When growing a business
Deep financial analysis can provide information on the most appropriate growth rate for a business, the actions required to achieve that growth rate, the capital requirements for the targeted growth rate and some of the risks of going after firm growth.
When raising capital
Financial analysis gives confidence and reassurance to investors and in so doing helps an entrepreneur attract strong investors.
When selling a business
Insightful financial analysis helps show a seller what they need to do to most effectively achieve the price they want and it provides a baseline for negotiating the sale of a business.
When buying a business
Financial analysis reduces risk by showing how a business is performing, its potential to go under, and what the new owner must do to maximise returns. It also provides the tools for a buyer to put a price on a business.
Who should care about financial insights?
Although it’s pretty obvious that managers and business owners should be highly concerned about properly collecting and interpreting financial data from their business, there are others who can benefit immensely from having better insight into how the finances of a business work.
For example, resource providers and consultants can be more effective in their jobs if they can properly analyse financial data.
As such, consultants and resource providers can develop a competitive advantage by collecting or accessing benchmarking information, setting up templates or systems to quickly analyse clients’ financial data and translating those findings into meaningful action.
While some advisors may try to do this on their own by applying the principles laid out here to set up a proprietary system, others have already recognised the value in using a tool such as ValuationUp.
“ValuationUp.com is Bain/McKinsey in a box,”said Pavlo Phitidis, CEO of Aurik Business Incubator, while Evan Rice of consulting firm Spinnaker Growth Partners said that ValuationUp is “super useful to us in showing clients what they need to do.”
Ultimately we all want stronger, more competitive businesses. Business owners want to maximise the potential of their business. Consultants want to give their clients the best possible advice to make their businesses stronger; resource providers want to invest in viable businesses that will provide a return.
Government officials want strong growing businesses as the backbone to the economy.
Where did the idea for ValuationUp come from?
Ochse reports: “My career at Bain taught me how to fix the issues that big companies faced. My finance knowledge taught me how to quantify the value of these projects in terms of their effect on the value of the business.
“Over time I consulted to many smaller businesses and ran strategy workshops for some bigger ones. It was quite obvious to me that businesses tended to focus mainly on sales and sales growth.
Very rarely did they consider taking on the easier (but less glamorous) projects that would do more for their company’s valuation.
“I came to realise that this was because they didn’t understand the impact or relative priority of these projects and that in turn was because they had no clear idea of whether they were over or under-performing in these areas.
“Over the last few years I had a number of clients ask me to help them understand finance, so I ran a course called ’Finance 4 Entrepreneurs.’ It was very successful but entrepreneurs didn’t use the Excel model we gave out.
“I followed up and realised that most entrepreneurs are scared of Excel; they were scared of breaking something they could not fix so they didn’t use it. At that moment I decided we had to do something in a more familiar interface – the browser.
“It had to be a black box, and it had to tell entrepreneurs exactly what they needed to do. Kenneth and I decided to shift our priorities almost entirely from our other business to this new one. It’s been flat out ever since.”
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Want to Better Your Business? Raise Your Price
Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive
Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins.
Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins. But what’s the best way to ensure employees remain productive, and happy in their day job?
The answer is simple and highly effective and I choose to sum it up with three short phrases – respect, trust and teamwork.
In partnership with my management team, which consists of about eight staffers across various disciplines, we strive to tick these boxes.
In total we’re ultimately responsible for managing roughly 500 employees.
Five hundred employees across several departments is a mighty job. But with teamwork, good listening skills and the right attitude from the top to filter down, any business can run like a well-oiled machine.
I’d like share with you the essentials for building and maintaining a productive workforce, and these apply to all industries, not just the hospitality sector:
1. What’s your definition of a productive team and how do you achieve that?
We need to keep in mind that productivity is a result, one that CEOs and managing directors strive for with their teams. But what happens beforehand in order to achieve that result determines whether it will be achieved at all, and is equally important. I suggest the following to ensure a productive team:
Define roles and responsibilities: Direction is incredibly important; everyone needs to know exactly where they’re going and how they need to get there, so KPIs are essential.
Often when roles and responsibilities are unclear, things go pear-shaped. I am an advocate for setting clear KPIs, it’s a good way to steer us in the right direction, and in turn helps to grow the business and the individual in his/her role.
Be flexible: Rigid environments are the worst kind, allow your employees some flexibility and the opportunity to be themselves in the workplace. We spend so much of our time at work, we need to be ourselves there.
Celebrate the team: When there are achievements, celebrate them, single out individuals who are excelling and living the company values. This builds morale and is indicative of appreciation, which is fundamental when running and building a business.
2. What has and continues to be your philosophy since managing a large team?
Know your strengths and weaknesses, as well as your team’s and leverage off that. Be prepared to learn from others, no one can operate in isolation, regardless of the level on which you operate. Accept criticism and don’t bulldoze someone’s ideas, that’s how you build trust.
3. What in your view are the top characteristics the team look for in a leader?
- Be consistent – inconsistency screams bad leader
- Provide guidance – this is key, don’t turn a blind eye, give input and council
- Listen – always listen intently
- Be impartial – always be fair
- Give credit – it builds morale and shows you recognise good work
- Be patient – Rome wasn’t built in a day, and remember not everyone thinks the same as you do
4. What’s your view on an open door policy and how does it assist with managing a team and ensuring everyone remains productive?
