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The Ultimate Blueprint for an insanely successful business. - Coggle…
The Ultimate Blueprint for an insanely successful business.
It all comes down to measuring, measure results & change activities
Creating Leverage
Measuring Time & Thinking Time - 2 Of the Best Forms of Leverage
What Gets Measured is What Gets Done
Get Clear Where You Are - Measure
Define Where You Want to Go - Your Goal
Identify The Root Problem That Is blocking the Progress - The Cause
Tackle The Problem - Execute
Determine Your Progress - Measure
If You Can't read the Scoreboard You Don't Know The Score.
The Language Of Business
Business Optics Comes Down to 2 Things
Comparing The Trends Over Time
Measuring The Relationship Between Numbers in a given time period.
Earnings Are Not The Same as Cash
Balance Sheet, P&L Statement, Cash Flow Statement
Strategies
Trend Analysis - Multiple Timeframes & Points (5 Past Years, 6 Months and YTD)
Do some R&D on the Big Boys
The Ultimate Blueprint
Profit = How effectively you're managing the expenses against the revenue
Revenue = How effectively the business assets are being utilized
Assets -> Revenue -> Profits -> Cashflow
In a well run business you want growth to go in the opposite order
Cash -> Profits -> Revenue -> Assets
Assets EFFECTIVE -> Revenue EFFICIENT -> Profits PRODUCTIVE -> Operating Cash
Operating Cash -> Free Cash Flow -> More Assets, Reduce Debt, Distribute to Owners
3 Types of cash - Operating, Investing and Financing.
The Pimp Factor
At the creation stage you can have LIFESTYLE or WEALTH, later on both, but as the start only ONE.
Money is never spent, only invested, so it either produces a return or doesn't.
Successful Business Owners invest in things that enchance revenue, the bottom line and cash flow.
Do I really need this? Will this help me make more money?
Building The Scoreboard
Revenues / Assets = Effectiveness %
Profits / Revenues = Efficiency %
Effectiveness * Efficiency = Return on Assets
Operating Cash Flow / Profits = Productivity %
OCF / Assets
Maximizing Profits
Do I want it or do I need it? - What Do I need it for?
Every dime you spend is an investment in keeping a customer or getting a new one.
N.O.G - No Overhead Growth
Maximizing Profits - Optimize before you Grow.
Maximizing Cash Flow
To be sustainable, your business must produce POSITIVE Cash Flow from the OPERATIONS of the business
Sell More, Spend Less, Reduce Accounts Receivable Days, Reduce Inventory Days, Increase Accounts Payable Days.
OCF Should be positive, OCF Should be greater than profits, OCF Should be faster growing than profits, OCF is bigger than investing cash needs, OCF - ICF = Free Cash Flow.
Keeping Score
Accrual Accounting
Did you earn it? Did you owe it? Did you use it?
Three Sets of Books - Accrual Accounting, Tax Accounting, Personal Consumption Accounting.
KPis Vs Critial Drivers
Critical Drivers - When I have a bad moth financially, what happened that shouldn't have happened or what should have happened that didn't happen?
KPIs = Effect , CD = Cause
Thinking Time - Develop Benchmarks and Hurdles for each CD, Communicate the CDs to your Team, Set the rewards and consequences around the attainment of these critical drivers, Measure Report and Correct the CD execution on a daily basis.
The Ultimate Goal
The Value of a business is directly tied to the size, predictability, sustainability and growth rate of its earnings.
Earnings * Multiple = Value
Minimize Risk - Identify the Risks, Think About The Probability of Each Risk, Identify and Rank 10 Highest Probability Risk with Largest Financial Costs.
Control the likelihood of each risk and it's financial cost.
60 Day CFO Plan
The Big 6 - Financial Optics
Cash
Cash Balances - 12 & 24 Months G/L
Cash Sources - Operating, Investing, Financing.
Cash Burn Rate - Rate Of Consumption & Total Fuel
Rolling 13 Week Cash Forecast
Beginning Cash Balance
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Thorough List of All the Sources & Uses of Cash - Generalization kills Clarity
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How to Deal With Big Picture Shortfalls
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Accounting Practices
Profits
Profit Margin
(COG, Variable, G&A, Marketing & Sales) - Common Sizing & Per Unit cost optimization.
Revenue
Return on Assets
Profits/Assets = ROA
Measuring Absolute Numbers is good, measuring and comparing growth rates is mastery!
The Big 6: Business Risks
Concentration Risk
Single Point Of Failure Risk.
Sustainability Risk
What could disrupt the future stream of earnings? What could decrease revenues and ramp up expenses?
Business Model Risk
External Risk
It is important for you to identify these risks and keep an eye on them. - Know where the gasoline is prior to the fire.
Leverage Risk
Understanding the Balance Sheet, Debt Structure, Interest Rates, Debt Maturities, Robustness of Lender Relationships. Making sure that there are adequate cash reserves to fund future debt obligations.
What is the upside? What is the downside? Can I live with the downside?
Excess Capacity Risk
You have to identify where the business should allocate its resources, if resources are idle or lacking in productivity, a great business owner will strike immediately and remedy this waste.
Entrepreneurs take CALCULATED RISKS.
How can I be smarter and more competitive? How can I add more Value and make fewer mistakes? How can I find the leaks that are costing me profits and cash flow & plug them? How can I take guesswork out of my decision making and take control of my business & finances? What critical drivers must I monitor to optimize and maximize profits & cash flow? How can I be more efficient with my business prioritization & activities? How can I move the needle with the least amount of wasted motion?
The True Crisis is the crisis of incompetence. The Greatest Fault with people is the laziness with which they attempt to find solutions to their problems. - Einstein