Pre-think Failure: Achieving Financial Goals

This wisdom on  Achieving Financial Goals was penned by Andy Langert, who was CFO of Alberto’s Consumer Group during the years of our culture change and dramatic growth. He now heads our family office and took an early look at my book. Thanks to Andy for sharing these great thoughts. – C.L.B.

At Alberto Culver, we were a public company with the pressure to meet quarterly and annual earnings projections. While we always said that we didn’t run the company to please the market analysts, we were fortunate to be able to deliver to expectations almost all the time. However, oftentimes we had to achieve our earnings target despite one or more unpleasant surprises, such as a sales shortfall or an unexpected expense.

How were we able to deliver such predictable results? By always having contingency plans. We always kept something in reserve to offset negative surprises. For example, we might have had the ability to generate additional revenue by shipping a new product, adding new customers, or adding promotional programs. We were always looking months and quarters ahead to be able to adjust to business conditions. On the expense side, we sometimes held back on advertising buys or curtailed some other discretionary spending that we held in our  ͞back pocket.͟ Further, we always had an active and visible  ͞margin improvement initiative,͟ where ideas and projects from all over the company generated cost savings. Since we did not budget for these cost savings, successful margin improvement projects became part of our contingency plan.

In one year, we were unable to achieve our sales goal because of the loss of a significant customer in our contract packing business. But, even in that year, we had the ability to achieve our profit goal. However, to do so would have required that we cut advertising, which would have been detrimental to the long-term health of the brands impacted by these cuts. In this case, we decided it was in the overall best interest of the company to miss the profit goal in order to support and protect the health of our brands.

Though we were a public company and paid great attention to quarterly results, we were able to draw the line when achieving short-term objectives would hurt us in the long term. Our thinking was rewarded as we posted year after year of record sales and profit after enduring a one-year setback.