Income Statement Analysis

Income Statement Analysis Jonathan Poland

Income statements are crucial to understanding a company’s financial performance. An income statement, also known as a profit and loss statement, is a financial document that shows a company’s revenues and expenses over a specific period of time. It is used to calculate a company’s net income, which is the amount of money it made or lost during that period. The income statement is important because it provides investors and analysts with information about a company’s financial performance, including its ability to generate revenue, control costs, and make a profit. It is also used to assess the company’s liquidity, profitability, and solvency, which are important indicators of a company’s overall financial health.

– Cost of Goods Sold
Gross Profit

Operating Expenses
– Selling, General, Expenses
– Research & Development
– Depreciation
Operating Profit

– Interest Expense
– Gain (Loss) Asset Sales
– Other
Income Before Tax
– Income Taxes Paid
Net Earnings


The “top line” on the income statement is always revenue or sales, the amount of money that came into the business during the period, generally on a quarterly basis. If the business makes car parts, then the total revenue is based on how much it sold during the period. An important lesson to remember is that revenue does not equate to profit, which depend on the costs (aka expenses) tied to generating the revenue.

Cost of Goods Sold (COGS)

The lower the better is a good rule to follow. COGS also known as cost of revenue is an important metric of company health and key to determine gross margins when searching for long-term investments.

Gross Profit + Margin

Total revenue less the cost of goods sold equals gross profit. This number shows how well a company turns revenue into earnings. Alone the number tells relatively little about a company, but when taken against revenue, the gross profit margins tell investors a lot about a businesses worthiness.

Gross Profit = Revenue – Cost of Goods Sold

Gross Profit Margin = Gross Profit ÷ Total Revenue

Higher gross margins can signal competitively durable advantages. In other words, companies with high gross margins tend to have a narrow or wide competitive advantage.  Apple’s gross margin as of 2023 is 43%, if you need a reference.

Operating Expenses

Right beneath the gross profit on the income statement are operating expenses. These include all the costs tied to running of a business. From selling and administrative to research and development, depreciation, and others. Each of these line items should be judged against gross profits.

Selling, General, & Administrative: These include management salaries, advertising, travel, legal, commissions, payroll, and similar costs. Anything under 30% of gross profit is exceptional. Anything over 80% would be problematic.

Research & Development: Consistent businesses, even technology firms, do not generally need to reinvest heavily in R&D in order to stay competitive. If one does, or if any industry does, even if its market value is growing, that is a red flag. The one caveat is if this expense remains the same or decreases with technological advances.

Depreciation: Hard assets are a real cost of doing business that financiers can use to pile debt onto a company’s books. In calculating working capital, do not overlook this expense.

Interest Expense

When a company piles on debt, there is an expense for interest it pays out. The more debt, the more interest. Sometimes, companies can add debt at low interest rates when money is cheap. As a general rule of thumb, total debt to income should not exceed 5x in non-financial businesses. For most companies, paying less than 15% of operating income would be best.

Earnings (BITA + Net)

Income is what’s left after a company’s paid all its expenses have been paid. The approximate taxes paid by corporations that are publicly traded equates to around 30%. Individual situations may apply like how many companies use exotic tax structures to avoid paying them around the world. Net earnings matter in context of the businesses ability to use them to grow. Some companies grow top line fast as they learn how to control costs, only later becoming efficient. However, a good rule of thumb is to follow the earnings and don’t bet on companies losing money consistently.

Durable Competitive Advantage

Durable Competitive Advantage Jonathan Poland

The most important aspect of durability is market fit. Unique super simple products or services that does change much if at all over time and that do not need continuous investment to stay relevant are always better than the opposite. In some industries this is impossible to do. How to spot these kind of businesses? Here are some core traits to look out for.

  • Consistent Growth in Sales
  • Consistent Growth in Earnings
  • Consistent Growth in Book Value
  • Low Debt to Income Ratio (> 5)
  • High Return on Equity Average (+12%)
  • Low Operating Costs to Income (> 75%)
  • Low CapEx to Income (> 75%)
  • High Gross Profit Margins (+ 25%)

The Power of Compound Interest

The Power of Compound Interest Jonathan Poland

Traditional finance will explain compound interest as the interest paid on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. However, it is also the rate of return on an investment like a stock or real estate purchase.

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When interest is compounded on an investment, the interest earned in one period is added to the principal, so that the interest earned in the next period is based on a larger amount. The more frequently interest is compounded, the greater the amount of interest earned over a given period of time. For example, if an investment earns an annual interest rate of 5%, the interest earned in the first year is $50 on a $1,000 deposit. If interest is compounded annually, the deposit will be worth $1,050 at the end of the first year. If interest is compounded semi-annually, the deposit will be worth $1,025 after six months and $1,051.25 after one year.

Historically, home ownership has produced around 5% a year while the S&P 500 has generated around 10%. Over time, that 5% difference per year adds up to an incredible advantage for stock ownership over home ownership. Let’s just use the average mortgage term of 30 years at 5%. Let’s just say you pay cash for your house and it costs $300,000. In 30 years, with the historic compound interest rate at 5% for real estate, that home appreciates to $1.3 million. Do the same investment amount at 10% for an investment in the S&P 500 and that asset appreciates to $5.2 million. The difference is stark and significant. Let’s say you get 20% a year… that investment now becomes $71 million. Let’s say you get 30% a year… that investment now becomes worth $785 million. You get it.

