The value of a company is affected by five factors which are collectively referred to as fundamentals of business. They are finance and accounting, marketing, strategic planning, leadership, and international business. For instance, if an organization gets things wrong in its accounting department, everything else will fail. Likewise, insufficient marketing will result in low sales and hence, low-profit margins. The fundamentals of the business must be balanced for the long-term stability and success of the company.
Finance and accounting – the cash a business has is highly essential.
What matters more here is the cash flow. You will be shocked at how some businesses take the issue of finance and accounting so lightly. The role of the accounting department is to keep track of all finances of a business and determine if the company has more cash in its reserves at the end of a period than what it had at the beginning of that specific period.
An organization requires funds to grow by completing its projects, paying its employees, buying raw materials, and venturing into new areas. Projects funded by the company’s cash are expected to begin generating revenues once they are completed lest they create a hole in the organization’s financial plans. When a company is accumulating debt instead of spinning cash, you know it is headed for doom.
Marketing – what does the client value?
Marketing entails, as a producer, removing the blinders that you wear about your services or products, wearing the lens of the customer, and having a second look at your products or services. Through the customer’s lens, you can see the actual value of your service or product to the customer.
Your product could be the best you’ve ever produced for the market. You might also think that the market should need it. But that’s just that – if the potential consumer doesn’t value it, you’ve lost the battle.
Strategic planning –being in the right market matters more than marketing itself, whether it is a home business or a big corporation doing it.
This is easily said than done. Strategic planning entails taking all measures and research to ensure that the business is promoting its products or services in the correct market. What is the correct market? Or so you may ask. Any niche in which a business can grow by making profits on its products or services is will be considered to be the correct market. Here is something to ponder about: whose reputation remains standing when a failing business with brilliant strategic planners tackles an established business with bad economics? It is the reputation of a successful business with bad economics. It applies to all sizes, small business and big corporations alike.
Leadership – having the best team leading the organization is priceless.
One person is never as smart as a team. Most of the insights that push organizations to great heights come from team members, not an individual at the top of the leadership structure. The more diverse a team is the better. For instance, if a team consists of skilled individuals from such backgrounds as marketing, human resource, management, finance, and even clientele background, it will be capable of pooling together a wealth of ideas that could prove useful to the organization. But that’s only possible if they are willing to speak their minds out. This can be affected by the nature of the folks at the top of the leadership structure. If the CEO is the type that would micromanage the organization and exert undue pressure on the staff, the concept of teamwork might never work at all.
International business – learning someone else’s culture is more important than we think.
If a business must deal with international clients or must operate in culturally diverse areas, the success of that business will be determined by its understanding of other people’s cultures. You see, doing business globally is all about being privy of what your Korean supplier thinks or what your German consumer wants. The spirit of entrepreneurship is partly fueled by your knowledge of other people’s cultures.
These are the core fundamentals of a business. There are other determiners as well such as operation systems and processes, demand, and supply-chain related factors. But the fact remains; the background on which business thrives consists of earnings, sales, marketing, leadership, strategic planning, finance and accounting, and such things as wage rates and taxes. And that’s probably why improving the fundamentals of the business are often viewed as bullish for stockbrokers.