The guaranteed formula and cost optimisation strategy for improved cash flow, increased profit, and increased business valuation.
Calling all CEOs and CFOs - don’t miss this opportunity.
Everyone is talking about digital transformation, business transformation, shareholder value creation, and better customer experiences. The reason everyone jumps on these terms is that they want their business to be successful.
In our capitalist focussed world, successful businesses are those that make more, attract investors easily, and always seem to be going from strength to strength.
Before reading any further, know that Intercor are not financial geniuses.
The team at Intercor are pragmatic, logical thinkers who are able to leverage these levers to make significant impacts on an organisation's ability to grow and scale in an agile way through cost optimisation and digital transformation. The results can be astounding. So, what is Intercor’s magic formula and transformation strategy that guarantees improved cash flow and fuels growth for the businesses that we work with?
7 Levers to Create a Business Growth Strategy
There are 7 levers that every person on the leadership team should understand. Some of the 7 levers need to be understood by every person in the business. They should be adopted and measured on a regular basis.
- Increase prices
- Increase volumes
- Reduce COGS (Cost of Goods Sold)
- Reduce overheads
- Reduce ‘Debtor days’
- Reduction ‘In Stock days’ or ‘Work in Progress’
- Increase in ‘Creditor days’
Let's explore each of these 7 levers for business growth in a little more detail.
Increase Prices
Increasing prices for business growth seems like a no-brainer. Most businesses are focussed on acquiring new customers and exploring new markets, and feel frustrated with marginal gains in revenue. A simple (and often overlooked) fix is to increase prices charged to clients. We discuss more on this topic on How to Increase Prices to boost revenue.
Increase Volume
This again may seem an obvious one for business growth, however, most companies approach this from the perspective of winning and marketing to new business and customers. We are not suggesting that this activity stops..far from it. But have you looked at your existing client base?
The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20% (outbound engine).
What would selling 1 more item, service, or solution to your existing client base mean for your business?
We expand on this topic in our article on the Impacts of Increased volume on your business. Increasing volume can also have a negative impact on your business that you may not already be aware of, and so need to be mindful of.
Reduce COGS
COGS or ‘Cost of goods sold is the costs directly related to the production costs of the goods or services sold by your business. It generally includes the cost of materials and labour used to produce the product.
To support business growth, your operational teams need to focus their attention on exploring opportunities to optimise in this area. Are they aware, and do they regularly review and measure those costs? We expand further on this topic in this article.
Reduce Overheads
For clarity, overheads are the costs relating to ongoing expenses required to continually operate the business. Overheads do not relate directly to the creation of the product or service you provide to your clients. In simpler terms, these costs exist no matter how much or how little you sell.
With business structures having undergone significant changes through COVID-19, huge opportunities exist for restructuring that can and will significantly reduce business overheads. Our article on Overhead reduction sheds more light on this topic.
Reduce debtor days
Most individuals within a business believe that reducing debtor days falls to the finance team. It is one of the big headaches for CFOs!
Most employees believe it is their responsibility.
WRONG!
Everyone within a business needs to be focused on reducing debtor days (i.e. the people who owe your business money). This is a surprisingly big topic, which we expand on in the following article: How to reduce the risk of increasing debtor days.
Reduction in Stock Days
If you are a physical product-based business you need to monitor and focus on reducing days in stock. That is the number of days your products are sitting inside your warehouse before they are shipped out to your customers.
If you are a service-based company, your focus will be on the reduction of work in progress (WIP). That is the unbilled time sitting in your business.
Increase in Creditor Days
How quickly do you pay your suppliers and partners? Is your accounts department paying quicker than they need to? Could payment terms be increased so the cash sits with you longer?
Unfortunately, many businesses are of the size and scale where they do not have internal procurement expertise. The result is often contracts that are firmly in favour of the supplier, and you, the customer, are none the wiser. This is our area of expertise and one we are passionate about. From our experience, we see a pattern where most businesses have been overspending for years needlessly. Our article, How to win in Increasing your Creditor days, goes deeper into this topic to help aid your business growth.
Implementing your Business Growth Strategy
We’ve all heard of the 1% rule, how making small improvements on a regular basis in life or business has a compounding effect over time. If you are a CFO reading this article, model what 1% or 1-day adjustments will look like for your business. If you are the CEO, challenge your finance team to model the impact of the levers on your business…you will be surprised.
Once you’ve modeled these small changes and your excitement has calmed down, your mind will be saying, “what if we could affect more than 1% or 1 day?”. That is where we can help.
The theory is always easier than the actions required to effect these changes. If you’d like to explore how we can help leverage these levers, let’s talk.
At Intercor, we are passionate about helping businesses be the best they can be through better use of technology. If you enjoyed this article, we would love you to share it on your social media or via the link with anyone else who may find it useful.
We work with large-scale clients who wish to transform and optimise their businesses for growth and value creation. A combination of our cost optimisation services and tech-enabled business design solutions yields outstanding results. Book a call with us to talk through the opportunities.
Why not download the full article and read up on the 7 Levers for Rapid Business Growth and Increased Business Valuation article?
If you enjoyed this article, we would love you to share it on your social media or via the link with anyone else who may find it useful.