Why Focus on Cash to drive Profit & Scale?
When you focus on optimizing cash levers, you will have the right inventory, at the right place and at the right time (maximizing revenue, minimizing obsolete inventory). You will have the early visibility to build capacity to expand and scale the business. And if you now can control inventory, then you will need significantly less inventory, your supply chain will be more agile and you will able to quickly react to changes in sales forecast. Healthy inventory means less discounting and maximized revenue which drives profit. Less inventory means more cash.
The ability to optimize cash will drive predictable/forecastable cash flow which drives earlier investment in revenue drivers (headcount, product development, marketing, sales, IT, etc). This drives scale because scale loves predictability.
Private equity and investors love a predictable, scalable cash generating business.
Discovery Questions
Do you run an ERP system? Which one? Do you have accurate inventory levels in your ERP: on-hand, in transit, on-order, at customers stores/3pls?
How do you Pareto (rank) your Skus? Do you use ABC: ABC based on ‘volume*Average_Selling_Price’, ‘volume*Gross_Margin’, ‘volume*Dims’?
Do you have excess inventory? Show us
How do you deal with excess inventory?
Does every overage get a Pareto root cause?
Do you have inventory shortages? Show us.
How do you deal with shortages? Who owns inventory?
Does every shortage get a Pareto root cause?
Do you control Sku proliferation? How?
How do you handle end-of-life Skus?
Do have a Material Requirements Planning (MRP) tool?
Are you using all MRP functionality?
Who does this?
Plus 38 additional questions…
