I had the opportunity to spend some great time with one of our manufacturing clients at a General Manager Business Acumen training program in Shanghai last week. The purpose of the program was to develop their strategic leadership and business acumen skills further so that they could address another challenging year in 2025.

In our program, we utilize a highly customized business simulation to present the participants with the chance to learn by doing and take their key learnings right back to the job in terms of “bridge-backs.” One of the most important concepts we focused on was free cash flow.

I am pleased to share some of the learnings and takeaways in the blog as a way of sharing with our Advantexe community. Here are five key reasons why free cash flow is going to matter a lot more in 2025:

We just finished a Business Acumen workshop for one of our heavy manufacturing clients. During the 3^rd round of their customized business simulation, we had prepared a “wobbler” for the purpose of having the senior leaders feel and discuss the impact of a significant interest rate cut after a full year of near recession cooling down. We wanted the conversation and the actions to focus on “saving” the business year in terms of the guidance the simulated teams had provided to their simulated shareholders and board of directors.

After the round, we processed what happened and had a nice 45-minute “bridge-back” discussion to plan actions to take the key learnings back to the real world.

I took a lot of notes and am pleased to share some of the interesting findings and insights.

Here are five thoughts on, “Can cutting interest rates significantly impact Q3 and Q4 performance?”:

Advantexe delivers many business acumen training programs for our clients in the automobile industry including clients who manufacture cars, clients who manufacture tires, and clients who supply the paint to new and refurbished cars.

Overall, the automotive industry has been volatile as it is still recovering from the pandemic and all the issues surrounding it. One of the more interesting aspects of where the market is right now is the deliberate and intentional choice of manufacturers to scale back on the production and forecasts for electronic vehicles.

For the last decade automakers such as Tesla, General Motors, Ford, and Toyota have been spending billions of dollars in the race to develop electric vehicles and build factories to produce them, with expectations that consumers would flock to these cars.

However, during the past 12 months, the growth rate of electric vehicle sales has slowed sharply as some car buyers have hesitated at the high prices of electric cars and trucks and the hassles of charging them, especially on long trips.

I had the pleasure of facilitating a great Business Leadership workshop for an organization adapting to a new strategy after a major merger of two equally sized enterprises. The workshop focuses on lifting up and developing business acumen and business leadership skills.

We spent some really good time introducing and discussing strategic frameworks and how to choose the right value proposition to offer customers.

After that discussion, we turned our attention to the execution of the strategy. As I have shared for many years, at Advantexe we define business leadership as the execution of your strategy through people. In discussing and learning about execution, one of the best ways to explore what works is to discuss and understand what doesn’t work. As part of an exercise, I asked participants working in teams of 5 (we had teams) to discuss and list out their top reasons why they feel strategy execution doesn’t work in their organization.

When Advantexe develops our customized simulation-centric Business Acumen training programs, we typically will include a few metrics or key performance indicators (KPIs) that our clients want us to focus on and teach to. The most common metrics we are asked for include Gross Margin, EBIT, EBITDA, and Total Shareholder Return (TSR).

This week, one of our clients asked us to lift up and teach our Business Acumen training participants about the Price-earnings (P/E) ratio. The reason behind this request is that their CEO is extremely upset that the Wall Street analysts covering his stock are saying the stock wasn’t valued as highly as it should be, and that the P/E ratio was too low.

The P/E ratio is a fundamental tool in financial analysis used to evaluate a company's stock price relative to its earnings. If ever there was a time for a business acumen blog and P/E ratio this, is it!

Here are five key aspects of the P/E ratio that are crucial to understand: