Professional Documents
Culture Documents
What is a driver?
A value driver is an action that affects business
performance in the short and long term
improving the financial health of your business.
(it adds to the business value)
Example of a traditional value driver:
Introduction of cost controls to manage short-term earnings
and cash flow.
Example of an action that does not add value:
Introduce cost controls that cut short-term costs at the
expense of product development or maintenance of the
companys physical assets.
Non-financial drivers
On-time delivery
Process cycle time
Cash cycle time
Number of unqualified leads
Number of qualified leads
Win rate
Proposal rate
Process improvements
Customer satisfaction
Employee turnover
Market share
Share of customer wallet
Number of new products
Number of new services
Customer attrition
Service calls per customer
Number of defects
Labor efficiency
Machine utilization
Financial drivers
Sales growth by customer
Sales from new products
Sales from new services
Customer profitability
Product/Service profitability
Cost per unit
Cost per customer
Break even point
Revenue per employee
Indirect cost as a percent to sales
Customer
Revenue per
Unit/Product
Line
Growth
Revenue per
Customer
Value
Effectivenes
Direct Cost
Customer
Days Sales
Retention
Outstanding
per Unit
Unabsorbed
Inventory
Turnover or
Overhead
Year Supply
Overhead as a
Average Cash
% to sales
Cycle
Cash
Flow
Share of
Customer
Staff per
Customer
Customer
Acquisition
Cost
Cash profit
per
Customer
Value
New
Customers
Retention
Rate
Number of
Customers
New Services
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5. Sustainable
One time value versus consistently increasing value
Example: Cost reductions as a result of a re-organization or acquisition
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Continental Airlines
1. Understood the Link between operations and financial
performance
2. Developed a strategy
Fly to Win - Shut down unprofitable routes, develop hubs to win
back business travel
Fund the Future selling off non-strategic assets
Make Reliability a Reality on-time performance, less lost luggage
Working Together remove mistrust between management and
workers
3. Measured performance
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Cash Flow
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Past performance
Management depth
Customer concentration
Vendor concentration
Industry
Geography
Debt
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Value Calculation
$150,000/(16%-1%) = $1,000,000
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Value Calculation
$165,000/(15%-2%) = $1,269,000
27% increase in business value
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Sales
Gross Margin
Sales, General and Administrative
Working Capital
Accounts Receivable
Accounts Payable
Inventory
5.
6.
7.
Capital Expenditures
Shareholder Distributions
Taxes
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Jan
Feb
(10)
(7)
(17)
(17)
(17)
Mar
(25)
(10)
(10)
(7)
(52)
(52)
(69)
(7)
(7)
(7)
(7)
(7)
(7)
(7)
(76)
100
(55)
45
(7)
38
Apr
May
100
(7)
(7)
(7)
(83)
(7)
(7)
93
10
(7)
(7)
(7)
(7)
Total
100
(25)
(20)
(10)
(35)
(90)
10
100
(55)
45
(35)
10
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Cash Flows
$20
$0
-$20
-$40
Accounting
Jan
Feb
Mar
Apr
May
-$60
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$8
10%
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Organization Development
Teach management and employees the link between what they
do and how their actions impact cash flow
Use Incentives
Not always necessary to make them monetary incentives..but it
helps
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Financial
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Questions?
jeff@jsmcpa.com
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