There are a few key factors to consider when calculating compound interest:

  • Principal: The initial amount of money that is invested or borrowed.
  • Interest rate (or) Rate of Return: The percentage of the principal that is charged as interest.
  • Compounding frequency: How often the interest is added to the principal (e.g., annually, semi-annually, quarterly, monthly, daily, etc.).
  • Time: The length of time over which the interest is calculated.

In conclusion, Compound interest is the interest on interest, it can grow the investment at an exponential rate and can be favorable for both borrowers and savers. The calculation of compound interest depends on the principal, Interest rate, compounding frequency and time. There are many online calculators available to help with the calculation.

What is Intermittent Fasting?

What is Intermittent Fasting? Jonathan Poland

Intermittent fasting is an eating pattern where you cycle between periods of eating and fasting. It does not specify which foods you should eat, but rather when you should eat them. There are several different ways to do intermittent fasting, including the 16/8 method, the 5:2 diet, and alternate-day fasting. The 16/8 method involves skipping breakfast and only eating during an 8-hour window, such as from noon to 8:00 PM. The 5:2 diet involves eating normally for 5 days per week and restricting calories to 500-600 for the other 2 days. Alternate-day fasting involves alternating between days of normal eating and days of severe calorie restriction. Some people use intermittent fasting to try to lose weight, improve their health, or simplify their lifestyle. However, it’s important to speak with a healthcare professional before starting any new eating pattern, especially if you have any underlying health conditions.

Here is a sample meal plan for one week using the 16/8 method of intermittent fasting:


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Grilled chicken salad with mixed greens, cherry tomatoes, avocado, and a vinaigrette dressing
  • Dinner (8:00 PM – 9:00 PM): Baked salmon with roasted vegetables and quinoa


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Turkey and cheese wrap with lettuce, tomato, and hummus, served with a side of fruit
  • Dinner (8:00 PM – 9:00 PM): Veggie stir-fry with tofu and brown rice


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Quinoa and black bean bowl with grilled vegetables and a side of guacamole
  • Dinner (8:00 PM – 9:00 PM): Grilled steak with sweet potato and broccoli


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Turkey and spinach salad with cherry tomatoes, feta, and a balsamic vinaigrette
  • Dinner (8:00 PM – 9:00 PM): Baked chicken with roasted vegetables and wild rice


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Grilled shrimp and vegetable skewers with a side of quinoa
  • Dinner (8:00 PM – 9:00 PM): Vegetarian chili with cornbread


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Turkey and avocado wrap with lettuce and tomato, served with a side of fruit
  • Dinner (8:00 PM – 9:00 PM): Grilled pork chops with roasted vegetables and mashed sweet potatoes


  • Breakfast (8:00 AM – 12:00 PM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Black bean and corn salad with mixed greens, cherry tomatoes, and a lime vinaigrette
  • Dinner (8:00 PM – 9:00 PM): Baked salmon with roasted vegetables and quinoa

I hope this meal plan gives you some ideas for how to structure your eating during the week using the 16/8 method of intermittent fasting. It’s important to remember to drink plenty of water and stay hydrated throughout the day, and to listen to your body’s hunger and fullness cues. Don’t forget to also include snacks if you feel hungry outside of your designated eating window.

Here is a sample meal plan for one week using the 5:2 method of intermittent fasting:


  • Breakfast (7:00 AM – 8:00 AM): Overnight oats with Greek yogurt, berries, and a drizzle of honey
  • Lunch (12:00 PM – 1:00 PM): Grilled chicken salad with mixed greens, cherry tomatoes, avocado, and a vinaigrette dressing
  • Dinner (6:00 PM – 7:00 PM): Baked salmon with roasted vegetables and quinoa


  • Breakfast (7:00 AM – 8:00 AM): Scrambled eggs with spinach and whole grain toast
  • Lunch (12:00 PM – 1:00 PM): Turkey and cheese wrap with lettuce, tomato, and hummus, served with a side of fruit
  • Dinner (6:00 PM – 7:00 PM): Veggie stir-fry with tofu and brown rice


  • Breakfast (7:00 AM – 8:00 AM): Greek yogurt with granola and a sprinkle of chia seeds
  • Lunch (12:00 PM – 1:00 PM): Quinoa and black bean bowl with grilled vegetables and a side of guacamole
  • Dinner (6:00 PM – 7:00 PM): Grilled steak with sweet potato and broccoli


  • Breakfast (7:00 AM – 8:00 AM): Oatmeal with banana and a drizzle of almond butter
  • Lunch (12:00 PM – 1:00 PM): Turkey and spinach salad with cherry tomatoes, feta, and a balsamic vinaigrette
  • Dinner (6:00 PM – 7:00 PM): Baked chicken with roasted vegetables and wild rice


