- How do plan your business where strategies are incorporated, business models are designed and metrics are appplied to show the latest performance level?
- You can be guided by the one page CANVASS approach which shows the key factors needed to be considered in business planning.
- Another alternative is the Balance Scorecard approach with its strategic mapping that shows goal, measures, targets and strategies for the four key business functions.
- Unfortunately the results in BSC could not be integrated quantitatively although arrows are shown linking key activities among the functions.
- The Du Pont or the ROE chart offers the best alternative in developing a strategic business plans.
- The business models in the ROE chart are linked, coordinated and integrated to achieve the goal of business i.e return on equity or return on assets.
- The costs, volume and pricing strategies are shown in the income model which has a goal of maximising profit margin or return on sales.
- The amount of current assets and liabilities are determined by the trading strategies. The right financial leverage could be adopted by both the CMO and CFO to ensure that the working capital is small yet adequate.
- The fixed assets are not critical in business. They only provide capacities such as office space, shops, factories, warehourse, equipments, transport which can be outsourced, rented or leased.
- Fixed assets could be leveraged by long term loans or bonds. Each purchase could be justified through discounted cashflow techniques such as NPR or NPV.
- The needed capital for this business is shown by the working and fixed capital. This could be raised by equity or loans or a combination of both. Financial costs should be minimized and business equity controls are sustained.
- Proper cash flow planning showing inflows and outflows of cash need to be prepared and monitored reqularly to easure liquidity at all times.
- Each business model and sub-model above could be evaluated and monitored through KPIs.
- Finally all the above figures are placed into the ROE excel chart and the ROE and ROA could easily be simulated.
- Refine and renew strategies and models could be integrated and simulated with the ROE excel chart.
