Every CEO and business owner understands the importance of Financial Auditing and Controls. Not only is it mandated for many businesses from a legal perspective, but it’s a very important business function to keep an eye on in order to uncover and root out fraud, waste and financial abuse. But many businesses can benefit by taking a similar approach to other important functional areas of the business. For example, could your company benefit from a regular marketing audit?
I want to quickly state that I’m not one that likes to burden businesses with “excessive process”. So please don’t interpret what you read below as an endorsement of such an approach. How formal the audit needs to be will be dependent upon the specific circumstances of your business. For a startup, an audit consist of the founders sitting around a table for an hour. For a multi-billion dollar public company, it might be a multi-month exercise involving committees and scores of people. The key here isn’t the “extent of process”. The key is regular, systematic attention in the form of a scheduled review.
So audit your financials, of course, but what else? We’ll take a look from the perspective of a mobile software or SaaS company, although most of these concepts also apply broadly to any business.
Overall Marketing Audit
Most folks wouldn’t consider the marketing function to be something that requires “auditing”. But think about it; it’s one of the most important drivers of most software-based businesses.
Why this is important:
- Product marketing and promotion is a constantly changing, dynamic part of a software business. After software coding itself, it’s the most important function in a majority of software businesses. That’s because the low variable cost nature of the software business tends to lead to a lot of room for creativity on the marketing side, with little constraints coming from direct product costs. Both marketing technology and “best practice” techniques tend to evolve rapidly in software markets.
- The marketing technique of yesterday often tends to stop working pretty quickly as it gets clogged with later adopting marketers jumping on the bandwagon. So it’s important to stay ahead of the curve – auditing this function often can uncover both approaches that are already in the early stages of performance decline, as well as hopefully discover ‘the next big thing” ahead of your competitors.
What needs to be done:
- The marketing audit can often be done internally, as long as key stakeholders who interface with the marketing department such as software development, sales and customer support/success are willing and able to provide feedback. Most important is that the VP Marketing and other department leaders have a self-reflective, “search for the truth” attitude and aren’t overly sensitive to criticism.
- This is important to ensure that the marketing department doesn’t get too comfortable and “rest on its laurels”. A new day is always dawning in marketing; your marketing function needs to be self-critical, so that they are a step ahead of change rather than a step behind. If budget allows, it can also be a great help to bring in an external marketing consultant to review and provide input. This can provide an objective voice on current performance, as well as bring fresh ideas to an area that requires constant new approaches in bringing products to market and promoting them successfully.
Pricing Audit
Pricing is of course part of “marketing audit” discussion above, but it is important enough that I wanted to call it out separately. Pricing is one of the most difficult things to get right, at least at first. Especially if you’re entering a market segment with a new type of product that has few obvious substitutes. So prices are set with the best information that you have at that time and you go from there.
It’s important that that’s not the last time you consider pricing. Not only could your initial assumptions have been wrong (and probably were), but markets change and evolve constantly. Pricing is one of the easiest things to change – especially in the software business with very low variable costs. The important point is that this is true not only for your but for your competitors.
Why this is important:
Nimbleness in pricing and being up-to-date with market forces is critical to software business success. Pricing is one of the most important financial levers of any business and can make a huge difference in your profitability, maybe even decide whether you make any profit at all. It’s not about constantly raising – or lowering prices. Pricing should be approached with a “Goldilocks” mentality: you need to shoot for “not too high, not too low, but just right”. And this is not a one time event, but a continuously evolving situation, almost like a living organism. Because of the dynamic nature of pricing, regular auditing can have a big positive effect on your business.
What needs to be done:
A number of things should be regularly audited:
- Competitor’s pricing – it’s critical to have a timely handle on your competitor’s pricing strategy and adjustments.
- Customer input – are price complaints significant, or not? I have an old saying: ” if no one is complaining about prices, the prices are too low”. But conversely if you’re getting a lot of pricing complaints or your sales force is telling you it’s preventing a lot of potential deals from happening, your prices are too high and need to be adjusted downward.
- Overall market segment and technology trends – is the market segment becoming more price sensitive due to economic conditions? Are customer coffers particularly flush due to segment growth? Is there a technological shift coming down the rails that could derail your business? These macro factors need to be tracked as well, to keep you from being blindsided and your business hurt in a big way. Or leaving money on the table, because you’re pricing too low.
Website – SEO, UX & Content Audit
Here’s another area that I could easily included in the marketing Audit section. But I believe it’s also important enough to discuss separately. There is a tendency in many companies to “put up a website and forget about it”. This is usually a mistake in the great majority of circumstances.
