In the early 1990s, balanced scorecards, Business Intelligence, Web Analytics and profit center management missed vital components for maximizing business value and leveraging potential equity. Older systems, like balanced scorecard and business intelligence/ performance, evolved from early use as a simple performance measurement framework but without the umbrella of business value.
Business value planning is a strategic planning and management system used extensively in business and non-profit organizations to align business activities to the vision and strategy of the organization, maximizing business value.
Purely financial measures tell only the story of past events, without an adequate story for growth in vital value pillars and drivers of the business.
After a business value plan is formed, strategic earnings move planning begins using two prongs as documented in the Harvard Business Review, “Two Routes to Resilience.” 1) future potential and 2) organizational values leading to probable earnings moves resulting in increasing personal equity for the Owner.
EARNINGS MOVE SYSTEM
(WHAT IT IS) The earnings move system retains traditional financial measures while expanding with key indicators for a view of current value activities for future earnings moves. The earnings move approach to transforming a company is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy while implementing them into action thereby maximizing business value. The system provides feedback around both the internal/external business processes and outcomes in order to ultimately optimize business value.
(WHAT IT DOES) The earnings move system has a customizable framework of business value bringing together critical areas for top Executives and Owners. An earnings move system, originated by David C. Whipple, uses a “business value” framework adding strategic non-financial measurements along with principles/laws of business value. These principles/laws are applied to value pillars and drivers to maximize business value.
(WHY YOU NEED IT) The system maximizes business value for leveraging/acquisitions and provides managers and executives a panoramic macro and discreet micro view of key indicators required for maximizing business value. The system also boils down short term and long term business development strategies working with organizational and marketing for owners and management. The earning moves strategically utilizes value pillars and drivers residing in the business for maximizing a company’s value.
(A BENFIT EXAMPLE/RESULTS) Critical for success of leveraging, merging or a structured buy-out that would offer a win-win for both entities. Business value measures create future possibilities through investment in market share, vendors, employees, processes, technology, and innovation in preparations for leveraging or a buy-out. For example during business value planning an internet based company (low price leader) identified a forgotten brick and mortar wholesale division with inventory of 1.2 million in plastic models(The Owner thought this would never sell and had tried several ways). After an introduction of the earnings move formula (increase price 3% and margin 3% while decreasing advertising 3%) the Owner immediately wanted to increase prices. We suggested to wait until further identification of value pillars and drivers along with a synergistic earnings move. Later, with key indicators and insightful research focusing on business value, three options were presented. Together we implemented an earnings move consisting of a sales team to prove current marketplace for plastic models for a potential buy-out. Sales increased in the wholesale division over $25% the first month resulting in an offer from a friendly competitor. Again, the Owner thought the old inventory would never sell but the new Owner had some great ideas and the money to purchase two of the three businesses in an undisclosed sum of money. Resulting in a win-win situation.
(HOW YOU CAN GET IT) The earnings move approach to strategic management was first detailed in a series of articles and an e-book “14 Immutable Laws of Business Value” by David C. Whipple.