I believe in an open door policy. It’s essential to build and develop trust. I’m the first to admit that it takes a while to build that trust, but once the team (on all levels in all departments) know your door is always open, and that they can trust you implicitly, half the battle has been won.
I host a GM’s roundtable every two months, just to establish how everyone is feeling and where everyone is at. It gives staff the opportunity to bring their challenges to the table, and I deal with them the best I can.
It’s 100 percent confidential and line managers are not allowed to attend. During this meeting we try reach common ground, and I commit to addressing and ultimately solving the problem(s).
Why Purpose Drives Profits
If you want to succeed, it’s time to start engaging where it matters.
Over the past two years, many clients have been extending brand positioning exercises into purpose-driven expressions.
When we look at it, it makes sense given the country’s demographics. With many of our fellow countrymen struggling to make ends meet, brands have stepped in to provide them with a picture of a future worth striving for.
Global customer-centricity study, Insights 2020, led by research firm Kantar Millward Brown, has attempted to understand how brands could drive customer-centric growth as well as the factors that really make a difference. The research surveyed 10 495 individuals in 60 countries, and there are some significant efforts worth investing in if brands want to engage where it matters most, in consumers’ hearts.
The research uncovered that for market-leading companies and brands, traditional value drivers such as quality, packaging, or distribution are necessary, but no longer provide a competitive advantage; most brands are capable of providing these drivers. What is important, are a few critical approaches.
1. Purpose-led brands
The study found that when companies or brands linked to a purpose, 80% of them outperformed the market. Only 32% of non-purpose led brands managed to perform better than the market.
Related: How To Calculate Gross Profit
2. On the ground
It’s important to engage with consumers in their space and on their terms. Through the use of memorable campaigns, experiential events and activations it is critical to engage with consumers on their turf.
3. Be truthful and authentic
Consumers can smell something inauthentic a mile away, especially when it’s coming from a brand. This forces brands to strive for authenticity in everything they do, especially when it comes to marketing. Building values and principle-based attributes into your brand as a guiding tool is essential.
4. Helping consumers commit
By allowing individuals to attach themselves to a brand with a purpose, it helps consumers personally commit to a cause that they consider important. When a consumer is personally invested, the link between the brand and product or service deepens.
5. Balancing heritage and modern relevance
There is a continuous tussle in balancing the traditional market, transitional market and the new consumers brands are trying to attract. Keeping the heritage and roots of the brand true to itself, while creating relevance for the new market, is a battle marketers are still fighting.
Need To Trim The Fat To Boost Profitability? Listen To Your Clients First
Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.
Finding the balance between offering the extras that set you apart from your competitors and keeping things ‘lean and mean’ to minimise wastage and maximise return on investment is a tricky balancing act.
I’ve noticed that many businesses try to attract or retain customers by offering what they think their customers want, rather than finding out what they really need, and then delivering that. That’s an expensive mistake to make – and it’s not going to achieve the business results you need.
I’ve also observed that now is the age of the new entrepreneur – the game changers who disrupt the status quo long set by big bureaucratic competitors who think that their customers will just accept an inflationary (or slightly larger) increase every year, just because they always have.
While Amazon has been around for a while now, there’s also an important lesson to be learned from its launch goal, which was to bring the price to the client. Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.
How have I applied these lessons in my business?
Firstly, we design our hotels backwards – we focus on the needs of our clients, very aware that what hotel guests wanted years ago is not what they want now. That’s why we don’t offer thing like a turn-down service with chocolates on the pillow. Nobody eats the chocolates, and nobody uses the toiletries – so why should we include the costs of these unwanted extras (and the cost of the staff required to implement them) in the final bill to our clients?
We do, however, offer free WiFi internet connectivity, free parking in our buildings, free laundry services and either bed-and-breakfast options or self-catering rooms.
Simply put, we’ve cut the fat that nobody wants anyway, and added the value that our guests have said they expect.
Our clients have said that they expect the whole hotel to be a workstation, and not just the business centre in a dark, unwanted corner. So, we’ve put a workstation in every room, with always-on access to the internet. Our hotels are designed with beautiful work spaces that cater for nomadic entrepreneurs and double up as comfortable meeting spaces, again – gone are days of boardroom only meetings, our spaces are primed for work and play in one integrated space.
Our clients have pointed out that they’re already paying for their room – so why should they pay for parking?
Many of our clients stay with us for days or weeks at a time, and have said it would be helpful if we did their laundry. So, we do that for them – and we don’t charge them for it.
It’s true that many of our old-school competitors offer a broader range of products and services than we do, but we’ve built a successful business on adding the value that our clients need, removing the costs and extras that annoy them, and keeping costs (theirs as well as ours) under control by cutting out unnecessary frills.
It’s an approach that’s worked for The Capital Hotels and Apartments as a disruptor in the hotel and long-stay accommodation industry, and I’m confident that its principles would apply to any other industry that’s ripe for disruption.
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