Blog written by Ron Kranz, Beyond The Benchmark
The business owners I work with tell me they want to grow their businesses. Grow what? Revenue of course! Be careful what you wish for.
When the top line grows, the cost of goods and operating expenses typically grow too – sometimes at a faster rate. When owners say they want to grow, they really are saying they want to make more money for their efforts. What they really want to grow is the bottom line and make more profit. Often the top line growth never gets to the bottom line.
Since business owners know that their businesses can perform at a higher level – especially after the economic recession – they prepare a plan for growth. They project growing revenue at 10%, 20%… and in fact, most think that they could double or triple their revenue growth over a 3 to 5 year period. In more cases than not, they do not achieve the growth that they planned. Growth either doesn’t occur or it occurs at a slower rate than desired.
Owners make a set of assumptions for growing their businesses and set out in a market place full of uncertainties. Typically things just do not turn out as they have planned. Situations change, assumptions falter, and course corrections are needed. Business owners are usually slow to see the changes, and slower to react with effective decision making. Often they lack the management tools to monitor changes that are occurring and have not strategically prepared for the management decisions needed to keep them on the desired growth path.
Predictive management tools measure the rate of change in your business, indicate your performance, and monitor the financial health of your business. These tools are needed to control growth up and down the income statement, and on both sides of the balance sheet. Predetermined management actions for various planning scenarios foster proactive and quick management decisions that control revenue and expense growth and ensure the growth of net income. Staying on the desired growth path becomes easier.
Predictive management tools and scenario planning can help you stay on a growth path and reach your desired outcome. Using the appropriate tools helps you move beyond just saying you want to grow – you actually get to experience the growth.