The Power of One

Thursday, October 19, 2017

Ask yourself - "Is the goal of your business to improve Profit, Cash and Valuation"

A story of numbers is told over 4 Chapters.

Chapter 1 – Profitability

Chapter 2 – Working Capital (Accounts Receivables, Inventory/WIP, Accounts Payables)

Chapter 3- Other Capital (This is the rest of the Balance Sheet and the main item is normally Fixed Assets)

Chapter 4 – Cash Flow (The result of the business is Cash Flow – You cannot read Chapter 1 Profit and expect to understand Chapter 4 Cash Flow)

Your management team needs to have a very sound understanding of Chapter 1 – Profit and Chapter 2 Working Capital

There are 7 key levers that your management team can impact to improve Profit, Cash and Value.

 Chapter 1 Levers ( Measured as a % )

  1. Price
  2. Volume
  3. Cost of Goods or Direct Costs
  4. Overheads

Chapter 2 Levers ( Measured in Days)

  1. Accounts Receivable Days
  2. Inventory Days
  3. Accounts Payable Days

 “How many 1% or 1 Day Changes should your company make to achieve your desired results.

The Power of One is the code of company – Every company will have their own unique code.

You need to have a Quarterly Power of One discussion in your board/management meetings