The Finance Gem 💎 Week #57: Revenue Growth, Costing and Strategy

BEFORE WE GET STARTED

1. A condensed and strategic version of The Cash Flow Masterclass is now available for Executive Leaders and another one for Portuguese Speakers. Sign up today for only $149 (or as low as $75 with automatic location based discounts).

2. We had over 1,000 people join us live for the Export Development Canada’ s Payment Terms Webinar where we discussed cash flow management strategies for growing internationally. The recording is available on EDC’s portal.

   And here’s a behind the scenes shot with the all-star team who made it all happen:

   

3. I’d love to get your thoughts on this week’s polls. Scroll below to share what you think!

THIS WEEK’S STRATEGIC FINANCE INSIGHTS

1. What drives Revenue?

2. 12 Financial Skills all Managers Should Learn

3. The Costing Cheat Sheet

4. The Management Strategy Checklist

1. What drives Revenue?

What Drives Your Revenue?

→ Three Things:

1. Sales Volume: the number of units sold

2. Sales Price: the selling price for the units sold

3. Sales Mix: the combination of sold product volumes and sales prices

⚫ How to impact Sales Volume:

✓ Increase demand to increase New Client Acquisition: implement targeted marketing efforts to increase brand awareness and attract new customers

✓ Improve and expand products/services: enhance existing offerings to stimulate customer contract renewals.

✓ Expand markets: expand offerings to capture new market, industry or geography segments

✓ Optimize inventory management: implement efficient inventory control systems and avoid stockouts or overstocking

✓ Inbound referrals: encourage customers and strategic partners to refer new clients through referral programs or word-of-mouth

✓ Net Promoter Score: track and improve customer satisfaction and loyalty to increase repeat business, referrals, and sales volumes

➡️ Use Volume to calculate Sales Volume Variances = (Actual Units Sold - Budgeted Units Sold) x Budgeted Price per Unit

⚫ How to impact Sales Price:

✓ Increase Pricing: review and increase prices to reflect changes in production costs, market conditions, and customer preferences

✓ Bundle Pricing: offer product or service bundles at a discounted rate, encouraging customers to purchase multiple items and thereby increasing overall revenue

✓ Value Pricing: set prices based on perceived customer value rather than solely based on production costs

✓ Premium pricing: position premium products or services with higher price points for customers willing to pay more for luxury offerings

✓ Cost management: monitor production costs and improve operational efficiency to maintain competitive pricing without sacrificing profit margins

➡️ Use Price to to calculate Sales Price Variances = (Actual Price - Budgeted Price) x Actual Units Sold

➡️➡️ Use Price and Volume to calculate Sales Mix Variances = (Actual Units Sold – Budgeted Units Sold) × Budgeted Contribution Margin

🎯 Remember that Revenue growth is one of the 3 main drivers of Operating Cash Flow growth.

OCF = Revenue -Expenses -Depreciation and Amortization +/-Other non-cash items (e.g. gains/losses on assets sales) +/ Changes in Working Capital

🎯 And Operating Cash Flow drives your sustainable business growth.

The Cash Flow Masterclass for Executive Leaders is now Live. This is the condensed version of my flagship Cash Flow Masterclass. Invest only 1.5 hours to focus on strategic decision making and watch yourself dramatically increase your leadership potential, impact and influence.

2. 12 Financial Skills all Managers Should Learn

12 Financial Skills all Managers Should Learn.

Why they should learn them.

And how to get there.

1// Financial Statement Analysis

🎯 Understand and examine the basic financial statements (income statement, balance sheet, and cash flow statement) to assess your company's financial performance and position, and to identify relevant trends and patterns.

2// Budgeting and Forecasting

🎯 Create and manage a budget, and forecast future financial performance to anticipate risks and opportunities, make informed decisions and ensure the long-term profitability of your company or unit.

3// Break-even analysis (B/E)

🎯 Determine the point at which your company's revenues will equal its costs to identify when the your company will become profitable.

4// Cost-Volume-Profit (CVP) Analysis

🎯 Understand how changes in costs, volume, and price will impact your company's profitability.

