When a business sells products of different margin, price and cost, the mix of what you sell can affect results. It's worth understanding this. At least it can explain changes in a way you can diagnose. Targeting better mix needs a mix-effect KPI to drive profit growth. Here, we show you how to measure the mix effect. Please note that this is an advanced topic. There is a link to a spreadsheet showing how it works.
These calculations are an example of a synthesised KPI, and do not qualify as a genuine business driver. Another example (also from Richard) is Purchase Efficiency, a KPI for measuring how well procurement is doing.
GrowthPath specialises in helping business use advanced metrics into customer and product profitability, and in adapting forecasting tools to use business drivers. This topic is an example of Profit Engineering, which is a Level 3 topic in our maturity model. Many small and medium sized business can become data driven businesses by deploying cloud ERPs and analytics. Read more about cloud ERPs here.
Measuring procurement: The Purchasing Efficiency KPI
Purchasing Efficiency is a KPI to measure the performance of procurement.
Mission and vision statements are ridiculous. If you agree, time to learn about the balanced score card for SMEs. An idea from the 1990s which is a genuine classic.
Can free shipping generate a sustainable advantage for an online retailer? There are right ways and wrong ways to do free shipping ... backed by research.
A really good example of taking a decision about risk is currency risk. This risk is easy to measure, and easy to insure against via "hedging". Sometimes risk hedging throws away an opportunity to outperform competition. Risk hedging may cost more than you realise; for some businesses, currency risk can be turned to advantage. The profit of a businesses come from taking the right risks. This discussion of hedging currency risk is an illustration of how to decide to insure against a risk, or to turn into a source of profit.
Business Plans that don't explain business value are almost useless
GrowthPath business plans help unlock the funding and focus needed to grow your business.
Since 2008, Tim Richardson has been helping Australian businesses access money needed for growth. He also launch new businesses (and he teaches Small Business Management as a visiting trainer at the Holmesglen Business Enterprise Unit).
What is the key to GrowthPath's business planning success?
Our business plans focus on proving how your business will become valuable. The plan and the financial model are closely integrated. Our plans are customised to each specific business, and use comprehensive, objective market research. We clearly explain what makes your business special, and why it is hard to copy.
Our approach is a proven choice if you're looking to sell your business, raise funds for expansion or understand the best options for growth.
Each business is a special combination of a market opportunity and your unique way of serving that opportunity. Those are the two key aspects of a business with potential to make money. Using off-the-shelf business plan templates means you get a me-too business plan, which makes the unique opportunity of your business very obscure. That's why most business plans get a thirty second glance from the money people. Writing a generic business plan is easy and proves nothing.
"Budgets aren't what they used to be," one CFO told us for this month's cover story. At a growing number of companies, in fact, budgets have ceased to be at all." Why is that?
Agility is the ability to quickly respond to opportunity. Increasing business agility is a key part of achieving opportunity-based growth. SMEs are small and don't have large budgets to spend on business development. They can, however, become very agile.
Fast, well informed decisions make money. But good decisions made too slowly can mean a lost opportunity.
Turning bean counters into gold
Business Growth and modern finance teams
SME finance teams should be driving the three elements of growth:
- awareness of profitable opportunities
- a fast response
- the ability to finance growth through cashflow management