Where is value created in your company?
It is good news for a company to be growing. But unfortunately it does not always mean that the company is doing the right thing. Often it is sufficient to provide those products or services that happen to experience a growing market demand at a certain time.
Growing and simultaneously making (more) profit is a lot harder to do. This means that a company is not only achieving a growth in turnover, but is also
correctly managing its pricing and gross margin
monitoring the costs so these don't rise faster than the sales and margins (something that is difficult for a lot of growth companies to control during certain stages)
attuning the size and organization of the enterprise to the current needs and more or less correctly estimating what will be needed in the future
But the ultimate goal of a company is to generate cash for its owners. Knowing where most of this cash is produced and seeing how to further optimize that process, is essentially what it is all about. Not all products or services make as much intensive use of the available resources. And the same is true of the customers.
Where can the cash be found? The cash is there!
This means that the company needs to make choices concerning its portfolio of customers and its product or service offers. To make the right choices, there needs to be an understanding of which product/customer combinations yield the highest return with regard to the resources invested. That is what value creation (i.e. producing cash) is all about.
Paquay & Associates help companies that have reached a turning point, to develop a clear picture of the current value creation and optimization possibilities.
P&A help to focus sharply in two different areas:
1. Structural returns
What elements guarantee certain returns and how do these returns evolve?
What kind of behaviour is needed in order to retain the current returns?
2. Structural value creation
Which customers and products generate relatively the highest returns, and why?
What behaviour is needed to maintain these returns and where can they be further optimized?
Characteristic of our approach is also that we run through this exercise with the owner or CEO and with the staff (or the executives in larger companies). Indeed, it is essential that the entire organization has an understanding of where the value is mainly created at this moment and where there is room for improvement.
A basic step for intensive collaboration
A detailed insight into the value creation is a necessary first step for an intensive collaboration with growth companies. After this exercise, we will have an objective and a clear picture of what is possible. This will become the reference and the objective we will be working towards in the other advisory processes.