation skills.
Yearly goals for a procurement team should include cost reduction, process improvement, team member development, and meeting business unit goals.

Sanjay Jain, a CFO with over 20 years of experience in the media industry, shares his career journey and insights. Starting in finance after completing his CA, Sanjay worked across various sectors before focusing on media. Sanjay discusses the evolution of the media industry, from traditional cable and satellite TV to the rise of OTT platforms. He also talks about the challenges and opportunities in the industry, including the need for content discovery and the impact of regulations. Sanjay emphasizes the importance of leadership, continuous learning, and adding value in the finance function. He reflects on his roles at NDTV Imagine and Aaj Tak, including experiences with their IPOs and the specific challenges news channels face. He discusses the importance of having a good track record and a credible plan before going public. Jain also talks about the NDTV Imagine saga and the lessons learned from it. He emphasizes the significance of strategy in business and the unpredictable nature of content success. In retirement, Jain pursues passions like stock market investing and angel investments, measuring success by happiness and peace.
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Takeaways
- The media industry has undergone significant changes, from traditional cable and satellite TV to the rise of OTT platforms.
- Leadership in the finance function involves backing your team, having a vision, and collaborating with other functions.
- The role of a CFO has evolved from being a controller and accountant to a strategic advisor who adds value across functions.
- Moving between industries is possible at a mid-level, but at senior positions, industry knowledge becomes more important.
- The CFO role allows for interaction with peers, insight into the company's growth, and the ability to influence decisions.
- Successful CFOs should be team players, have a desire to learn the business, and listen more than they speak.
- The IPO of Aaj Tak was a significant event in Sanjay's career, and he played a role in the company's growth and success. Having a good track record and a credible plan is essential before going public.
- The media industry is unpredictable, and success in content creation is often a matter of gut feeling.
- Retirement should be a time to focus on passions and find happiness and peace.
- Investing in the stock market requires careful observation and patience.
- Angel investments should be made with money that can be written off and should consider the founders' passion and knowledge.
- Success should be defined by happiness and peace, rather than just wealth.
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Quotes
"The media industry had been bleeding

In this episode, Peter Walker, Head of Insights at Carta, discusses his journey in the startup world and the role of data in his career. He shares insights on the challenges and trends in implementing analytics at scale. He also provides an overview of the funding landscape and the impact of the pandemic on fundraising. The conversation explores the impact of changing interest rates on startup funding and the challenges faced by startups in the current market. It discusses the decline in seed funding compared to series D funding, the need for capital in late-stage rounds, and the shift in fundraising dynamics. The conversation also touches on the liquidity of equity for startup employees, the decrease in startup hiring, and the changes in startup compensation. The guest shares insights on leadership, success, and advice for emerging professionals.
Takeaways
- Startups can leverage data to make informed decisions and improve their operations.
- Data storytelling is a powerful tool for communicating insights and making data more accessible.
- The implementation of analytics at scale requires data cleaning, understanding the audience, and integrating different databases.
- The funding landscape for startups has been challenging, with a decline in fundraising in recent years.
- The impact of the pandemic has varied across different stages of a company's life cycle.
- Changing interest rates have had a significant impact on startup funding, with seed funding down compared to series D funding.
- Late-stage rounds require massive amounts of capital, and the decline in late-stage funding raises concerns about where the money will go.
- Startup employees are facing challenges in accessing liquidity for their equity, leading to a decrease in exercise rates.
- The startup job market has seen a decrease in hiring and an increase in shutdowns.
- Startup compensation has undergone significant changes, with equity compensation decreasing and salary compensation remaining relatively flat.
- Leadership can be demonstrated at any level within a company, and energy and consistency are important qualities for leaders.
- Startups should consider starting fundraising earlier than expected and focus on making every dollar last longer.
- The guest's goal is to make Carta data ubiquitous and be the single source of truth for startup data.
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Quotes
“Energy is contagious.”
“The funding winter is thawing, but is still rather chilly.”
“Things are a lot harder than they appear on the surface.”
“A lot of marketers do themselves a disservice by not understanding data as much as they should.”
“The cap table is a record of who owns what percentage of a company.”
“A lot of B2B companies can actually use this as a new form of marketing. It's data content that educates your audience about the world and the market that they're in.”
“Insight is a piece of information that's going to help you make a decision.”
“Always on I think is it sounds good real time, but it isn't always necessary.”
“Industry, time, location, these are all very clear and obvious filters to put into your data that kind of expose and kind of tease out differences between parts of your data set.”
“I come in