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Be prepared to advise the company's owner or CEO on the difficult everyday decisions that ensure the success of the company. Use the toolkit provided by this course to enhance the profitability of any growing private company. Quickly learn to target the key financial information that will determine whether the company continues to grow and prosper or whether it will struggle and eventually falter and fail. Shift from a reactive to a proactive mode of operation and end the constant firefighting common to many private companies.
This course teaches you how to use various proven financial tools and techniques to assess the impact of day-to-day decisions on growing business operations and profitability. It presents and illustrates useful techniques for turning those difficult decisions into routine decisions that will maximize profitability and improve business performance.
Objectives:
Prerequisite: Experience in finance, operations or accounting
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Chapter 1
Role of Strategic Planning, Mission, Vision, and Goal Setting (Macro Tools in Profitability)
Learning Objectives
One of the most important but neglected areas of profitability enhancement is the Strategic Level. Too often organizations want to jump into tactical ways to improve profitability. This area if addressed properly will do more to improve overall profitability than any other area. In this chapter, we will focus on
Introduction
In this chapter, we will look at profitability from the larger perspective or the macro tool level. The most significant profits are generated from understanding and applying the macro concepts. Unfortunately, some of the items that we will discuss may be considered as fluff, nonproductive, or in general just a waste of time. The companies that ignore these macro level tools are missing integral components to achieving greater profitability. In many ways the proper application of the information within this chapter will do more to drive overall profitability than any of the micro tools that will be discussed later on during the text.
The macro tools which we will consider are
Dreams
Let us first examine where profitability really comes from. Many of our organizations are caught up in the day to day struggles of producing products or delivering services. When they are thus occupied, it is difficult for them to look at the big picture. The companies may only be focused on how to increase gross margin by another one or two percent or how can they shave off an extra $5,000.00 from their expenses. Therefore, where should we begin our journey and understanding of the overall picture of profitability? We need to back up to the start of any business. For any organization, for profit or not for profit, profitability begins with a dream. It may be two people talking over coffee at a restaurant – It may be two people on the golf course discussing new business ventures – It may be two organizations discussing the way they can create a joint venture. These conversations give life to dreams. These dreams are the seeds of the future business. These dreams even in their beginning phase represent the future value of the organization.
Take a moment to consider your own organization. Your company has a value. It may be a combination of earnings, assets and goodwill. But where did this value come from? It is true that the company may be decades old and generating significant profits in operations. Where did the first concept for the company take place? Did not the overall concept from the company begin with a dream or one opportunity that somebody identified? That initial dream may have been modified incrementally as the business involved. However, the incremental changes are refinements of the initial dream. When companies make significant paradigm switches in the way they do business, it is a result of a new dream.
Let us have a little fun. Pretend that you are interested in starting a small business. What would that business be?
As simple as it may seem, this process can be the seed which can generate significant future value and lead to the creation of a new organization. In addition to the start of a new business, this dream process is also essential for companies to break out of their day to day operations and jump the traditional business life S curve. This is also the reason that many strategic planning processes endeavor to bring outside facilitators in to help company staff identify opportunities for new avenues of growth.
Consider some of the companies that have changed from their traditional products and/or services. What has been the impact on the organization?
Business Plan
The new organization which began from a dream and was translated into vision is now ready to create a business plan. This business plan will outline all of the key detailed items which will be necessary to have a successful venture.
Does your company have a business plan?
If so, why was it prepared?
How often is it reviewed and revised?
Unfortunately, many people create the business plan only to obtain financing for the project. Once the project has been completed or the funding has been obtained, the business plan is relegated to the Bookshelves. Since the business plan is limited to only obtaining financing, it is often not used as a strategic tool to help drive the business. The business plan should have a life of its own, and should be reviewed and updated annually. Keep in mind that the business plan is separate from the strategic plan and it should be very helpful in sharing the company vision with key stakeholders and employees. There are many outlines available for business plans and most have similar components. To see many different versions, visit www.google.com and search on "business plan" +outline. An example of a business plan outline follows:
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