Return on Company Value Add vs Cash Return
The highest cash payback on cap-ex is typically 3 months, allowing for commissioning? That is a 4x cash ROI?
So how on earth could you achieve a 10x cash return on investment in less than 6 months?
Taking a quick look at a random sample of 30 case studies of the 200 that the icebreakerexecutive team have completed:
£220m added company value across 30 SME projects. All of these projects were completed in less than 6 months.
- This achieves a 244 x ROI on the company value add
- or a cash return of 54 x our fees.
In some instances the stakeholders restricted the results we could have achieved because they frankly lacked the courage to go the whole hog, but still not a bad return on investment though?
These results was achieved purely by investing in and reinvigorating the people, no cap-ex, no AI. Although it did include some digital channel marketing strategy.
Here is one investment in people at a £200m plc where the executive team took on board all of the proposal: these results were implemented in 6 months. We have continued to do much work with this CEO :).. Cash is a far better measure of success because contrary to profit which can be misleading cash is an absolute figure and does not lie!
Is a turnaround any different?
The approach is different although defining the successful outcome and the means to get from a-b is the same. just the balance sheet might be shot and you must to deliver within a very short finite window or….!
Most businesses just have too much time?
These returns would have been substantially greater if we had picked the easy ones or there were more larger listed companies in the mix. We are turnaround experts so if we were heart surgeons we would be the heart surgeon that takes on those patients that would taint your post-operative survival KPIs. But the same solution applies to seemingly well patients or great leadership.
In all these situations we redefined and delivered these results in situations where leadership and their teams were exhausted and had run out of ideas steam.
In many instances the balance sheets were negative, so we had to create the cash to keep these businesses alive as well as the cash to pay our fees. We know how to generate cash because we have had to.
The ROI calculation
The added company value ROI was calculated like this
- Added company value = EBITDA increase x 4.5 (a modest EBITDA multiple)
- Project cost to deliver = interim management fees
The return on investment includes businesses (we could not save and or had to sell the assets or break up and sell the businesses).
Cost vs investment?
When can a cost be defined as an investment? The difference between a cost and an investment is the retained legacy. All these turnarounds have gone onto grow with these step change improvements and a refreshed team.
Where to invest?
Investment in people is critical to creating great businesses.
We have captured our underlying capability and to make this far more accessible to far more organisations in the 12 x 3-minute chapters of the winning thinking program.
www.winningthinking.uk is a summary of the underlying capability that enables these results by achieving:
1/ employee engagement 2/ breakthrough strategy & profit
• Create a robust purpose • Achieve breakthroughs
• How to engage employees • Create sustainable profits
• Create committed employees • Transform capability on the job
• Getting everyone thinking • Create time: Are you too busy?
• How to manage risk • Get everyone implementing
• How to create trust • How to stay on track
Are you too busy?
If you are too busy its certain we can achieve a double digit improvement on your margins – prove me wrong :).
have a great day
Only the best Tom