Building your financial structure for the future
Your company’s financial structure is often the key to its success. But a financial structure, meaning the financing framework you use to operate your company, is not an easy thing to design – even if you have the time to do so.
After all, you are always on the go, growing your business. Every day, you will be making important decisions which affect your business and that growth. Yet you will be much better prepared to make those very decisions with a solid financial structure in place.
Working together, we will build a control and management tool which will help you bring your business to the next level. Designing the right financial structure for your business, from strategy through to implementation, will put you right in the driving seat when it comes to taking your business forwards.
Understanding the difference between capital structure and financial structure
There is an important difference between capital structure and financial structure:
Every organization needs funds. How you choose to source those funds is described by your company’s financial structure. This structure lays out the exact mix of debt and equity an enterprise relies on. Equity might include retained earnings or common or preferred stock. Debt might be in the form of loans or issued bonds. It is this composition which will allow investors and banks to determine the risk and value they should attach to your business.
The capital structure of your business only concerns itself with your company’s long-term sources of funding. These will include all of the above – equity capital, shareholders’ investments, long-term loans and the like.
Yet there will also be short-term liabilities, such as trade credit. These items will be a part of your overall financial structure. They will not be a part of your capital structure. Here is a quick summary:
- Financial structure definition: the way the assets of your company are financed. It includes short-term and long-term debt, equity and liabilities.
- Capital structure definition: the way the long-term sources of your funds are structured.
It is usually easiest to think of your company’s capital structure as merely a part of its overall financial structure. Your capital structure is sometimes listed as a ratio or percentage. Typically, you will have numerous sources of both debt and equity.
Get a full financial structure analysis of your business
I will provide a financial structure analysis which will help you determine if your business is going in the right direction. If your KPIs (Key Performance Indicators) are not being reached, they will also help show what needs to be changed to enhance your growth curve.
I can also design a financial structure which is adapted to your business’s needs. Part of this will be deciding on the best financial structure ratio. This is the percentage to which your company is debt-financed and to which percentage equity-financed. It will include all short-term and long-term sources of financing.
With this knowledge, you will always be able to control and improve your outcomes.
I regularly analyse the financial structures of businesses in every industry. Contact me today to discuss yours. My clients hail from places as far afield as Belgium, the Netherlands, Luxembourg, France, the UK, Switzerland, Norway, Sweden and Germany.
Benefit from a complete capital structure analysis
Proper capital structure analysis is just as vital whether you are planning to start a business or you have been operating for many years but are looking to build a more efficient and profitable organization.
If you have an existing business, it will already have a capital structure ratio which tells anyone who reads it how it is financed. As this is only the structure of your capital, this percentage includes only long-term sources of financing, both equity and debt. These might include long-term loans, retained earnings, stakeholder investments or equity capital.
For example, a company that has $25 000 of funding from equity and $75 000 from debt would be 25% equity-financed and 75% debt-financed. This is often referred to as the leverage or gearing ratios.
Armed with a full analysis of your business’s capital structure, you will be much better equipped to make a whole range of decisions. Including those smaller day-to-day financial choices on which every successful business rests. I will provide you with a comprehensive structural breakdown which will help you know how to grow your company for many years to come.
Call in an expert for a strategic analysis of your business
A simple business strategy analysis definition will show you that this highly important field is, in large part, just what it sounds like:
Business strategy analysis involves carrying out in-depth research on your own company and the environment in which it operates – including competitors in your chosen market niche as well as the market itself – in order to create a strategy which will help you to become even more successful in future. Essentially, this boils down to answering questions about what you need to do next to get the best from your business.
A full business strategy analysis will include stages such as:
- Current strategy research: including both the internal – employees, operational efficiencies and otherwise – and external, changes in the economy, consumer preferences or political trends.
- Current strategy analysis: how effective is your strategy? Will it allow you to meet your targets? Is it aligned with your brand values and mission?
- Future strategy planning: necessary if the current research strategy research and analysis phases identify problems.
- Future strategy recommendation: a final recommendation as to the changes which will result in the most profitable strategy.
The changes which a recommendation might make could include:
- Changes in capital structure
- Alterations to supply chain management
- Editing business processes to better meet the needs of the market environment or current projects
Expert supply chain analysis identifies where you can be more efficient
Get a thorough supply chain analysis and you will know exactly how many of your financial resources you are spending – and occasionally wasting – to get what you need to operate your business.
Technically, a supply chain is “the inputs and outputs between firms”. Supply chain analysis is the quantitative examination of the prices and value added or subtracted as those inputs and outputs happen. This process can be analysed as physical flows of materials – the precise items needed to manufacture your products, offer your services at your usual high standard or otherwise conduct your business’s operations. They are also usually also analysed in terms of the money involved. This is sometimes called supply chain financial analysis.
All of this often involves mapping out the supply chain to determine the product flows and quantify the activities of the various organizations involved. I then provide you with a thorough analysis of the time and resources used by the different sections of your supply chain as well as options and recommendations for how it can be improved in the future.
With this analysis in hand, you will be able to implement even more cost-effective strategies, such as cost to serve or using an improved multichannel approach. You will also be prepared to react quickly to changing conditions in the future.
Contact me today and join the companies across Europe who use me as their supply chain analyst. I already provide this kind of analysis for business owners in Belgium, the Netherlands, Luxembourg, France, UK, Switzerland, Norway, Sweden and Germany.
Choosing the best financial metrics
Financial metrics are quantitative measures which can be used to compare, track and judge how well your business is performing financially. Sometimes referred to as financial KPIs – Key Performance Indicators – they are the measuring sticks by which you determine your business’s performance.
Some of the most common financial KPIs include:
- Cash flow
- Cost management ratios
- Efficiency ratios
Yet not all of these metrics are the best indicators for every business type – or for companies in every industry. Some are what are sometimes called “vanity numbers” rather than being very useful for truly assessing your financial performance and future.
I will help you determine the most effective financial metrics to evaluate your business by. My goal will be to build you a “dashboard” of indicators and gauges you can refer to in order to make decisions as to the future of your business and develop and improve your strategies.
As a Virtual CFO, I can also help you determine and analyse your financial ratios. Sometimes called your account ratios, these are the comparison of two figures in your accounts which can also be used to analyse your financial statements. A good example is the earnings yield – your earnings per share divided by your share price. You will see these written as a percentage value or a decimal.
The first step will be to assess your goals. This will allow us to select metrics which will allow you to measure the full effectiveness of any business decisions you are planning to take as well as to measure your progress towards actual numerical goals. This last point is a vital thing to be doing if you want to make sure you are getting the best out of the hard work you put into your business.
Financial analysis services ideal for companies in every industry
I provide financial analysis and coaching services for businesses in every industry on a regular basis. Do you provide beauty services or legal services? Are you an IT company or restaurant owner? Supermarket or corner retail shop?
Whatever sector you operate in, smart financial analysis will help you boost your growth, increase your revenue and make sure you have the most cost-effective and efficient supply chain as well as the most sensible financial structure and capital structure for your business type.
I will help you determine and analyse your current position. Then we can work on choosing and integrating the metrics which will help you know how effectively you are working towards your goals.
Once you have this always ready to refer to, you will be able to make those large and small alterations needed to keep your business as profitable as it possibly can be. Then it will be the turn of regular ongoing analysis to help you ensure that it stays that way.
Get in touch with me now to get a thorough financial analysis of your company wherever you happen to be based. I regularly work with clients in Belgium, the Netherlands, Luxembourg, France, UK, Switzerland, Norway, Sweden and Germany.