Tag Archives | growth

Accretion

See Also:
Depreciation
Asset Market Value vs Asset Book Value
Fixed Asset Turnover Analysis
Research and Development
Straight-Line Depreciation

Accretion Definition

Accretion is the increase through time of a natural asset like land or a financial asset. The increases occur through growth and multiplication like through the following:

Meaning

Businesses often use this type of accounting for the development of assets in the form of an accretion expense, or an increase in the present value as the asset draws closer to its final future value. It is also used in Mergers and Acquisitions (M&A) when discussing the earnings per share for the company using pro forma statements after the transaction takes place. In other words, these accounts for the synergies which are likely to be realized. In addition, it will feed directly into the combined entity’s bottom line. Accretion real estate is simply the development of land through the growth and development of land. This can be through the development of a shopping center or something simple like the growth of livestock through breeding.

accretion

 

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Incentive Comp Plans Driven by Business Model

Does your business model drive your incentive comp plans?

Incentive Comp Plans Driven by Business Model

The traditional thought process is to decide how your business will make money and then develop incentive comp plans to encourage employees to act in a way that supports the business model.  But that is not always the way things work in real life. Sometimes an incentive compensation plan that sounds great on paper ends up driving a very different set of behaviors than anticipated.

One business I worked with set up an incentive system to encourage profitable sales growth. Even the president was rewarded when the company grew sales and made more money. At least that is what the income statement said. However, the owners were not able to take more money out of the business. In fact they had to keep borrowing to support the increase in inventory that the company kept buying. Eventually the inventory was literally worth more than the whole business. The owners owed money to the bank and they could not take any more money out of the company. All because of an incentive system that was not what it first seemed to be.

A slight change in the incentive system to include the cost of inventory immediately changed behaviors at the company, brought the bank line down to zero, allowed the owners to take more money out of the company – and in the end – profits increased!

So, does your business model drive your incentive comp plans?

incentive comp plans

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Can You Build Success by Narrowing Your Customer Base?

I recently read an interesting Business.com article by Art Saxby. Art Saxby is the founding principal of Chief Outsiders. In this article, he talks about how to achieve success by narrowing your customer base.  Sounds counter-intuitive… But how many firms tie up valuable resources catering to high-maintenance customers who often don’t stick around in the long run?

Can You Build Success by Narrowing Your Customer Base?

Here’s an excerpt from the article:

Achieving success by narrowing your customer base?

It sounds counterintuitive, but many small- to mid-size businesses can achieve higher profits and more success by downsizing the base of customers they serve.

Creating the perfect situation in which you and your customer base share common goals, respect, and appreciation can alleviate personal and professional stress and allow your business to grow.

Identifying Positive and Negative Customers

Some customers can boost your profits. Others can break your bank. If you don’t know which are which, you’re jeopardizing your business. Many companies could significantly increase profits overnight by either firing troublesome, unprofitable customers or ratcheting the price up so unprofitable customers leave or become profitable.

  • Positive customers truly understand and appreciate what you do. They’re willing to work with you and pay a fair rate for the product or service they receive. When you compare the revenue you receive from these clients to the time spent for their continued business, you should find a fair and practical balance.

While every customer or client cares about price, your positive customers understand the value you bring to their businesses. You understand the issues they have with growing their businesses and you talk to them about ways you can help; they, therefore, understand and value what you do.

  • Negative clients, on the other hand, can tax both your business’s operations and finances. For many companies, there’s a constant push to sell whatever can be sold to whoever will buy it. The business appears successful, and salespeople and operations stay busy in this scenario.

However, these customers can actually cost your company money, without really understanding or valuing the benefits of the product or service you provide. Your sales team might have lured these customers in with big price discounts or unrealistic delivery commitments to close the initial sale.

Negative customers often kill profitability by tying up valuable resources, like customer service time, engineering, or inventory. In many cases, these high-maintenance customers leave before you even recover your startup costs.

When is it Time to Narrow Your Base?

One of the biggest clues that your company is spreading its net too broadly in terms of customer base is when most new sales are closed due to low prices and discounting. To sell to a wide audience, a product or service must have broad appeal.

However, if everybody likes your business, but nobody loves it, you are forced to compete on price. By trying to reach everyone, you meet a bit of everyone’s needs, but not enough of anyone’s specific needs for them to pay you a premium. It’s also possible you’ve loaded up your product/service with things customers don’t care about and aren’t willing to pay for.