  • Breakfast (7:00 AM – 8:00 AM): Smoothie bowl with Greek yogurt, berries, and a sprinkle of chia seeds
  • Lunch (12:00 PM – 1:00 PM): Grilled shrimp and vegetable skewers with a side of quinoa
  • Dinner (6:00 PM – 7:00 PM): Vegetarian chili with cornbread

Saturday (fasting day):

  • Breakfast (7:00 AM – 8:00 AM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Cucumber and tomato salad with hummus and a side of fruit
  • Dinner (6:00 PM – 7:00 PM): Grilled chicken with roasted vegetables and quinoa (200 calories)

Sunday (fasting day):

  • Breakfast (7:00 AM – 8:00 AM): Skip breakfast
  • Lunch (12:00 PM – 1:00 PM): Grilled veggies with hummus and a side of fruit
  • Dinner (6:00 PM – 7:00 PM): Baked fish with roasted vegetables and quinoa (200 calories)

I hope this meal plan gives you some ideas for how to structure your eating during the week using the 5:2 method of intermittent fasting. On the two fasting days, it’s important to keep your calorie intake to a minimum, aiming for around 500-600 calories. On non-fasting days, you can eat normally, but be sure to still make healthy food choices and listen to your body’s hunger and fullness cues. Don’t forget to also include snacks if you feel hungry outside of your designated eating window.

Austrian Economics 101

Austrian Economics 101 Jonathan Poland

Austrian economics is a school of economic thought that originated in Austria in the late 19th century with Carl Menger, professor of political economy at the University of Vienna from 1873 to 1903. Later Fredrick Hayek, Ludwig von Mises, and Murray Rothbard would demonstrate the mastery Austrian style of analysis can have over today’s economy.

The theory is based on the idea that individuals, rather than governments or other large organizations, are the primary drivers of economic activity. Austrian economists believe that prices, wages, and other market signals reflect the underlying value of goods and services, and that these prices should be allowed to adjust freely in response to changes in supply and demand. They also place a strong emphasis on the role of entrepreneurship and innovation in driving economic growth. Austrian economics is often associated with classical liberalism and libertarianism, and it has influenced a number of economic theories and policies.

Some Axioms:

  • Human Action – All humans seek to improve their situation from their viewpoint.
  • Action Scarcity – The factors available for improving human’s situations are scarce.
  • Human Fallibility – Humans make mistakes.
  • Human Rationality – All humans are rational beings.
  • Action Time – All human actions take time.
  • Action Consequences – All human actions have consequences.
  • Action Choices – Humans choose those actions they believe will best improve their situation.
  • Action Ideas – The ideas human’s hold determine their actions.

Two important modern theorists in the Austrian school are Ludwig von Mises and Friedrich von Hayek. Mises received widespread attention from other economists in the 1920s with his challenge that socialism was totally impossible in a modern economy because of its lack of market prices, for him the indispensable means of rational resource allocation. Both Mises and Hayek have contributed significantly in molding the Austrian theory into an integrated whole. Their explanation of cyclical swings in business as resulting from uncontrolled credit expansion at the hands of government added another significant block to the Austrian structure.

Business Goals

Business Goals Jonathan Poland

Business goals are targets that an organization sets for itself in order to improve its overall strategy and performance. These goals are typically designed to increase profitability and enhance competitive advantage.

There are several types of business goals that organizations may set, including financial goals, such as increasing revenue or profitability; customer-related goals, such as improving customer satisfaction or loyalty; and operational goals, such as increasing efficiency or productivity.

In order to achieve these goals, organizations must develop and implement a strategic plan. This process involves conducting a thorough analysis of the organization’s internal and external environments, identifying opportunities and challenges, and setting specific, measurable, achievable, relevant, and time-bound (SMART) goals.

Once the goals have been set, organizations must work to implement and execute the strategic plan, which may involve making changes to business processes, allocating resources, and setting performance targets.

Effective goal setting and strategic planning are crucial for the success of any organization. By setting clear and achievable goals, and developing a comprehensive plan to achieve them, organizations can improve their overall performance and increase their chances of long-term success. The following are illustrative examples of measurable business goals.


A farmer targets revenue of $400,000 with a strategy to plant several high value crops.

Overhead Cost

A company plans to reduce software licensing costs by $1.1 million by retiring a legacy system.

Gross Margins

A cafe has a goal to increase gross margins from 30% to 35% by introducing higher price menu items such as specialty coffees.

Unit Cost

An organic cereal company plans to reduce unit costs by 10% by directly purchasing several key ingredients from organic farmers.

Market Penetration

A snowboard manufacturer establishes a target of 10% market penetration with a pricing strategy designed to offer low prices to price sensitive customers.

Sales Volume

An ice cream company plans to increase summer sales volumes to 14 million units a month by expanding sales into the Mexican market with a distribution partner.

Customer Acquisition Cost

An air conditioning maintenance company plans to reduce customer acquisition cost to $1000 per contract with a sales partnership with a building management firm.

Customer Lifetime Value

An airline seeks to improve customer lifetime value to $144000 for its elite members by expanding its services at airport lounges.

