Starting with this edition, we will also have a dedicated section for talking about operational business management. In fact, we are convinced that under such conditions of great uncertainty and instability as the current ones, it is no longer enough to be updated on news on tax and labour, about which in any case we will continue to keep you informed, but it is also important to learn about new simple working tools that will help us to better select strategic goals and fine-tuning course adjustments, in order to achieve them.
For this reason, together with the editorial staff of Detergo Magazine, we have decided to issue a series of articles on operational management topics that we hope will provide you, as entrepreneurs, frequently overwhelmed by the emergencies of the daily life, a moment of brief reflection and a source of inspiration for drawing up some development plans or, as we often like to say, turning your entrepreneurial dream into reality, to simply make it happen. The new section will be called “Pills for the Future”. We hope that you will find it interesting and that you will send us your comments and suggestions to the e-mail address that you will find at the end of the article
We would like to join you on this journey with a series of interesting articles. We will call it the “the Path to Growth”.
Where are we today? Which are the medium to long term needs of the entrepreneur, whether small or large, which are its questions?
The economic-financial dimension is extremely important, but it is not the only perspective for planning the future. It is necessary a more extended vision, from different perspectives. And there are at least some other three of them. But we will discuss about this later. Why is the year-end profit never equal to a cash-flow increase? We will see the determinant factors of the cash-flows and profit. But that’s not enough: every company has a business model, but are we sure we know it in detail? Do our most trusted collaborators know it? To better understand it, let’s have a look together to a simple and intuitive analysis. After seeing it, we will have a better understanding on how we are working.
But especially, on how are we managing the profit margin on our sales? Why do we generate profits (or losses)? The “magic” formulas: ROS (Return on Sales), TOCI (Capital Turn Over), ROI (Return on Investment), Leverage (the use of borrowed funds). Not so complicated! Is it enough to take care of the profits and the cash-flow for feeling safe? The answer is NO. Don’t forget that there are also some other perspectives. The company is like a tree. A strategic tree. Here is a well-known quote that we shouldn’t forget to mention: “There is no favourable wind for the sailor who doesn’t know where to go”. These were the words of Seneca, a great philosopher inviting us to check for the ship, establish a course and keep it under control. If not, we are at the mercy of the winds and currents! An entrepreneur, especially in the complicated times full of surprises like those of the recent years, must know how to handle the helm, and not falling overwhelmed by the daily small-big emergencies.
But how can I do that? Always Seneca, also said that “We cannot change the direction of the wind, but we can adjust the sails”. So, yes, even for guiding a company towards some ambitious goals, it is necessary to adjust the sails. There is a method, that it is not even so difficult to be applied. It’s a way to put things in place, set goals, find out the necessary conditions to achieve them, and how you can delegate things to your collaborators. We can’t do everything by ourselves! So, once arrived here, we have a strategy map, a nice design and goals that we know we can achieve. But we need money, and we don’t have so much at our disposal. We cannot hope in miracles, but we can share you something about the Growth Facilitators.
These are not the esoteric things that so many Web Gurus were talking about. These are much more simple things: legal regulations, benefits, corporate transactions described by the Civil Code, which are often tax-free, innovative finance tools offered by the network, labour cost bonuses. And much more. Many of you are probably already using them, others have heard of them but might think that they are only for the large companies, and some have not even heard of them. But what it makes them Growth Facilitators, however, is the way how we use them.
Having a clear idea of a growth or transformation project, we can combine different Facilitators to help the company support an ambitious growth process, its reorganization, a generational transition, its entry or expansion on the foreign markets, digitalization or the implementation of the AI. The acronym is very trendy, but translated it really simple terms, it is called Artificial Intelligence. After making this journey together, we hope that we will receive questions, observations, critics, and reports on particular problems. They are going to help us to better understand your industry so that we will be able to help you in designing your growth project.
After this premise, we go back to the very beginning and therefore… Where are we? As you can certainly imagine, we meet a lot of entrepreneurs in our consulting business, and when we talk about this and that, discussing about the daily life, there is certainly no one who did not notice how much the things have changed in these recent years. Reflecting on it, the changes have not arrived with the Covid and the conflict in Ukraine, but we had them even before. The ever-increasing pressure of the Chinese companies, a logistics distribution system that Amazon has revolutionized, the early shortages of raw materials, a globalization and technological and information technology progression that have killed whole industries (who remembers the Kodak Instamatic?). And the list could continue.
And then? Well, the Italian SME (small and medium enterprise) found itself in a short time in the situation of passing from a relative stability, where you knew who were your competitors, the interest rates were always the same, the products and services were always being improved but there were few those that were daring to “pull the rabbit out of the of hat”, by promoting revolutionary things, in the context that in the attempt of defining the market uncertainties might result a minimalist description. Making a competition, was like the famous rowing race between the universities of Oxford and Cambridge. A calm Thames, the boats were all the same, without engines, all with 8 rowers and a helmsman, a starting line, a gunshot telling when to start, and a clearly visible finish line. The strongest and the most attentive one, wins. But what about nowadays? Nowadays’ competition is far more complex.
The variables have multiplied, the rules are not the same for everyone, some economical regulations excessively burden the Italian SME (Small and Medium Enterprise), the logistics revolution and technological innovations are bringing new competitors on the market, that we had never heard of, and that perhaps operated in totally different industries. Who would have imagined five years ago buying a car on a website, without ever having touched it before? The effects of all this instability: uncertainty, change anxiety, unclear ideas, postponing important decisions, disorientation, non-investment…
Maliciously, when we hear about how much the world has changed, we agree and ask one question: And how did your company change? And here, for those willing to talk about it, usually start the multiple distinctions. – It’s different for us – I don’t have the time to make long-term plans, I have to keep up with thousand things – We have always made it like this, and it was always good – My collaborators don’t understand anything – We don’t earn anything but it’s impossible to change something, in a short time
But there are also some deeper doubts: What I am going to do when I won’t be able to work anymore? Does the company that I have created from scratch, has any value without me? No one will ever want to buy it. My children don’t care about it. I have some dreams, but they will remain so. Dear readers, we will stop here for the moment. Our journey will continue in the next issues. And we hope that you will have the pleasure to follow us. •
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DETERGO Magazine # April 2023