Building Margin

90: How to Unlock Value and Boost Cash Flow

Dec 10, 2024
What is value in business, really? Discover the elusive 'value formula' that can transform financial and operational performance. Explore strategies to enhance profitability through price premiums and cost efficiencies. Dive into key metrics that assess performance and learn how to align every business action with measurable impact. Ready to elevate your organization? Uncover the secrets to boosting cash flow and watch your profits soar!
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INSIGHT

Value Is Future Cashflow

  • Value equals the present value of all future cash flows a company will generate in its useful life.
  • Cashflow, not accounting profit or revenue, determines firm value.
INSIGHT

Profit Isn’t The Same As Cash

  • Profit can mislead because earnings may be reinvested or tied up in working capital.
  • Many firms are profitable on paper yet go bankrupt due to cashflow shortfalls.
ADVICE

Earn Price Premiums, Don’t Just Cut Prices

  • Pursue price premiums by increasing perceived value through better experience, quality, or lock-in.
  • Avoid using simple price cuts to fix weak value because discounting destroys long-term margins.
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