Read Online The Mobile MBA: 112 Skills to Take You Further, Faster (Richard Stout's Library) by Jo Owen - Free Book Online

If there is too much risk, raise equity or scale back your ambitions and reduce your funding requirements.
Models of business
    Behind every business there is a very simple financial model. Understand that model and you will understand what drives the business. Financial analysts will often try to capture performance in one simple metric; for instance, consider:
    • Retailers : change in like-for-like sales (after the effect of new store openings and closures)—this captures the underlying health of the business
    • Subscription television : average revenues per customer, and churn rate
    • Hotels : occupancy and average revenue per room night
    These are useful measures of the overall health of the business. As managers, it pays to go one step further and identify the specific levers that you can pull to improve the performance of the business. Three examples will help to make the point:
    1. Retailing. The gross profit of a store is a result of five factors that can inform management decision making:
    a. Number of people passing the store (location decisions)
    b. Multiplied by the proportion of people entering the store (marketing decisions)
    c. Multiplied by the number of people buying in the store (merchandising decisions and sales effectiveness)
    d. Multiplied by the average value of each sale (merchandising and sales)
    e. Multiplied by the average margin of each sale (buying and pricing decisions)
    2. Consulting. This works on the basis of finders (partners who sell business), minders (managers who manage the business) and grinders (associates who do the work). The business model is then based on four variables:
    a. Billing rates: how much you charge per hour, which varies for finders, minders and grinders
    b. Utilization: how much billable time you expect from each level of the firm
    c. Breadth of the pyramid: fewer finders means more leverage and more profit, but makes it harder to sell enough business
    d. Rate of attrition and promotion: the faster you promote people, the faster you have to grow, or your pyramid goes awry. Alternatively, fire people in the middle and you create room for promotions from the bottom while keeping the shape of the pyramid and your economics together. New joiners do not understand the brutal economic reality that forces the up or out system of consulting firms
    3. Credit cards. The credit card business depends on acquiring and keeping the right sort of customer. The simplified model of the business can be built around the value of each customer. The value of the customer is the result of:
    a. The cost to acquire the customer: channel and marketing decisions
    b. The average spend per customer: customer targeting, profiling, marketing
    c. Average length of retention per customer: quality of service and operations
    These are very crude ways of looking at your business. And that is the whole point. The simpler the system, the easier it is to see past the noise of day-to-day issues. Unless you manage the basic drivers of the business, the monthly variances appear as noise and you have to react to them on an ad hoc basis. Once you control the basic drivers of the business, you control its future.
Financial accounting
    Financial accounting is the bedrock on which the performance of the firm (and management bonuses) is based. Financial accounts should give a true and fair view of the financial position of the firm. In practice, most firms are proficient at managing the presentation of financial accounts, so that they are less of a bedrock of financial performance and more like quicksand in which you can easily sink.
    Financial manipulation never improves the underlying performance of the firm. In most cases, it simply makes this year look good at the expense of future years. So bear in mind the following:
    • As a manager, and potentially as an investor, it pays to read behind the headline numbers that are presented in the annual report and to understand the underlying performance of the firm.