WHY DO ENTERPRISES NEED TO OPERATE BASED ON FINANCIAL VIEW?
I have read through a shared article on this topic by Mr Phung Le Lam Hai – Chairman, Investment Director of Equitix Investing, the reason is that… businesses need to clearly separate effectively their businesses and understand the basics nature of costs.
Without a deep understanding of the nature of costs, it is difficult for businesses to make the right decisions to operate.
For example:
1. Enterprises think that their cost of goods is good…
But after accurately calculating from finance, the actual cost of capital made by enterprises is not as good as they think.
– They underestimate the cost
– Misunderstanding the value that makes up a unit of product
This leads to a cumbersome business instead of focusing on other strengths that make Customers-choose themselves instead of trying to produce by themselves Belief in reducing costs.
The numbers say it all and decide whether the business’s actions should be… do it yourself, OEM or control input materials.
2. Incorrect understanding of salary fund costs and management structure
This leads to recruiting people who are not suitable for their size.
Sales could not keep up with the unusual increase in fixed costs allowed.
Or be aware of the attractiveness of your business values (vision, training roadmap, salary structure, bonus, benefits …) to invite a suitable person to the company.
Or need to determine to find this person, how much will the corresponding revenue be?
3. Marketing expenses
To know yourself:
a. Being a good product and service, but not knowing how to make a brand, the cost is high.
b. Or our products are not different, so we need to focus on activities that convey the difference quickly and have better information coverage than the competition.
c. Or need to find an outsourced unit to push the big budget, which can run the risk of losing money because the essence is not how much budget to spend on Marketing, but the essence is that we are good enough to push or not?
4. Valuation of the company is closely related to the cost of asset investment and asset optimization.
Because of the large annual free cash flow, after deducting the annual reinvestment costs for the sales vision each year. The higher the value of the business, the higher the business model when the business model does not depend too much on increasing assets to generate more sales.
It means ROA: Value of return on assets to evaluate the efficiency of using shareholders’ money in business operation.
When the free cash flow, Nomna is the amount of money that is self-sufficient and self-operated without depending on the additional capital from shareholders every year, always more attractive than the models that only have more money to grow. , or very slow growth.
5. When businesses achieve large sales
Sometimes it is not in sales capacity but in 3 AVA criteria.
– Availability: Is the item available, not available where to push the number?
– Visibility: Is it easy for customers to identify? Can’t see why buy?
– Affordablity: Is the price reasonable for the value when compared to the competition. Available and conspicuous but not suitable for KHMT why increase the number?
Then the action of the business will focus on coverage, not on recruiting marketing staff.
6. Understand breakeven point
To know the return on variable costs (costs vary with sales)
The question is, from the break-even point, the products the business sells from the break-even point onwards, i.e. output increases by 1 amount, How much does the profit increase? While variable costs are still generated-add from the output has broken even and made a profit.
7. Listed selling
Post-promotion price
And use the right message to understand.
Listed prices serve many purposes and positioning goals, or value anchors in customers’ heads.
The use and habit of using promotional products of the business will also be implemented and operated well when using the right message, the same financial meaning is 15% discount, Marketing Dept creates a habit. bad habits for customers, they should wait for promotions instead of grateful to old customers to do market research; clearly they have different customer perceptions and mean not only… short-term DS but also long-term brand health.
8. Lack of understanding of loan interest, credit, regulated interest rates from the central bank or the economic cycle…
Causing corporate assets to peak, spending irrationally, losing liquidity, or staying above profits. uncollected liabilities, over-invested reserves or not aware of the risk of cash flow through the business in difficult times.
Both reflect financial management capacity and reduce the value of your business in the eyes of professional investors.
Without understanding finance, how can a business grow and make the right decisions?
The above is just a small part of the fundamental analysis in the businesses that Equitix Investing is helping them.
Mr. Lam Hai shared with me that “operating a business requires billions of things every day to make decisions”.
Therefore, if you do not understand finance, your business can hardly grow.
“The owner is never enough, if he does not understand and manage his (and investors’) money well.” – Mr. Phung Le Lam Hai – Chairman, Investment Director of Equitix Investing.