There is widespread acceptance that the main source of an organisation’s competitive advantage stems from its investments in, and management of its various “intangible” resources.
Management needs to recognise what is valuable or important to success but they also need to know what is missing or damaging to future prospects. Whether management is focussing on continuous improvement, opportunity finding, risk managment or problem solving, the quality of your intangibles represents a vital component of success or reason for failure.
Better Decisions – Investing in Intangibles
Whatever the nature of your planned investments, the quality of the business case really matters.
IntangAbility® helps you to understand the overall resources needed to survive and thrive. Tangible Resources AND Intangible Resources.
All organisations need to:
- Understand what resources are available and how best to use them
- Understand what you need and how you are going to get it
- Focus on doing rather than talking about doing
- Sweat the assets ALL the assets, tangible and intangible
- Mitigate the risks, tangible and intangible.
Access to Finance
Company Director Tim Hoad says, “Some lending decisions are obvious: a simple case of “yes” or “no” based on knowledge about a business and the relationship with the business. Other lending opportunities fall somewhere between an obvious yes or no, in these cases lenders go through a process of looking, listening, sensing – they evaluate based on their knowledge, experience and perceptions – they ask questions until they feel comfortable that they understand why money is needed, how it will be used and what value will be created both for the business and the lender. They review the business plan, the financial forecasts and, in particular, the management in order to decide whether the people to whom they are lending will actually do what they say they will do.
Bankers never see business plans which indicate that an enterprise will fail, or cash flow forecasts which indicate that a business will not be able to repay. Lenders use their experience and judgement to identify areas of unsubstantiated management assertions, hopes, aspirations and so on. Lenders go through the financials and non financials to get a feel for the economy, efficiency and effectiveness of the overall operations but the real drivers for success of any venture “the critical success factors” are largely intangible in nature – for example knowledge, experience, reputation etc. For these reasons, business plans must provide lenders with a clear picture of what management will actually do to achieve their projections, they must also provide lenders with reassurance that money lent is in safe hands. Once lenders feel comfortable with the people, the proposition and the pricing the decision has, in effect, been made.
The financials have to stack up but virtually all of the drivers of success, the business assumptions, the sensitivities, the risks and mitigating factors are non-financial (intangible) in nature”
Intangibles are important
Businesses fail because they run out of cash (financial) but why do they run out of cash?
“Cash flow is important but before a business runs out of cash they run out of trust, ideas, opportunities, deals, work and, in effect, options. Cash receipts are the end product of doing the deals and collecting the money: so what is really important is winning the business and getting paid.
It is intangibles which drive success. Knowledge Flows, Idea Flows, Trust Flows and Work Flows are all ingredients of ”competitive advantage”. Having the skills, competencies and capabilities necessary to negotiate profitable deals is what really matters. Cash flow is simply the outcome of doing profitable deals”.
Financial Analysis of financial statements gives you a view of the past……
Non-Financial Evaluation of plans and context gives you a sense of the future……