Complexity Kills Companies
I worked with a company that needed to limit overhead expense to 15% of revenue to be profitable. Their overhead rate starting point was 25%; they grew expenses to 37% by the end of the second year, and 55% by the end of the sixth year. What drove these adverse outcomes? Adding overhead staff, rather than unlocking productivity, and increasing facilities costs for space that was never used.
Complexity And Mass Burns Time And Cash
Consider how the following items add to your company’s complexity and mass or prevent operational flexibility, profitability, and supporting scale.
Mass is increased by:
- Unclear objectives and the lack of a written game plan
- Long-term contracts
- Excess staff
- Inconsistent communication
- Permanent decisions
- Not using proven software applications
- Meetings
- More entities than revenue
- Thick process
- Inventory (physical or mental)
- Hardware, software, and technology lock-ins
- Office politics
Avoid these things whenever you can. That way, you’ll operate more profitably and be able to change direction.
The more expensive it is to make a change, the less likely you are to make it. Huge organisations can take years to pivot. They talk instead of act. They meet instead of do.
If you keep your mass low you can quickly see and change business drivers: what differentiates you in the market, dependence, being cash positive, and having customers that promote you.
If you are thinking of selling your business now or in a decade, or passing the baton to the next generation, the Value Builder Score assessment allows you to see your business as a buyer would see it, and to identify how you perform on each of the eight key drivers of company value.
Get Your Value Builder Score
The checklist takes about 13 minutes to complete, and after you’re finished you’ll get a customised summary outlining how you performed and where you could improve the value and sellability of your company.
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