Customer Churn

A cloud platform seeks to reduce customer churn to 3% for small business customers by reducing bandwidth costs that are often cited by customers as the reason they are closing their account.

Conversion Rate

A streaming music service has a goal to improve its conversion rate for website visitors signing up for an account to 3% by accepting more payment methods.


A house builder has a goal to generate 400 leads for a new development project with advertising and the launch of a local sales office.

Win Rate

A software company has a goal to improve its proposal win rate to 50% by recruiting talented sales people.

Customer Profitability

A cloud computing provider seeks to improve the value of a government contract to $66 million per year by providing value added services in areas such as security management.

Share of Wallet

An information security company seeks to improve its share of wallet to 40% for large accounts by offering a line of infrastructure products.

Productivity Rate

A software development company seeks to improve its average lines of code per day with a program that lets developers work from home three days a week if they meet productivity and quality targets.

Efficiency Rate

A bank seeks to improvement its data center infrastructure efficiency to 65% with a new cooling strategy. Data center infrastructure efficiency is the percentage of energy at a data center that is used for computing as opposed to other facility uses such as cooling.


A bank that plans to improve the throughput of a mortgage application process from 440 application reviews a day to 880.

Cycle Time

A company targets improvement in the cycle time of order-to-delivery to an average of 47 hours.

Time to Market

A product development initiative at a bank targets a 6 month time to market for a new mortgage product.

Time to Volume

An electronics firm targets a time to volume for an innovative new camera lens of one year and one million units.

Figure of Merit

A solar panel company seeks to improve its cost per watt to $0.29 with new designs and manufacturing methods.


A manufacturer of ceiling fans plans to diversify its product line with a number of lighting products with a target to generate 25% of revenue from the new product line within 3 years.

Customer Satisfaction

A telecom company targets a customer satisfaction rate of 55% from 35% by removing unpopular contract terms.

Customer Ratings

A hotel seeks to improve its ratings on a popular travel site from 3.2 to 4.0 by addressing the top 3 complaints in reviews with new services and policies such as a later check out time and cheaper flat rate parking prices.

Customer Loyalty

A brand of coffee targets 1 million loyal customers with a plan to aggressively position their product as the cheapest high quality organic coffee on the shelves.

Churn Rate

A software platform plans to fix several bugs and remove unpopular features to improve monthly churn rate from 4% to 2%.

Brand Recognition

A dentist advertises their clinic all over town with a target of achieving 20% top of mind brand recognition for local dentists.

Brand Image

A technology firm does a rebranding and promotional campaign to break its association with a legacy technology and establish an more modern brand image. The goal is for brand recall of 30% for the produce category software as a service.

Employee Satisfaction

An insurance company seeks to improve new employee satisfaction to 80% with a more extensive onboarding process.

Employee Retention

A restaurant owner seeks to improve one year employee retention to 80% by offering more consistent and predictable shift scheduling.

Employee Performance

A graphic design company seeks to improve employee performance with a series of training workshops. They will measure performance improvement in terms of client satisfaction with a target of 90%.

Return on Investment

A factory is expanding from two production lines to three with a target return on investment of 1400%.

Payback Period

A telecom company builds a new data center with a goal to achieve payback within 4 years.

Occupancy Rate

A hotel is investing in room renovations to improve customer satisfaction and ranking of the hotel on travel sites. The goal is to improve its occupancy rate to 94% and average price per night to $200.


A SaaS app targets uptime of 99.99% with architecture and infrastructure upgrades.

Load Time

A fashion brand redesigns its website with a target of a 3 second average load time.

User Engagement

A streaming media service seeks to improve its average user engagement to 11 hours a month by introducing new children’s shows.

Mean Time to Repair

A telecom service provider targets a mean time to repair of 35 minutes.


A manufacturer of men’s shirts has a goal to reduce returns from 18% to 5% by improving the quality of materials to produce shirts that are more opaque and less likely to wrinkle.


An airline plans to measure risk probability and risk impact for its legacy IT systems and reduce that risk by $4 million over five years with modernization projects.


A fashion brand plans to improve positive perceptions of its brand by switching to 100% sustainable materials that are responsibly sourced, have low environmental impact and are renewable.

Strategic Communication

Strategic Communication Jonathan Poland

Strategic communication is the deliberate planning, dissemination, and use of information to influence attitudes, beliefs, and behaviors. It is a crucial aspect of successful organizations, as it helps to align the actions and messages of the organization with its goals and values.

There are three main types of strategic communication: internal communication, external communication, and online/digital communication.

Internal communication refers to the communication within an organization, including communication between departments and between management and employees. Effective internal communication is important for building trust and ensuring that all members of the organization are informed and aligned with the company’s goals and objectives.

External communication refers to the communication between an organization and its external stakeholders, such as customers, investors, and the media. Effective external communication helps to build and maintain relationships with these stakeholders and manage their expectations.

Online/digital communication refers to the use of digital platforms and channels, such as social media and websites, to communicate with stakeholders. In the digital age, it is important for organizations to have a strong online presence and to effectively use digital channels for communication.

