Do you have a strategy for creating wealth for your company?

According to recent studies, 9 out of 10 companies (See "Beware The Busy Manager" by Heike Bruch and Sumantra Ghoshal) do not have a clear strategy that involves both growth and wealth creation. Executives in those companies lack focus and generally have less energy. Some look toward growth and expansion, hoping to maintain profitability; others attempt to maximize short-term profits without strategically thinking about sustainable growth in the long term. Does this sound like your company?

Perhaps a short explanation is needed...

The fundamental truth about business success eludes most companies. They believe that the goal is to achieve a particular profit margin, and that this profit margin represents their return on investment. That's only a part of the story, and keeps most companies trying to catch up or stay with their competition.

What's missing from their "wealth" formula is Velocity, or Asset Velocity . Velocity is the most under appreciated component of return on investment. For too many business leaders, it's not even on the radar screen, says Ram Charan in his book, "Every Business Is A Growth Business". I fully agree. Asset s Velocity is defined as your Total Sales divided by your Total Assets. A second version is Total Sales divided by your Short Term Assets (inventory and account receivables). This figure is the real key to business success, and should be a primary focus of your overall strategy and business model. Why?

Here's a simple example. Say Company A has sales at two times their total assets (an Asset Velocity of 2). Their competitor has figured out how to have the same sales volume as Company A, but with half the assets. That is, Company B's assets are ¼ of their sales, so they have a Velocity of 4.

Assuming both companies have a Net Profit Margin of 5%, the return on investment for the two companies looks like this:

Company A:

TRUE ROI = Net Margin x Velocity; 5% x 2 = 10% ROI

Company B:

TRUE ROI = Net Margin x Velocity; 5% x 4 = 20% ROI

Now, assuming the cost of money remains at about 5%, Company A will have created 5% wealth (ROI –Cost of money), while Company B will have 15% wealth created! This means the asset velocity concept is extremely critical for any business when inflation and high interest rates are the trend (as they are today!)

If you are in an inherently low-margin business, higher interest rates and inflation means a low velocity. The downside is that your business may die! Even if your margins are high, you still need to think about velocity. New competition can create a sudden shift in customer demand, and shrink your margins. Without developing a strategy for your Asset Velocity, you're always looking over your shoulder. This could eventually starve, and kill your company.

You must learn about Velocity in times of higher interest rates! Here's a very simple explanation of why this is true. Let's assume your asset velocity is 1, which is usually the case. To grow your sales by $10 million, you need to have $10 million in additional assets from your shareholders, or borrowed. Suddenly, a new competitor with an asset velocity of four (4) enters your market. To reach sales of $10 million they only need an additional $2.5 million in assets. They are in a much better position, and the competition could ruin your company.

What does Asset Velocity and Strategic Thinking have in common?

When you start thinking in terms of increasing your Asset s Velocity, you have to think strategically. It is not by its nature a tactical or operational problem to solve, although operations is a component of Asset Velocity.

This is where the Strategic Wealth Creator System™ comes into play. Everyone is looking for the magic formula that will catapult their company into the lead in their market. While I can't tell you off the top of my head the exact magic that will work for your company, I have devised a devilishly clever and logical system to help you come up with your_own_unique strategy_and_accompanying_singular_business_model. I call it the Strategic Wealth Creator System™ because it is truly a series of different processes integrated into a system that can be replicated in your organization, year after year. This changes the rules of the game, and gives you the advantage!

Simplifying the above diagram

Essentially, the Strategic Wealth Creator system takes you through a series of well-defined processes that determine your direction, scope, competitive advantage, and value proposition. These in turn determine your Business Model and your Leadership Strategy. With these in hand, you develop an innovative implementation plan that is disruptive to your competitors and puts you in the lead.

What is the System?

The System is customized to the particular needs of each company. It's transferred by a series of five one-day sessions held with the CEO and his or her staff during a three month period of time.

What's more important, however, is understanding what you end up with when you've completed the process. You'll know which products and services will strategically create the greatest wealth for you in the future and which customers are your optimum target. You'll also know which products, services, and customers are your least profitable choices. You will not spend time and resources in any of them; therefore reducing your inventories and resources. In other words, you will increase your cash flow by increasing the asset velocity. And, you'll have a clear strategy and implementation plan for creating your future.

In the process, you'll develop a corporate culture of value innovation, courage and passion to implement your new vision. Your confidence will grow, and your wisdom and knowledge along with it. These are the true factors that will keep you ahead of your competition for years to come. Remember –I won't tell you what to do; but I will share with you and your staff how you can formulate the right strategy for you and implement these new strategies in your company. Through_my_proven_practical_concepts,_and_the_system, you_will_leverage_the_knowledge,_experience,_and_creativity_of_all_your company.

To learn more about this system and other services provided by Carlos Dias & Associates, please complete our information_request_form. Our initial consultation is free and without obligation.

If you require immediate assistance, please contact us at carlos@carlosdias.com.

Carlos Dias
carlos@carlosdias.com