Taking a Business to the Next Level – Part One: Key Drivers
A business driver is a process or activity that drives operational and financial results and is vital for the continued success and growth of a business. Successful business owners know their key drivers and attempt to maximize those under their control.
Most owners will say that revenue is their primary driver but others that also relate to profitability are not only easier to control, they make a significant impact on the overall success of a business, too. These drivers fall into the area of operational efficiencies. In manufacturing, they relate to things like how work flows through the plant, inventory management control, margins and duplication of processes.
Inventory, for example, is often one of a company’s largest assets but is the least managed. Mismanagement is actually quite typical in small businesses and includes such things as inadequate recordkeeping and a slower turn rate than would be expected as a result of carrying too much inventory. Inventory is just cash sitting on a shelf and margins can be greatly influenced by managing that inventory.
Improper inventory management leads to operational deficiencies which are a distraction to the company – both to the CEO from his/her efforts to grow sales and as it opens the company up to poor management of the company’s liquid assets which has a negative effect on cash and eventually, profits.
Lenders can often tell how a company is run just by walking through the warehouse. If the warehouse is messy, that’s probably an indication that the books are messy and that the company is underperforming. If the warehouse is clean and well maintained, there probably will be a better set of books and the company will be running well.
Business owners should walk through their warehouse and honestly evaluate: Is it tidy? Is the inventory well-arranged? Is there a natural flow to things? As lenders see hundreds of small businesses, business owners can ask their lender how their warehouse compares. If not well, they’ll know they need to run a tighter shop.
Operational efficiencies need to be nailed down so that when sales do bring in greater revenue, the business can handle it.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.