To plan and implement effective strategic communication, organizations should follow a process that includes identifying communication goals and objectives, conducting audience analysis, developing messages, choosing appropriate channels of communication, and evaluating and providing feedback.

There are several challenges that organizations may face in strategic communication, such as managing crisis communication, dealing with conflicting messages, maintaining consistency in messaging, and managing internal and external stakeholder expectations.

To overcome these challenges and effectively communicate with stakeholders, organizations should follow best practices such as developing a clear and consistent brand message, being transparent and authentic in communication, engaging with stakeholders and building relationships, using a variety of communication channels and platforms, and continuously evaluating and adjusting communication strategies.

In conclusion, strategic communication is an essential aspect of successful organizations, as it helps to align the actions and messages of the organization with its goals and values. Effective strategic communication requires careful planning and consideration of various factors, including the audience, message, and channels of communication. While there can be challenges in strategic communication, following best practices such as being transparent and consistent, engaging with stakeholders, and using a variety of communication channels can help to overcome these challenges.

The following are illustrative examples.


Being open, honest and forthcoming with your stakeholders as a matter of principle. For example, a solar panel manufacturer that communicates a quality problem to customers, investors and regulators in a straightforward manner. This can earn a firm respect and trust.

Strategic Silence

Strategic communication can include efforts to keep secrets from external stakeholders. For example, customers may delay purchases if they know a vastly improved version of a product is soon to be released. As such, a firm may have incentives to keep product releases secret until shortly before launch.

Defensive Publication

Defensive publication is the practice of releasing public details of things you don’t want your competition to patent. For example, a firm that develops a new speaker design may release details that serve as prior art that prevent competitors from patenting the idea.


Propaganda is manipulative use of communication to influence. For example, a firm that spreads disinformation to undermine public support for environmental regulations.

Fear, Uncertainty and Doubt (FUD)

Communication that aims to create fear, uncertainty and doubt about the competition. This strategy was historically used by large IT firms whereby salespeople would imply that customers who choose products from smaller competitors often end up getting fired for this decision. This was so common that it became a truism in the phrase “Nobody ever got fired for choosing (fill in large firm name)”

Embrace, Extend & Extinguish

Embrace, extend and extinguish is the dubious strategy of embracing a smaller competitor or open standard only to lead them to ruin in the long term. For example, a large IT company that voices support for an open source technology but then help to lead the project in ways that cause it to fail.

Striking Fear Into the Hearts of the Competition

Striking fear into the hearts of the competition is the practice of communicating strategies that are intended to draw a competitive response. For example, a firm that announces a future product capability that would change everything in an industry. This may cause the competition to waste resources chasing this capability when it may not be feasible. This can be interpreted as illegal in some situations — particularly if you mislead investors by implying that you will do something wonderful in future when you have no serious intention to do so.

Self-Fulfilling Prophecy

An effort to change things by communicating a vision such that it becomes more likely to become reality. For example, an early pioneer of electric vehicles who communicates a vision that sparks other firms to invest in the technology creating momentum for a technology that requires massive infrastructure changes to be successful.


Seeking to engage stakeholders such as lead users. For example, a technology firm that pitches its platform at developer’s conferences to increase adoption.

Brand Image

Promoting a brand image. For example, a CEO who communicates wild ideas about the future to promote the image of a firm as being innovative.

Brand Recognition

Communication that is simply intended to create recognition of your brand name and symbols in the minds of your target audience. This is based on the tendency for customers to simply buy what they recognize.

Public Relations

Public relations is the process of communicating to stakeholders such as investors, employees, partners, communities and regulators. For example, a firm that seeks to create positive investor sentiment by communicating efficiency improvements.

Change Management

Internal communications design to build momentum for change.

Business Objectives

Business Objectives Jonathan Poland

Business objectives are specific targets or goals that an organization, team, or individual strives to achieve within a certain time frame. These objectives are used to measure the performance and success of the business and can be used to inform decision-making, allocate resources, and motivate employees.

Objectives can be either long-term or short-term and can be related to a variety of areas, such as financial performance, customer satisfaction, employee development, or efficiency. For example, a long-term objective for a company might be to increase its market share, while a short-term objective could be to improve customer satisfaction ratings by a certain percentage within a quarter.

In order to be effective, business objectives should be specific, measurable, achievable, relevant, and time-bound. This means that they should be clearly defined, with a quantifiable outcome that is realistically achievable within a specific time frame and that aligns with the overall goals and priorities of the organization.

Business objectives can be used to drive performance and drive growth by providing a clear direction and focus for employees and helping to ensure that resources are being used effectively. They can also help to create a sense of accountability and allow for the tracking of progress towards achieving specific goals. Overall, setting and working towards business objectives is an important aspect of running a successful organization.

The following are common types of business objective.