Analyze Your Sales Team’s Invested Time

Analyze your sales team’s invested time. This process can reveal which customers take up the majority of your business’s efforts. Often, a salesperson will cater to certain companies or segments and have specific product lines she likes to push. It’s a natural tendency to gear your efforts toward your interests, but this approach can really inhibit a company’s growth.

The likes and dislikes of a salesperson can actual control a company’s growth. If everyone is only focusing on what they consider their specialties, productivity and shared goals can suffer.

Focusing on price versus quality, and on isolated sales efforts versus a unified vision, can weaken your customer service and profit potential.

Companies can increase profitability by avoiding unprofitable customers. Clients only interested in price are often unfit for long-term business relationships.

The original article can be found here.

To learn more financial leadership skills, download the free 7 Habits of Highly Effective CFOs.

Narrowing Your Customer Base

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Narrowing Your Customer Base

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Managing the Sales Process – Upcoming Webinar

Join Craig Klein of SalesNexus and Jim Wilkinson of The Strategic CFO as they discuss what should be measured in every sales process, how to set goals for and measure it and how to manage sales people to achieve business growth.

When:
Wednesday, February 6, 2013
4:00 PM – 5:00 PM EST

Register for webinar here.

Managing the Sales Process

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Growth in 2013

There is going to be growth in 2013. I recently read an interesting article highlighting a survey conducted by American Express. It indicates that despite the current climate of economic uncertainty, CFOs are looking to invest to drive growth. The economic uncertainty refers to the recent threat of the fiscal cliff and sluggish economic growth. In addition, CFOs expect to achieve higher revenue and profits in 2013.

Article on Growth in 2013

Here’s an excerpt from the article illustrating this point:

Senior finance executives report positive sentiments for their own companies… [However, they still] harbor continued concern for the U.S. economy in 2013. Three in five senior finance executives (59%) are prioritizing investments in growth… [In contract, 37% of senior finance executives] are focused on saving money in order to protect the bottom line.

Senior finance executives also report a healthy revenue and profit outlook. Three in four respondents (75%) anticipate revenue growth for their own companies in 2013, and 69% expect increased profits. They are also confident they will reach their goals: 84% of senior finance executives are certain their companies will achieve what they set out to accomplish in 2013.

This generally optimistic view also holds when projecting further into the future – 89% of senior finance executives expect to see higher revenues three years from now.

Your Company’s Growth in 2013

What growth plans does your company have for 2013?  Are you planning on investing in new technology, developing new products or services, or expanding into new markets?  Or have you decided that, due to the current economic climate, it’s safer to retrench to protect the bottom line and live to fight another day?

Find the link to the full article here.

Growth in 2013

Don’t Be A CFnO!

I once had a client who called his CFO a CFnO. He had had five CFOs in a seven-year period. He felt frustrated as they were always telling him why he couldn’t achieve the sales growth he wanted rather than helping him get there. As a result, he saw them more as an obstacle and less as a team player.

To their credit, some of their comments were probably accurate with respect to aggressive growth; however, their approach made them ineffective as leaders.

Don’t Be A CFnO: Guide to Your Entrepreneur

When working with entrepreneurs, tell them, “We can do anything you want, but we can’t do everything at this time.” Ask them what they want to do first. And remember, you should be leading them to succeed, not serving as a roadblock to their success.

To learn more financial leadership skills, download the free 7 Habits of Highly Effective CFOs. Find out how you can become a more valuable financial leader.

CFnO

Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to manage your company before your financial statements are prepared.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

CFnO

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Employment in Services to Dominate US Job Growth

The US Department of Labor issued a report yesterday detailing expected changes in US job growth or employment over the next decade.

Employment in Services to Dominate US Job Growth

The US expects service related jobs to constitute virtually all (96%) jobs created through 2018. The health care industry employment constituting a significant portion.

Whereas, the US expects manufacturing employment to continue its long decline. The recent recession accelerated it to the tune of two million manufacturing jobs.

In addition, the US expects a third of new job openings to require educational attainments past the high school level.

All in all, this report seems to confirm that the basic trends in the US economy over the last four decades will continue. In that time, the country has moved from an exporting creditor nation with a large manufacturing base to an importing debtor nation heavily dependent on the technical and financial service industries for economic growth.

Click here for the actual report.

If you want to determine which candidates are the right fit for your company, then use our 5 Guiding Principles For Recruiting a Star-Quality Team.

US Job Growth

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US Job Growth

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