A manager may be led to create evidence to support a narrative of good management, growth and high margins
Every business owner wants to demonstrate their management with good financial numbers, favorable operating margins, efficiency in working capital and inventory management. When the numbers are not in line with the objectives of the business plan, the company’s manager may be tricked into creating evidence inconsistent with reality to support his narrative of good management, growth, and above-average margins. Being better than the “market pair” justifies multiple arbitrage assessment in mergers and acquisitions (M&A), more advantageous conditions in investment rounds, positive image and easier negotiations with suppliers and lower commissions with banks.
Contrary to scouting practices, aka”buy the book“, the adoption of “creative” initiatives leads to overestimated assessments even by those who understand and experience the topic. Concealment or misinformation, intentional or otherwise, on costs, loans, working capital and margin cannot be considered common practice.And identifying when this happens is far from simple.
The way to reduce the risk of errors is to monitor companies and the management very carefully, analyzing its annual and quarterly financial statements, comparing them with the execution of the strategic plan, its financial results and discussions with the administrative body. It’s not a trivial task, and few asset managers have teams that combine intrusive corporate operations and analytics to select an investment portfolio.
There are effective practices to increase the efficiency of operations see in detail. The possibility of improving turnover, mix of services and products, average ticket, sales per square meter of shop and working capital and reducing the risk of inefficiencies with management models, predictive tools and georeferencing systems is already within the reach of “almost everyone”. It is not rocket science retail is a continuous job.
Strategic planning, with well-defined objectives and key results (OKRs) and appropriate governance, helps ensure transparency and effectiveness of internal processes and evidence-based decision-making, regardless of company profile or size, be it public or private, listed or not.
Be wary of spectacular numbers, compare the maturity of the business plan execution with the expected result, have clear metrics and indicators. Don’t underestimate control and accounting. In the case of retail, operational efficiency is the only way to achieve positive results and sustainable growth. Profit is, and always will be, the consequence of executing well-designed planning.
Marco França is a PUC engineer and founding member of Auddas
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
