Methods and concepts for Value Based Management (VBM)
Steps Ahead ... Early Warning Indicators
During the years Steps Ahead… recognized several Early Warning Indicators that indicate that a company is vulnerable for negative changes in the economic climate and other heavy weather.
It is obvious that the risk profile is higher if a company scores on many of these indicators. In this way these indicators are a simple but effective method to investigate the health of a company and the vulnerability for heavy economical weather.
Indicator 1: poor management
lack of professional management, no balanced management team, too much dominance of the director/owner, too little responsibility on lower hierarchical levels, too much sales driven, poor corporate governance;
Indicator 2: poor strategic planning
opportunistic business development, no long term financial projections;
Indicator 3: poor finance mix
high financial leverage, low solvency, balance sheet not according conditions of the credit letter of actual bank lines;
Indicator 4: poor management information
inacurate, not in time, too complex, insufficient detailed budgetting;
Indicator 5: poor business mix
unclear contribution margin/contribution of individual business activities, clients, products, sales channels to the company profit;
Indicator 6: fat business
insufficient cost management, not in line with gross margin;
Indicator 7: business rigidity
inacurate business flexibility, inflexible cost structure related to business dimension (turnover);
Indicator 8: poor risk management
no explicit risk awareness and risk management;
Indicator 9: poor cash management
no detailled rolling forward cash forecasting, poor working capital management, Cash is King !;
Indicator 10: poor advisors
lack of sharp, independent, pro-active external advisors with business experience in corporate and financial restructuring and redesign, cash management, stock reduction, etc.;
Read more about our Corporate Restructuring approach ...
