Methods and concepts for Value Based Management (VBM)
Steps Ahead ... SCORE®
Are your business costs in line with your margin ?
Are your labour costs in proportion to your management costs ?
Looking for clear answers ? Steps Ahead… offers two approaches:
Approach 1: Joe the Plumber says…
Find a year in history in which the company performs well. Recalculate the current annual figures based on the cost structure of this well performing year (related to turnover levels). Analyse the differences and set up a cost cutting plan to line up your cost structure…
Approach 2: Steps Ahead… says...
Steps Ahead… SCORE®: a financial business productivity analyses in which different costs and revenues are evaluated to check if they are in proportion against each other. Every deviation from the standard has to be explainable.
The used standards are universal for every size or type of company and not sensitive to inflation because they are based on the added value of the company.
How is this possible ?
Added Value
The premisses of Steps Ahead... SCORE® is that every company has the objective to create added value by its core activities. The added value of a company is: turnover minus costs of goods sold (minus third party services minus special corrections). In the end the added value consists of costs plus revenues.
The costs have to be made to execute the business activities that realize the business revenues. The creation of added value takes place in the core activities of the company. For this reason it is critical to exactly define the core activities of the company as a basis for the SCORE® analyses.
Business Functions
To create added value every company needs to execute the following six functions:
Direct Productive Functions:
1. Invest and maintain production facilities
2. Direct Staffing
3. Communication
4. Floating Capital
Indirect Productive Functions:
5. Management
6. Continuity Assurance
Costs
To execute these business functions, it is obvious that certain costs have to be made. In the Steps Ahead... SCORE® methodology, all company costs are rubricated to these six functions and the costs are calculated as a percentage of the added value. SCORE® defined standards for these percentages on basis of many international case studies during the last decades. The rubrication of costs according to the business functions is key in the method.
Steps Ahead… SCORE® standards
How do these standards look like ?
Analyses
By determination of the score per business function and comparing it to the given standards, SCORE® gives insight in the companies performance and cost structure.
Read more about our SCORE® Methodology (only available in Dutch) ...