Burn Baby Burn
John Silliman Dodge
FMQB April 21, 2006
In my FMQB article from October 21, 2005 (Think
Like a Customer, Act Like an Owner), I suggested that we could
solve most of our business issues if we would only get over ourselves
and our insider thinking. If we saw ourselves from the outside in, the
way our listeners and customers see us, we’d be in a better position
to compete. At the same time, if we operated the business as though it
was our money that was on the line, how much more on-target would we be?
The phrase burn rate became common during the dot
com era. It refers to how much money you burn through in a day, in a month
of running your business. You know how much money it costs to live in
your house—what your mortgage payments are, what your insurance
is, taxes, all of that. You know what it takes to operate your car in
monthly payments, tires, gas, oil, insurance, maintenance, registration.
If you have financial software, you probably know how much you spend on
DVDs. But I’ll bet you only have the vaguest notion of how much
money it takes to operate your radio station for one day. If you owned
the place and you were responsible for making that number, would you do
a few things differently? Would you spend money on consultants who only
tell you what you already know? Would you run expensive focus groups just
to get more proof that your morning show is tanking, when this is something
your gut and your two eyes already tell you?
Time is money, too. Think about the time you spend in meetings.
I don’t know anyone who looks forward to them, accept maybe the
actor, John Cleese. He once said that meetings were a necessary evil because
if it wasn’t for the sleep he got in meetings, he wouldn’t
get any sleep at all. But love ‘em or hate ‘em, meetings are
a way of business life. But what if you had to pay for your meetings?
I mean put a big chunk of change into the meeting meter? If it was your
money, would you spend it on meetings that didn’t produce any outcomes?
Would you gather your entire staff together to discuss matters that could
best be handled by three people?
I’m not big on formulas. I think our product is an
emotional service, and what we really sell is a state of mind. But I do
believe in business metrics. They’re how we keep score. Numbers
are one important measure of success or failure. Are you ready for some
really big numbers? It’s time to calculate your burn rate. Time
to figure out what things really cost. Fasten your seat belt because it’s
a head spinner.
Take your building, your lease rate and all the fees. Add
your utilities, your taxes. Your transmitter and your honking big power
bill. Add the bandwidth you serve. Throw in all of your gear, all of your
fees to licensing orgs, satellite charges, the debt service, everything.
Include the furnishings, the maintenance and cleaning contracts. Add all
these physical things together plus everything else I haven’t even
mentioned. Before you even get to the first person, it’s already
a bigger number than you imagined. But that’s nothing.
You know your people are your biggest expense, though I’m
sure that if you hire the right people, they’re your best investment.
But for the sake of this exercise, total up every salary in the house,
right up to the top job. Figure the bonuses and the perks. Do the taxes.
Don’t forget the benefits. Some stations easily top 35% of salary
with benefits. Annualize the hourly folks. Then throw in all the people
on retainer—your consultants, your lawyers. Are your eyes glazed
over yet? Stop if you want but here’s what we’re getting at:
when you divide this WHOPPING big number by 2080, which is the number
of working hours in a year, you finally see what it costs to run your
radio station for one hour. Holy smokes.
If you think like an owner, then it’s personal. This
is your money you’re spending. Now you know the real cost
of this morning’s 45-minute promotion meeting or your weekend remote
broadcast. Once you know your burn rate, you start to think differently
about productivity, effectiveness, expectations, right business actions,
even about time itself.
Now that we know what it costs to operate the station, let’s
take this notion one step further. What about your personal burn
rate? I’m not talking about cash now, I’m talking about your
personal time account here on the planet. That’s the one true currency
in life, the one thing you can’t bargain for. When your time runs
out, you can’t get it back. Early in your twenties, your career
stretches way out in front of you like Interstate 90 from Boston to Seattle.
No problem ‘cause I got all the time in the world, you say. Then
a few exits go by. And a few more. Soon you’re flying past Cleveland
headed west for Chicago. Damn, this ride moves faster than you thought.
Your personal burn rate turns out to be pretty high, too.
My friend and fellow consultant, Jaye Albright and I are
both fans of Peter Drucker, one of the brilliant business minds of the
20th century. Drucker has three things to say about making the most effective
use of your time:
- Identify and eliminate the things that don’t need to be done
at all. You’d be amazed at how many there are. Ask the question:
what would happen if this thing were not done at all. If nothing consequential
would happen, then stop doing it.
- Figure out the tasks you do that could be done just as well, or even
better by someone else. Then assign those things away.
- Finally, determine the ways that you waste other people’s time.
Simply ask, What do I do that takes your time but doesn’t contribute
to your effectiveness? If you have good relations with your staff, you’ll
hear the truth. Then act on it.
I ran this notion by a smart GM I work with. She said, Yes,
I agree with all your points, John. But I don’t want to get so hung
up on metering my organization’s time and putting a dollar figure
on every minute that I eliminate all the opportunities for creative brainstorming.
The value of some things simply can’t be quantified. And I agree
with her. But I notice that both of us are thinking more like owners than
ever before just because we ran this exercise. Now we know the burn rate.
And baby, it’s a big number.