Are you looking to put together a successful business strategy? Make sure you include these 9 core principals or failure will be sure to befall your business. Read them now!
You may be feeling uncertain about how to go about developing a strategic plan that will help your business grow. You may not know the information to include in the program and what tools you need to have at your disposal.
Here are 9 building blocks to help you develop a comprehensive business strategy for your company.
Principle #1: You Must Have Net Cash
Net cash is the amount of money that a company has on hand and is an essential metric. This is calculated by subtracting the current liabilities from the net assets to measure how much cash can be distributed without going into debt.
Principle #2: Revenue Growth Reclaims Sustainability
Revenue growth is a crucial factor. This is the measurement of how much a company’s revenue has grown over time. This helps to understand if their growth will be sustainable in the long term and which areas need more attention when marketing.
Principle #3: Know Your Net Income
This is the measurement of how much net income a company has earned for every dollar it spent. This is simple arithmetic and helps to understand which areas need more investment when it comes to marketing and where there may be an opportunity for you to reduce costs.
Principle #4: Profit is Pivotal
In the business world there is no doubt that profit usually takes precedence over most other aspects.These are the net earnings from a company’s revenue. This is important because there would be no money to pay off debt and reinvest into future operations of the business without it.
Principle #5: Know Your Economic Value
This is the measurement of how much a company has contributed to economic growth. It is the value of output minus the cost of input. This helps to understand which industries will benefit from long-term investment, which may not last in the coming years due to technological changes or other external factors affecting their sustainability.
Principle #6: Growth Indices Add to Economic Growth
Growth indices are the best measure of economic growth. These are the measurements of how much a company has grown in comparison to its peers. It is an indicator of competitive advantage and helps investors determine if that business will continue to deliver earnings growth over time or whether it should be cashed out sooner before there’s no more upside potential left.
Principle #7: Operational Efficiency is Productivity
This is a measure of how efficiently a company operates. Operational efficiency equals the ratio of total output to the ratio of total input. It tells investors whether or not the current management team has been able to be impactful in driving down costs and be more efficient in their operations. This can then translate into earnings growth over time.
Principle #8: Liquidity Gives You Spending Freedom
Liquidity is a measure of how easily the company can use its cash and amounts to more breathing space. Liquidity affects short-term earnings and financial stability, as well as long-term growth potential.
Principle #9: Balance Efficiency and Solvency
The balance between efficiancy and solvency is the ratio of how much money a company can spend before it needs to obtain new financing. A high number would indicate plenty of cash on hand, which helps for short term and long-term planning purposes.
What Is in a Business Strategy?
A business strategy is an outline of the actions and decisions a company plans to take to reach its business goals and objectives.
The strategy defines what the business needs to do to reach its goals, which can help guide the decision-making process for hiring and resource allocation.
What Is Economic Value Added?
Economic value added (EVA) is a measure of a company’s financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis.
What is Liquidity?
Liquidity is the degree to which a security can be quickly purchased or sold in the market at a price reflecting its current value.
Liquidity in finance refers to the ease with which a security or an asset can be converted into cash at market price.
What Is Economic Growth?
Economic growth, the process by which a nation’s wealth increases over time.
Although the term is often used in discussions of short-term economic performance, in the context of economic theory it generally refers to an increase in wealth over an extended period.
Pay particular attention to the principles involving net cash, revenue growth, net income, profit, economic value, growth indices, operational efficiency, liquidity, efficiency, and solvency. They can guide your way and make it easier for you to steer a successful business strategy that works for you and your clients.