Tag Archives: Comparison

How Do You Unlock Your True Profitability with Sound Cash-Flow Trade-offs? Six Points

Situation: A CEO has her company on a positive growth track. The company has a solid customer base. Their products and accompanying services are increasingly well-accepted. She is ready to take the company to the next level of growth and profitability. How do you unlock your true profitability with sound cash-flow tradeoffs?

Advice from the CEOs:

  • Profit is different from cash flow. Make this distinction clear and act to boost cash flow.
  • Tracking Cash & Forecasting:
    • Watch the company’s bank balance. Frequently track cash inflows and outflows by period.
    • Carefully assess and project the pattern of customer buying habits and payment performance to develop sound revenue assumptions.
    • Compare the company’s margin dollars and billings with norms for peer group businesses.
  • Issues to consider in forecasting:
    • Hiring means commitment of future cash outlays. Consider contingent work force options.
    • Project and plan for future large payments (equipment, technology, marketing, loans, etc.)
    • Differentiate between investing in ongoing business capacity as opposed to incremental add-ons.
    • Look at cyclical trends and issues. Understand your customers’ purchase habits and patterns.
    • Develop likely “what if” scenarios (good and bad) and develop plans to reduce the impact of surprises.
    • Analyze the company’s business model and determine exactly how cash flows through the company’s operations.
  • Analyze important upcoming decisions: hiring equals investment; outsourcing equals expense. Evaluate needed support for each.
    • Differentiate investment versus outsourcing decisions. Smooth cash flow through selective outsourcing – especially when dealing with sudden or cyclical peaks. Avoid the risk of committing long-term resources by staffing up to address short-term peaks.
  • Focus on the opportunity cost of money. Add this focus to both planning and assessment.
    • Operate with a mix of other peoples’ money and ownership funds. The latter are more expensive than bank interest because the trade-off is what you could earn through alternate investments.
  • Fine-tune the company’s planning tools. Analyze budget and cash implications of alternate plans through detailed budget projections and follow-up by tracking cash expenditures.
    • Use Cash Flow Statements to analyze and project trends in investments, operations and financing and how each of these affects cash balances.

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How Do You Communicate Benefits Changes Following an Acquisition? Four Thoughts

Situation:  A company was recently acquired. The acquirer wants to merge benefit structures between the two entities. Both contribute a similar amount toward benefits; however the distribution of benefits between retirement and health plans, and other benefits varies considerably. How do you approach the staff to communicate changes in benefits following an acquisition?

Advice from the CEOs:

  • Ideally, you want to gather employee input on what benefits are important to them before the overall package is finalized. This will help you to negotiate in your employees’ interest.
  • Make sure that the acquiring entity is aware of state regulatory requirements that may force them to retain state-specific benefits.
  • National companies often employ a cafeteria benefit strategy that allows the employees to make choices among benefit options, and fund these choices either at a company-paid base level or allow employees to supplement their choices through pre- or post-tax payroll deductions. There are numerous providers who offer cafeteria plans.
  • What’s the best way to have a conversation with employees once the new benefit package has been finalized?
    • Emphasize that the company is offering and funding this benefit and specify the amount that the company is funding as a percent of salary.
    • Create a grid mapping the full program:
      • Amount of company contribution
      • Old Program and benefits
      • New Program and benefits
      • Changes in allocation and changes in the total value of benefits offered.
    • If you have access to industry or regional comparisons for like-sized companies, and those comparisons put your company in a favorable light, share these as part of the communications package.
    • If you know that a highly valued benefit is being reduced, consider a short-term subsidy to ease the shift.
    • Be sure that you are clear and concise in your communications of the new plan and changes to the employees. You may want to have an outside consultant on hand to cover specific questions.
    • Be sure that any decisions your employees must make in the new program are fully and clearly explained.

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How Do You Communicate Benefits Changes After Being Acquired? Seven Suggestions

Situation: A company was recently acquired. The acquirer wants to merge benefit structures between the two entities. While company contributions are similar, distribution of benefits between retirement plans, health plans, and other benefits between the entities varies considerably. How do you approach the staff about the changes in a positive manner?

Advice from the CEOs:

  • Ideally, you want to survey employees on what is and is not important to them about their benefits before the package is finalized. This will help you negotiate on your employees’ behalf.
  • Ask the acquirer whether a “cafeteria” benefit program is feasible. This would allow your employees to make choices among benefit options, and to fund these choices either at a company-paid base level or to supplement their choices through payroll deductions.
  • Inform the acquiring company of your state’s regulatory policies on state-specific benefits.
  • Once the new benefit package is finalized, ask for assistance communicating the new package to your staff. Create a simple and concise grid for the program:
    • Amount of company contribution,
    • Old program and benefits,
    • New program and benefits,
    • Use the grid to demonstrate that while the allocation may be different, the company contribution remains the same and the total value of benefits offered is unchanged.
  • If you know that a highly valued benefit is being reduced, consider a short-term subsidy to ease the shift.
  • Be clear about decisions that your employees must make in the new program.
  • If you have access to industry or regional comparisons for like-sized companies, you may wish to share these.

Key Words: Acquisition, Benefit Structure, Change, Employee Input, Cafeteria Plan, Options, State Requirements, Short-term Subsidy, Comparison

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