Why this is important:
In today’s world, your website is the front door to your business for many, if not most, of your prospects. If a website looks dated, slow and unappealing, a prospect may choose to “turn around and walk the other way”. Websites that aren’t constantly updated have a tendency to not reflect what’s currently going on with your products and company. In addition, issues such as slow response times, mobile-specific usability, out of date content, broken links, confusing user experience paths and much more can appear fairly quickly without constant attention, costing your real business.
What needs to be done:
- Your website needs to be treated as a “living document” as opposed to a static object. It really requires constant new and updated content. Is your product content up-to-date? Is you mobile experience fast and easy? Are all the contact forms working properly? Is your design and color scheme state-of-the-art circa 2005? Is your SEO optimization maximizing organic visitors to our site? These are just a few examples of the myriad issues that can appear with a website without constant oversight. So really, the website should be viewed as something to be almost continuously re-evaluated.
- Special focus on your website as part of an annual or semi-annual marketing audit which includes stakeholders from every function and at every level of management is a good fail-safe structural process for most companies. You can bring in outside design, technical and marketing experts around times of major change. But at a minimum, an internal team with top management support should conduct regular audits.
Software Coding Standards Audit
So here’s the software specific part of the discussion, although it doesn’t apply only to “software companies”. Most modern companies of any size have a software development component to it, whether that’s embedded code for a hardware or semiconductor company, or simply the development of internal business applications developed specifically to support nearly any type of business.
Why this is important:
Software code has become so critical to the operations of so many systems and products today. A code malfunction can stop the operation of all but the “dumbest products” in the market, causing a potential customer relations catastrophe. Or in the case of internal business applications, it might bring your operations to a near or complete halt, costing huge amounts of efficiency at best or actual revenue at worst.
This is an area the CEO – unless he has a strong software development background – needs to surround him/her self with technical folks that can really be trusted. Whether we are talking about a VP-Engineering, VP-Software Development or IT Director, this is a critical role for nearly all companies today.
What needs to be done:
- Make sure that your code base is up to date from a “best practices” perspective. Do a review to make sure that you are using the BEST modern development tools, not just the tools that “have always been used” or that is “most comfortable” to the current staff. Software technology evolves rapidly and it’s important to keep up to date. Much like a marketing audit to ensure current best practices, software development state-of-the-art can change rapidly. In this respect, some turnover in your technical operations can be beneficial as it may help inject new ideas and discussion about how things should be done. I’m not advocating wholesale turnover, mind you. Just consider an injection of new blood from time to time to ensure you don’t stagnate in such a dynamic function.
- In addition to tools and coding standards, it’s critical that your software systems are technically state-of-the-art with respect to security and data privacy these days, for obvious reasons.
- Lastly, I’ve never heard a software developer say “that code I inherited from the guy that left is very well structured, perfectly commented and easy to understand. I’ll have no problem maintaining and updating it”. Again, the next time I hear this will be the first. So have an independent internal technical team that ensures that your code base is maintained from a programmer usability perspective to a reasonable standard, so that some measure of continuity is possible in times of transition.
Compliance Audit
While most of us probably hate it, compliance probably needs to make this list for nearly every company these days. For example, if you do ANY business in Europe, the new GDPR law means you need to be concerned about privacy and data security. In addition, many software company market segments reside in highly regulated industries like banking, healthcare or government. And the HR related laws around discrimination and harassment – to name a couple of important topics – now apply almost globally to every type of business.
Why this is important:
Laws are constantly changing, especially if you operate your business in a worldwide market environment. It’s nearly impossible for a CEO and senior management team to stay on top of everything, especially since your main focus should reasonably be on creating revenues and profits. Lack of compliance in important areas can lead to catastrophic consequences in today’s world.
What needs to be done:
- Non-compliance can lead to big fines, operating constraints and a real stain on the company’s reputation. In extreme cases, it can impact your ability to compete a s specific geographic market. Taken to the extreme, it can lead to shareholder lawsuits and a lot of financial damage to public companies. Almost no expense should be spared to protect the company in this area.
- In this area it’s important to not only have internal departments that adequately track and bring compliance issues to your attention. This can include many different things; from IT procedures to employee performance in a wide variety of activities. I believe that this is serious enough stuff in many instances that an outside team of expert consultants should audit your operations regularly to ensure compliance.
So there you have it, my take on some important business function to schedule regular “audits” of, if you are a mobile software, cloud-based or SaaS business. Do you need a marketing audit, or an audit of another important functional area? I realize that for purposes of brevity I left out a few functions that could easily have been included. What’s on your list? Please Use the comment field below to take exception or add to the discussion.
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