  • Revenue – Revenue such as a product management team with a revenue target of $45 million for a particular product line.
  • Costs – Reducing costs. For example, an automation project that reduces the cost of warehouse operations.
  • Competition – Competitive objectives such as gaining market share.
  • Knowledge – Developing know-how and intellectual property.
  • Return on Investment – Achieving an attractive return on investment is a common objective for strategies, projects and investments in assets and securities.
  • Efficiency – The amount of output you get for a unit of input. For example, the amount of electricity required to produce a unit on a production line.
  • Productivity – The amount of output you get for an hour worked such as the amount of work required to produce a pair of shoes.
  • Processes – Improving processes such as reducing the cycle time of an order fulfillment process.
  • Capabilities – Implementing new business capabilities or improving existing capabilities. For example, a human resources department that launches a campus recruiting capability that allows the firm to engage graduates at 12 universities and colleges.
  • Brand – Brand objectives such as brand awareness and brand loyalty.
  • Product – Product development objectives such as time to market and time to volume.
  • Sales – Sales targets such as customer lifetime value and customer acquisition cost.
  • Pricing – Pricing objectives such as price leadership.
  • Distribution – Distribution objectives such as developing distribution channels in a new region or country.
  • Customer Relationships – Reducing customer churn and cross-selling related targets.
  • Customer Experience – Improving the end-to-end customer experience as measured by customer satisfaction, ratings and reviews.
  • Employee Experience – Satisfied, productive and creative employees. Measured by employee surveys and productivity metrics such as revenue per employee.
  • Organizational Culture – The norms, expectations and habits of your organization. Measured with surveys. For example, a survey of manager perceptions of resistance to change and office politics.
  • Operations – Objectives related to your core business processes. For example, the availability of your IT services.
  • Quality – Quality objectives such as improving quality control metrics, reducing customer returns or improving product ratings.
  • Risk – Risk management objectives such as reducing the probability and impact of information security incidents.
  • Innovation – Innovation objectives such as developing a product with revenue potential that is an order of magnitude beyond your current products.
  • Compliance – Implementing controls to achieve compliance to standards, laws and regulations.
  • Sustainability – Objectives related to the global impact of your operations and products such as reducing harmful waste.

Economic Moat

Economic Moat Jonathan Poland

An economic moat is a concept in business strategy that refers to a company’s ability to maintain a competitive advantage over its competitors. Economic moats are considered to be a key factor in the long-term success of a business, as they allow a company to protect its market position and generate sustainable profits over time.

There are several types of economic moats that companies can possess. One type is a cost advantage, which refers to a company’s ability to produce goods or services at a lower cost than its competitors. This can be achieved through economies of scale, access to low-cost raw materials, or superior production processes. Another type of economic moat is a network effect, which occurs when a company’s product or service becomes more valuable as more people use it. For example, a social media platform becomes more valuable to users as the number of users increases, creating a strong incentive for new users to join.

Other types of economic moats include brand recognition, regulatory barriers to entry, and customer loyalty. Strong brand recognition can make it difficult for competitors to gain market share, as consumers may be more likely to trust and purchase from a well-known brand. Regulatory barriers to entry, such as patents and trademarks, can also create economic moats by making it difficult for new companies to enter a market. Finally, customer loyalty can create an economic moat by making it difficult for competitors to win over a company’s existing customer base.

In order to assess the strength of a company’s economic moat, investors can consider a number of factors, such as the company’s financial performance, market position, and competitive landscape. Companies with strong economic moats are generally considered to be more resilient and have greater long-term growth potential, as they are better able to protect their market position and generate sustainable profit.

The concept of economic moats was popularized by the investor Warren Buffet, who is known for his focus on finding companies with strong competitive advantages. Buffet has famously stated that he looks for companies with “wide moats” that protect their business and allow them to generate sustained profits over time.

However, the idea of economic moats is not new, and has been discussed by business strategists and economists for many years. In fact, the concept can be traced back to the 19th century, when the economist Adam Smith wrote about the importance of competitive advantage in his book “The Wealth of Nations.” In the book, Smith argued that businesses that are able to produce goods or services more efficiently than their competitors will be able to sell them at lower prices, leading to increased market share and profits.

Today, the concept of economic moats is widely accepted and has become an important factor in business strategy and investment analysis. Many companies and investors seek to identify and create economic moats in order to sustain their competitive advantage and drive long-term growth.

The following are common types of economic moat.

Barriers To Entry

A general term for an industry that is difficult for new competition to enter due to factors such as permits, know-how and capital requirements.

Coercive Monopoly

A monopoly that is established by preventing competition with extraordinary powers.

Government Monopoly

The most common type of coercive monopoly that is established by government protection.


Unique or expensive infrastructure that competitors can’t match such as hydroelectric dams or railway lines.


Knowledge, capabilities and skills that are difficult to duplicate.

Legal Protections

Legal protections such as licenses, permits and intellectual property.


A unique physical location such as the only hotel with beachfront access to a famous beach or the only data center beside a stock exchange.

Loyal Customers

Customers who are fans of a particular brand or product line may be difficult or impossible for competitors to influence.

Natural Monopoly

An industry that makes more economic sense as a monopoly such as a region with a single railway line.

Organizational Culture

Factors such as norms, behaviors and values that differ widely from one organization to another. Organizational culture is notoriously difficult to transfer or emulate.


A business process that competitors have difficulty challenging such as manufacturer that consistently achieves higher quality at a lower price.