5// Capital Budgeting (NPV, ROI)

🎯 Evaluate and select long-term investments in new equipment and facilities to optimize performance and ensure your company's continued growth and profitability.

6// Working Capital Management (W/C)

🎯 Balance collections, inventory stocks and payments to reduce your Cash Conversion Cycle without damaging client and supplier relationships, and without foregoing sales opportunities.

7// Financial Ratio Analysis

🎯 Calculate and interpret critical financial ratios (liquidity ratios, profitability ratios, debt service ratios and solvency ratios) to get insight into different aspects of your company's financial health.

8// Performance management

🎯 Establish goals, monitor progress, and provide feedback to align employee and organizational goals and increase your effectiveness as a manager.

9// Risk Management

🎯 Identify and manage financial risks (credit risk, market risk, and liquidity risk) and their impact on your company performance.

10// Leverage/Service/Coverage

🎯 Make informed decisions about both debt and equity financing to ensure your company has the appropriate funding and capital structure to support growth.

11// Performance Metrics (KPIs)

🎯 Monitor and manage profitability and cash alongside other relevant metrics like production efficiency, quality costs or customer net promoter score.

12// Business/Unit/Asset Valuation

🎯 Understand valuation drivers at the asset, unit/division and business levels to impact them effectively.

Download a full resolution image here.

3. The Costing Cheat Sheet

The Costing Cheat Sheet

11 Essential Cost Areas to Manage.

Because costs will drive your break even point.

Your Breaking Even Point will drive your Net Income.

And your Net Income will drive your financial stability and growth.

Here’s what’s included in the Costing Cheat Sheet:

🎯 The Key Cost Drivers

🎯 Cost - Volume - Profit Analysis

🎯 The Overhead ABC

🎯 Gross Profit vs. Contribution Margin

🎯 10 Types of Costs

🎯 20 Cost KPIs

🎯 20 Cost Analyses

🎯 The Weighted Average Cost of Capital

🎯 Margin vs Markup

🎯 CAPEX vs. OPEX

🎯 60 Cost Concepts

Use this Cheat Sheet to help close to these critical Cost concepts, and help improve your profitability and sustainability.

And help others to the same by sharing this valuable resource.

Download a full resolution image here.

To purchase the PDF please visit my website.

The Cash Flow Masterclass gets 5* Reviews!

~ Executive and Portuguese Versions now Available ~

s⭐⭐⭐⭐⭐ 

4. The Management Strategy Checklist

Everyone is talking about SWOT, PESTEL, VRIO and Porter's 5 Forces.

But nobody is showing you how to use them.

Here's a checklist with 12 Essential Strategic Frameworks you Need to Know.

And the steps to take so you can actually use them in your organization.

➡️ Start with PESTEL Analysis

- Scan your macro environment.

- Evaluate political, economic, and other pivotal factors.

- Assess broad influences that can shape your business direction.

➡️ Dive into Porter's Five Forces

- Analyze your competitive landscape.

- Understand the power dynamics between you and your suppliers and buyers.

- Recognize the threats of new entrants and substitute products.

➡️ Unpack your SWOT

- Examine your organization's internal strengths and weaknesses.

- Identify external opportunities and threats informed by PESTEL and Porter's insights.

- Develop strategies that build on your strengths and address your weaknesses.

➡️ Consolidate with Value Chain Analysis

- Break down your company's core activities.

- Determine where you add the most value and where inefficiencies exist.

- Align your insights from PESTEL, Porter's, and SWOT to optimize your value chain.

➡️ Formulate your Strategy

- Categorize products/business units and allocate resources strategically with the BCG Matrix

- Evaluate growth strategies (Market Penetration, Product Development, Market Development, Diversification) and decide on your ideal direction with the Ansoff Matrix

➡️ Implement and Monitor

- Implement and monitor strategy while balancing financial, customer, internal process, and learning & growth perspectives with the help of the Balanced Scorecard (BSC)

Download a full resolution image here.

The PDF file is available for sale in my store.

Visit my digital store to check out my viral cheat sheets and checklists

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