A small problem in one area can have a ripple effect throughout the company. According to Kevin Cope, founder of Acumen Learning the secret to cutting through this complexity lies in understanding the five key drivers of business – cash, profit, assets, growth and people.
“We tend to become specialized and get very good at focusing on the specific parts of our jobs, so much so that we fail to see the big picture – how what we do fits into the overall goal of helping our company make money, achieve its strategic objectives and be profitable,” Cope says.
Having worked with dozens of companies, including many in the Fortune 500, Cope has discovered that focusing on the five key drivers – cash, profit, assets, growth and people – enables everyone to understand how their organizations operate, make money and sustain profitable growth.
“While each driver is unique, it is also completely dependent on all of the other drivers. You cannot affect one without influencing the performance of another,” he writes.
“Leaders have to take the connections between the drivers into account as they make their decisions, or risk running their business into the ground.” Employees, too, need to understand the drivers in order to think strategically and communicate more effectively which, in the long run, will enhance their own career opportunities, Cope says.
These are the drivers:
Cash – “Cash is the fuel that drives a business. Without cash, a business can’t pay its bills, can’t pay its employees, can’t buy the goods it needs to produce the products or services it sells,” writes Cope. He lays out how to evaluate the three key components of cash – cash position, cash flow and liquidity – and details what all businesspeople need to know about generating cash as well as how to use it wisely to spur growth.
Profit – “Profit is simply the difference between how much you make by selling goods and services and how much it costs to produce and sell them,” Cope says. He clarifies the differences between profit and cash flow, and also explores the concept of profit margin, which reveals how efficiently a company is turning revenue into profit. In the book, he details the benefits and risks of varying approaches to growing sales revenue and reducing costs.
Assets – Assets include everything a company uses to produce revenue – whether it is tangible, such as buildings and equipment, or intangible, such as patents. Cope discusses the dilemma all businesses face: how to balance asset strength – which enables companies to meet obligations, take advantage of opportunities and survive tough economic times – with asset utilization – which is necessary to produce revenue and sustained growth.
Growth – “Constant change is a reality in today’s business environment, and growth is one of the [few] ways to handle it,” Cope writes. After explaining how growth is measured – in terms of both revenue and profit – he addresses how it can be achieved, by internal expansion (opening new stores, selling new products) and by merging or acquiring new businesses.
People – People lie at the center of the five key drivers, Cope says. “People make the decisions, supply the financial resources, buy the products, provide the labor and services…. They drive cash, profit, assets and growth,” he writes. “Meeting, exceeding and anticipating the wants, needs and expectations of your employees, customers and other important stakeholders is essential to your financial success.”
Cope is the author of Seeing the Big Picture: Business Acumen to Build Your Credibility, Career and Company (Greenleaf Book Group Press, March 2012),