Relationships with governments, industry groups, universities, partners and customers.


Reputation can be a potent long term advantage. For example, a law firm with a reputation for winning complex cases may command high fees.


Unique access to superior or lower cost resources.


A firm that has achieved economies of scale is often difficult for smaller firms to challenge.

Switching Barriers

A firm with captive customers who find it difficult to switch to a competitor.


Superior technology built into products, decision making or process execution.

Customer Service Principles

Customer Service Principles Jonathan Poland

Customer service principles are guidelines that an organization follows to shape its service strategy, policies, procedures, measurement, and culture. These principles are unique to each organization and are based on factors such as its goals and brand identity. They can be presented as slogans or more detailed statements that function as rules. They can serve as a foundation for an organization’s customer service efforts and help to ensure that its service meets the needs and expectations of its customers. Both styles are represented in the examples.

Always Help

One of the most widely disliked customer service attitudes is coined in the phase “It’s not our problem.” As such, many firms have established a culture of always helping the customer, even if a request is completely unrelated to their products and services. Principle: it’s always your job to be helpful to customers.

Measurement Balance

Performance measurements such as average call time, often have unintended consequences such as rushed, impolite or inadequate service. Principle: performance indicators are designed to maximize customer satisfaction, including qualitative assessments of results.

Common Courtesies

Modern customer service approaches often emphasize personality and informal service styles that attempt to build rapport with customers. Nevertheless, many customers continue to value the polite treatment that is often associated with a more formal approach. Whatever approach is taken, common courtesies are a fundamental customer service practice. Principle: customers are addressed with polite language.

Complaints As Opportunities

Establishing a policy of learning from complaints and generously compensating where complaints have any merit whatsoever in the interests of brand reputation and customer loyalty. Principle: every customer interaction is an opportunity to learn, improve and impress.

Customer Experience

Viewing customer service as part of a comprehensive brand experience that is carefully designed to express your character as a company. Principle: customer service is a cornerstone of our brand and reflects our values, spirit and quality.

Customer Is Always Right

A well known customer service principle that suggests that customers be treated with great respect. It is associated with practices such as no-questions-asked product returns, valuing customer feedback and treating perceived problems as problems. Principle: the customer is always right.

Customer Perspective

Viewing each interaction from your customer’s perspective. Avoid saying things like “Do you know how expensive it would be if we gave every customer a refund?” or “We are so busy today, you called at our busiest time.” Principle: customers are uninterested in our business constraints, view each interaction from the customer perspective.

Customer Relationships

Building business relationships with customers and valuing customers on a long term basis. Principle: impress customers to build lifelong relationships.

Customer Satisfaction

Valuing each customer’s opinion of your service, experience, brand and products. Principle: continuously gain feedback from customers.

Emotional Intelligence

As a skill, customer service demands insight into emotions and the capability to effectively use emotion. Principle: value and develop emotional intelligence as an ability and skill.

Employee Satisfaction

It is unlikely that your customers will receive exceedingly good customer service if your employees are overworked, stressed out and under appreciated. This can result in a downward spiral whereby unhappy employees make customers angry, leading to more unhappy employees. Principle: employee happiness and customer happiness are the foundations of a profitable business.

Engage Customers

Actively engaging customers as opposed to waiting for them to call. For example, by joining relevant conversations in social media. Principle: engage the customer at every opportunity.


Providing customers a path of escalation if they are ultimately unhappy with your service. This is widely considered critical to handling service quality issues, reputation and compliance. Principle: customers can reach managers who are empowered to handle special complaints.

Feedback Loop

Improving processes, products and practices based on customer feedback. Principle: customer service is a critical source of feedback that is actively used to drive business improvements.

Frontline Decision Making

Empowering customer-facing staff to make decisions as opposed to merely applying a policy. Principle: frontline staff are empowered to make exceptions to policy.

Frontline Information

Customer-facing staff are provided with ample information. Principle: frontline staff have full access to organizational knowledge and are informed of relevant situations as they arise.

Know Your Product

Customers expect your staff to be experts in your products. Principle: employees are experts and evangelists for our products before they ever face a customer.


Listening to the customer with intent to understand their unique situation, personality and needs. Principle: listening skills and abilities are a key skill for customer-facing staff.

Make Exceptions

It is often neither practical nor desirable to develop policies that cover every possible customer service scenario. As such, exceptions to policy are a regular course of business. Principle: policies are helpful guidelines not an unbendable set of rules.

Measure And Improve

The practice of measuring and improving your service culture. Principle: our customer service performance is measured and continuously improved.

Multi Channel Support

Customers often have a strong channel preference and may resent being forced to a particular channel such as web, phone or in-store for service. Principle: customers are free to choose their preferred channel for support, a full array of services are available on each supported channel.

No Scripts

Customers commonly complain that scripts are used as a substitute for thinking and that they result in irrational responses that indicate a lack of listening or comprehension on the part of a customer service agent. Principle: each customer interaction is unique, improvised and unscripted.

