Powerful Financial Modeling Tools to Validate Your Everyday Decisions

Your operations are the engine of your business.

This includes equipment, systems, procedures and supplies. All of these enable your business to produce its product or service.

The next two years will bring rapid change, which creates opportunity and potential growth. Traveling around the US, we consistently hear growth forecasts of up to thirty percent in the next twelve months. How exciting! But consider this question first – how well equipped is your business engine to seize these opportunities?

When the financial crisis happened, the operations of businesses changed. The first indicator was the increase in the number of days for Accounts Receivable. It was an early warning sign of tough times ahead. Next, there were pricing pressures, initially called downsizing, later changed to rightsizing as the operations became leaner. The engine you now find has lean capacity, tight pricing and with Accounts Receivable higher than they should be. And this is the engine you’re going to ask to grow by thirty percent?

“Now, let me introduce another concept, the second wave of bankruptcy.

It’s a sad fact that many businesses went under during the financial crisis. As sad as that is, maybe it needed to happen. The poor performers are weeded out and the strong ones remain to grab the opportunities in the improving economy. But not all businesses that survived the first wave of bankruptcy will survive the next two years.” – Nick Setchell

Consider the capacity of your engine when making your growth forecasts. It’s much better to grow by twelve to fifteen percent with a sensible pricing strategy, than by thirty to forty percent with a foolish pricing strategy. A business with the latter is a candidate for bankruptcy. It’s going to happen to many businesses, so be sure it doesn’t happen to yours.

‘Your Operations’ is the final of the 4 Business Quadrants. Feel free to go back and read about the other quadrants – Your Foundation, Your Market and Your People

Join us for our next series of blogs on Core Management Principles. The first one will look at what I call ‘3W Accountability’.  If you want to more, contact us to have a chat with Nick Setchell.