Product Marty Cagan

Make a Friend in Finance

How many of you understand the economics of your product? Do you know your exact revenue model? Do you know the total costs of your product? Do you know how much you pay for each new customer? Do you know their lifetime value to the company? Do you know the return your product has generated for the company?

In my experience, most product managers, especially technical product managers, have only a very shallow understanding of how their product (or their company) makes money. Especially those of us that came to product management from engineering.

I learned a long time ago that I could benefit a great deal from making a friend in the finance department. At every company i’ve ever worked at I have asked the CFO for someone that could help me answer these questions, and it always amazed me at how willing these people were to help, and how much information they had available for those that asked.

I’ve found that my friends in finance can help with three big things.

– Understanding Your Product

Sit down with your friend and ask for help determining and evaluating the financial aspects of your product, starting with the questions I posed above. If you have partnerships, read the contracts. If you license technology, look at the agreements. Ask your friend to help you assess your product. Is it carrying its own weight? Is it a good investment for the company? What trends does your friend see? Is the product heading in the right direction?

– Understanding Your Customers

While we typically have good tools for understanding how user’s behave on a web site (via web analytics), the finance department often has a wealth of additional information on the actual customers, accumulated from transaction histories, payment information, customer data and management reporting. You both of course need to be sensitive on what information you can view and how you use it, but in terms of understanding your customers it can be extremely useful.

More than once I’ve uncovered information about my products from the financial staff that truly surprised me, and exposed fantastic opportunities. One time in particular I remember asking my friends why nobody knows this, and he replied “because nobody asked.” Realize the life of a finance person is largely thankless, and driven by extreme deadlines (“our quarter closes on Thursday and we’re announcing earnings on Monday!”). I also have this theory that people in finance are often fairly quiet, and not the type to come to your desk advocating product opportunities. Usually, you’ve got to go to them.

– Preparing The Business Case

You’ve got a great idea, but you’re not sure about the business case. Your friend in finance can help. You’ll need to provide most of the inputs, but your friend will know how to put together the case. If it’s a good case, you’ll also find that having someone in finance that has studied the economics of the potential product can be a big help with senior management.

So go make a friend in finance. You need the information they have and their help in interpreting the information and putting it to good use. I think you’ll find that these people want to help their company, and appreciate the opportunity to do so.