Patient And Fast

Ideal interactions with customers can often be described as both patient and fast. Think of the barista at a cafe who engages customers in a unrushed conversation but then prepares beverages with skill and speed. Principle: customer interactions are unrushed, work that keeps the customer waiting is conducted with speed and accuracy.

Performance Management

Regularly rewarding and recognizing employees to mitigate the work related stress that is commonly associated with customer service. Principle: superior performance is regularly rewarded.


Customer service is often described as being an acting skill that requires a professional or calming persona in the face of the most difficult of situations. Principle: employees are expected to maintain a calm, professional demeanor in the presence of customers.

Personal Responsibility

It is common for customers to complain that customer service representatives don’t apologize when the company they represent is clearly in the wrong. In some cases, representatives are known to say things like “It wasn’t me who over-billed you, it was our billing department.” In other words, representatives may confuse apologizing on behalf of an organization for taking personal blame. Principle: you represent our organization and are expected to apologize and take responsibility for perceived problems.

Personalized Service

Customers have different personalities, situations and needs. Principle: service is customized to individual preferences and needs.

Plain Language

Avoiding the use of jargon such as industry or technical acronyms and communicating with intent to be clearly understood. This often needs to be balanced with other principles such as respecting the intelligence of the customer. If it’s likely that a customer will understand a particular technical term, it’s often better to use it. Principle: avoid jargon and complex terms that the customer may not understand.

Positive Language

Use positive language where possible by focusing on what you can offer as opposed to directly saying no. However, positive language should not be used to deliver bad news such as a flight delay announcement. Principle: use positive language to avoid challenging the customer or directly saying “no”, instead focus on what you can offer.

Process Hiding

Customers tend to dislike being told “you’re not following our process.” As such, many organizations establish the principle that customers don’t have to jump through hoops or understand processes. Principle: the customer is never required to understand or follow our processes, they are guided through each process without having to be aware of it.


Most organizations set principles related to professionalism such as standards of appearance, behavior and habit. For example, employees may be heavily discouraged from talking about personal things such as their dating experiences in front of customers. Principle: standards of professionalism are clearly communicated to employees and are incorporated into performance goals.

Provide Certainty

Customers tend to value certain information over uncertain. For example, it’s often better to tell customers a flight will be delayed for an hour than to say “15 minutes to an hour.” Principle: communicate unambiguous information to customers.

Provide Choice

Customers value choice. If a package is lost in the mail, give them an option of an immediate refund or shipping the product again with free express shipping. Principle: offer customers pleasant choices.

Provide Information

Customers value information and want you to respect their intelligence. Unless information is truly a confidential secret that’s terribly important to your competitive advantage, it’s often better to share. For example, if a flight is delayed, tell your customers about the problem. Principle: share information that customers may find interesting.


Building rapport with customers is a well known way to gain loyalty and brand value. Principle: building rapport with customers is a valued skill and ability that is core to our recruiting, training and performance management.

Service As Marketing

Viewing service reactions as an opportunity to show off your brand culture and values. Principle: each interaction with a customer is an opportunity to impress with everything that our brand represents.

Service As Public Relations

Service both exceptionally good and exceptionally bad tends to attract media and social media attention. Principle: treat each interaction with a customer as if your conversation will be published in media and social media.

Service Commitments

Publishing service commitments and guarantees and earning a reputation for living up to your commitments. Principle: our service commitment and values are openly published and we talk about them proudly with every opportunity.

Service Culture

The idea that service extends beyond a policy or set of practices but is reflective of your organizational culture. This includes factors such as organizational values, norms, habits, language, history and symbols. As such, efforts to improve customer service may require a culture shift that impacts your entire organization. Principle: service is reflective of corporate culture, improving service requires improving as an organization.

Service Delays

Waiting times are amongst the most common customer complaints. Principle: we do everything we can to avoid making the customer wait.

Service Diligence

Customers commonly dislike being bounced from one representative to the next. They also may resent being directed to a self service tool when they’ve gone to the trouble to reach a human representative. Service diligence is the idea that at least one employee stays with a customer until their request has been satisfied. For example, when a customer asks for directions to the customer service counter in a department store, an employee walks them to the counter and stays with them until someone helps them. Principle: the first employee to receive a customer request is responsible for ensuring the request is completed and the customer satisfied.

Service Fairness

Customers may feel stressed out and unappreciated if they feel that service is unfair. For example, customers tend to prefer a single line for all windows because it guarantees first-in-first-out service. Principle: processes and practices are designed to treat customers consistently and with fairness.

Set Expectations

When customers know exactly what to expect, they are much less likely to be disappointed. For example, detailed and honest product descriptions can improve service rankings and decrease returns for online sellers. In many cases, communicating negative information such as things that a product can’t do is greatly appreciated by customers and may improve sales as a result of improved trust. Principle: set customer expectations with as many honest details as possible.

Single Point Of Contact

Be easy to contact. Principle: we publish a single phone number and web address that can be used to access all of our services.

Stand Out Service

The idea that customer service should stand out by going beyond the call of duty. It is common to use true stories of employees who did great things for the community or customers as a foundation for corporate culture and marketing. Principle: going beyond the call of duty may pay off in unexpected ways.

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