This is a column written by our representative, Kazuaki Sawada, detailing the insights he has accumulated in the fields of business revitalization, management improvement, and bank relations.
This time, we focused on the flow of "founder-dependent management → three limit criteria → numerical organizational management → stable growth after business succession." What I particularly want to convey to second and third-generation presidents is the importance of "transforming the intuition and experience of the previous generation into a management system that anyone can judge."
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Please use this as hints for management decisions, such as building a management foundation, improving management quality, cash flow management, bank relations, business succession, and restructuring after the appointment of the second or third generation. Also, feel free to contact us with any questions or inquiries when putting this into practice.
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Relying solely on the founder's experience and intuition for management can reach its limits during business succession to the second and third generations. To protect and grow the company, it is important to adopt a "management based on limits" that makes decisions based on numbers. 1. Limits on Labor Costs Establish standards based on the labor distribution ratio (labor costs ÷ marginal profit) and manage the balance with profits. Maintain the hierarchy of labor cost increase rate < sales increase rate < marginal profit increase rate < ordinary profit increase rate < equity capital increase rate. 2. Limits on Expenses Compare budgets with actual results and verify cost-effectiveness. Prevent unnecessary expenditures. It is important for management to achieve results with limited expenses and costs. 3. Limits on Investment and Borrowing Confirm repayment capacity and investment recovery, and avoid excessive capital investments or borrowing. Regularly review the continuation of unprofitable businesses. The criteria for judgment include: - Setting borrowing limits: Do not invest beyond the dependence on borrowed funds or monthly sales multiplier. - Withdraw from businesses that have recorded losses for three consecutive periods. - Make capital investments within the range of depreciation expenses and ordinary profits. What is important is not to adhere to uniform numbers, but to set standards that fit the company's financial situation and continue to verify them. Let’s shift from management based on intuition to management that can be judged by the organization. Next time, I will discuss "Turning Complaints into Opportunities."
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Our company is a group of professional consultants who value practical insights born from responding to corporate needs. With practical management know-how and a strong belief, we solve management challenges and achieve everything from startup support, reconstruction and revitalization support, growth expansion support, and business continuity support to building a solid management foundation.
