Is there future for agricultural cooperatives in Ukraine?
Every company develops through a number of stages: from the start-up stage, when businesses are being formed and have little earnings, to the break-even point.
Then, there follows the profit stage, but only if the company is not in the valley of death, where most businesses lie buried after they failed to reach the breakeven point.
These stages make a company’s lifecycle.
Financial planning plays an important role in the company’s lifecycle. At first stages, financial planning is the company’s backbone, which then becomes its vascular system that allows to digitalize and balance the inflows/outflows/cash flow via the business budgeting system by business areas.
Financial goals should be prioritized in view of specific factors. These factors:
- Company lifecycle.
- Strategic goals (local/global)
- Market size and market positioning.
- Competitive environment, etc.
That said, the financial objectives must also meet certain criteria, such as the reality.
- reality. In this case, we assume the attainability of tasks in a certain period. At least one successful entrepreneur knows that business objectives should lie beyond the life and remain unattainable as a perfect ideal. This notion applies well at the early stage of development;
- measurability and predictability. Objectives should be susceptible to mathematical calculations and financial analysis;
- non-stop progressivity. The objectives you set should be of permanent nature and progress exponentially, that is be growing together with the company;
- intensity and extensity. The intensity implies the internal efficiency of a company – the ability to work its way through costs. Extensity – the ability to increase external sales.
Supervision tools are behind every success and should be used at any stage to ensure the development. One of them is a system of key performance indicators (KPI) used to spell out objectives and their timelines.
It also tracks their implementation speed, progress, and other important factors.
Essentially, KPI is a tool that can visualize the movement towards your goals. The benchmark to measure the efficiency of your business and to answer important strategic questions, such as: “what’s the score?”, “does the efficiency increasing?”, “has our EBITDA increased (or Revenue, Market penetration)?”, “does the unit economics work?”, etc.
The Deming cycle aligned with OODA concept (Observe–Orient–Decide–Act) is just as important.
They are designed to solve any problems through a comprehensive analysis of all the factors affecting them.
We can see how it works in world-class companies that are keen users of these methods in their processes.
For example, if there is a manufacturing defect detected at Toyota factories, the entire conveyor line shutdowns instantly. Then the entire technical staff is gathered. Through joint efforts, they identify the problem and create a solution.
That is, they observe, orient, decide and act as the OODA concept guides.
Once the problem is dealt with, the conveyor resumes operation and no problem alike reveals itself after the conveyor is fine-tuned. The staff is this informed of previous shutdowns and will prevent the recurrence. By the way, that is the answer why Japanese vehicles have almost no breakdowns.
With these principles implemented at each stage your business starts up and develops, you will definitely succeed.
This post is also available in: Russian