How to Become Financially World Class, Part 5
Dr. Andrew Stotz (AKA the author here) is having a free webinar for ValueWalk readers (Capped at 100) on Nov 21st on the topic of “top 6 valuation mistakes” enter here
We know that business is hard, but we believe that the financial aspects should NOT be. World Class Benchmarking is a clear-cut financial tool for that takes the finances of your company from complicated to simple, from scattered to focused, and from individual to team.
How to answer these questions?
- How do I create clear and consistent financial goals?
- How do I get everyone on my team to understand the company’s financial goals?
- How do I make sure that the company’s financial goals do not cause internal competition?
- How do I align my team’s financial goals with my firm’s financial goals?
Top of the triangle
- The top of the triangle is the measure that matters: Profitable Growth
- We rank the company from 1 (best) to 10 (worst)
- We track the company for 5 years
- A company should strive for strong profit growth with minimum asset use
Middle of the triangle
- Profitable Growth rank driven from results of two different measures below
- Strong Profitability means generating more profit from assets
- Earnings per share Growth, the market values it and so should you
Bottom of the triangle
- Results at the top of the triangle are explained by the two items below
- Profitable Growth is explained by the company’s rank against global peers on six different measures, four of them on the bottom of the triangle
- Asset utilization – Revenue generated from assets
- Profit margin – A measure of cost control
- Sales growth – Proves customers want products
- Profit margin change – Internal driver of EPS growth
- Level two and three explain what is the source of Profitable Growth
Now you see the gold of World Class Benchmarking
- By just looking at the triangle you can know about the financial performance of the company
- Profitable Growth matters most
- Everyone understands a 1-10 ranked scorecard
- Like a scorecard in sports the goal is clear to all team members and does not change midgame
- This gets all employees aligned behind one financial goal, to become Financially World Class
Article by Become A Better Investor