Business Acumen - Five Tips to Make You Indispensable

Part One of Advantexe’s Making Yourself Indispensable Series

As we enter the second half of 2023, there is a noticeable difference in the domestic and global business ecosystems. A year ago, you probably heard of people being let go from their jobs. Today, you probably know someone directly. It’s been startling.

As we look at the economy, the foundational business indicators are in front of us:

• The Gross Domestic Product (GDP) is slow and decreasing
• The jobless rate is still low, but the amount of new jobs added is decreasing and the number of layoffs is increasing
• Consumer spending is decreasing
• Capital expenditures of businesses looking to grow are decreasing
• Inflation isn’t going anyplace soon

Based on these data and the research that Advantexe does every day working with more than 60 global clients, we believe that it is safe to forecast the second half of 2023 is going to be challenging and the expectations of businesses in terms of the contributions and productivity of employees is going to go up. There is something you can do to make sure you can do to help... become indispensable to your organization. Indispensable means that your company, business unit, and team simply can’t live without you.

By becoming indispensable, you position yourself as a valuable asset the company cannot afford to lose. This not only enhances job security but also opens doors to numerous opportunities for growth and advancement. When you consistently demonstrate your expertise, reliability, and strong work ethic, you establish yourself as a trusted resource that colleagues and superiors can rely on.

While there are many skills and capabilities that can make you indispensable, we are providing this three-part blog series which focuses on the core and foundational capabilities of; Business Acumen, Business Leadership, and Strategic Business Selling. These three capabilities make up the majority of the skill sets organizations need to be successful and having them can put you on the path of becoming indispensable.

Part one of our three-part series on making yourself indispensable to your company focuses on the importance of building, at the very least, foundational Business Acumen skills. Business acumen definition - an understanding of how a company makes money, how your company makes money, how your customers make money, how your competitors make money, and executing a strategy to win in your chosen markets.

Everything in business starts with a business strategy. It’s the plan, the aspiration, and the guiding force behind all decisions. There are several foundational strategic frameworks that most companies utilize including one called, “Playing to Win: How Strategy Really Works.” Understanding a framework like this and how your company differentiates itself from its competitors is a foundational skill that helps you make the best decisions no matter what job you have.

2) Understand Your Company’s Profit & Loss (P&L) Statement

Every company, whether public or private, has a P&L statement. If you work for a publicly traded organization the leaders of your company conduct a quarterly earnings call of analysts and investors highlighting the previous quarter’s results and sharing guidance for future results.

The P&L shares:

• How much revenue your company has generated
• The expenses such as the cost of goods sold and all of the operating expenses incurred to generate those revenues
• The difference between the revenues and expenses is the profit

The capabilities that you can build include:

• Trend analysis – understanding how your company is doing quarter to quarter
• Common size analysis – understanding the relationship between expenditures relative to revenue and then benchmarking them to previous results and competitive results
• Percentage change analysis – understanding that changes year over year or quarter over quarter and comparing them to goals, objectives, and competitors.

3) Understand Your Company’s Balance Sheet

The Balance Sheet shares:

• The assets of a business including cash, accounts receivables, and inventories
• The liabilities of a business including accounts payable, wages payable, and taxes payable
• The amount of debt the company has acquired

The capabilities that you can build include:

• Trend analysis – understanding the changes to the balance sheet quarter to quarter
• Common size analysis – understanding the relationship between the elements of the balance sheet relative to assets
• Percentage change analysis – understanding that changes year over year or quarter over quarter and comparing them to goals, objectives, and competitors.

Every company has different metrics of performance. Do you know your company’s metrics of success? Typically, they include things such as:

• Earnings before interest, taxes, depreciation, and amortization (EBITDA) – an indicator of the profitability of the business operations before uncontrollable elements like taxes and interest.
• Return on Sales (ROS) – the net income divided by the revenues
• Return on Assets – the net income divided by the asset base
• Return on Invested Capital (ROIC) – the net income divided by the amount of capital invested in the business

Every industry and every business has different drivers of stock price. Long-term investments in R&D drive some industries like the pharmaceutical industry while other industries like the chemicals space are dependent on net free cash flow. Typically, the primary drives of stock price include:

• Investments in R&D
• Investments in Marketing & Sales
• Free cash flow
• Revenue growth
• Profit growth
• Asset utilization

In summary, the future of your company is going to depend on employees having the strong business acumen skills needed to make the best decisions that drive the results needed to achieve the goals and objectives set by the company. Having business knowledge and financial acumen  can help you make the best business decisions that can make you indispensable.