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Strategic Directions

Discussing strategic directions with business people is not an easy task. Most successful business persons are already employing successful strategies that have made them very profitable up to date. Changing strategic directions is normally considered risky, but it might be worth a look, since the competition is doing the same thing. Change may not be necessary or even desirable. However, with a thorough understanding of all the strategies outlined in this 3W Business Profitability Analyzer web site, the business owner may choose to test the concepts on a small scale before implementing them on a larger scale. Other business owners may choose to implement a strategy immediately and be happy with increased profitability. Either way, the strategies work, and the business enjoys a higher return on their working capital investments.

Business executives seeking advice in steering the business toward new directions will be delighted to know that Alternative Financing can provide Strategic Alternatives. Most businesses can double the sales revenue without seriously impacting the fixed cost of the business. Consider the strategies outlined in the chart below and compare the typical business transaction for either the 2X (2 times) or 4X (4 times) strategic alternatives with two transactions. Note that profits increase from 40% to 66% for the 2X strategic alternative using the same amount of working capital. Profits increase from 40% to 52% for the 4X strategic alternative using only half the amount of working capital. Does that seem impossible? It is possible and is verified in the quantitative analysis in this 3W Business Profitability Analyzer web site . The key point is that using someone else’s money is better than using your own. The IRR proves the effectiveness.

If a business desires to grow and increase the bottom-line profitability, there must be a major change in how the business creates profits. The business must be prepared on occasion to use outside investment into its business, even though the business may prefer not to accept external financial assistance. Notwithstanding, an overriding business strategy has been discovered that allows almost any business to double its business without requiring any additional investment by the business.

This strategy has been christened as the Two Times Strategy. (Note the 3W Business Profitability Analyzer incorporates a variation of this strategy, that being a Split Transaction Strategy where the number of transactions is split into two different transaction funding senarios.) The most impressive aspect about this strategy is, there is almost no risk to the business. Bottom-line profits increase if the business is growing significantly. There is a downside risk for the business and that occurs when the business does not grow under any circumstances. If the business is growing at or near the cost of living index, the business will break-even. This means there is no risk provided the business is growing and a small cost if the business is not growing.

The Two Times Strategy is a strategy that almost any growing business can deploy and increase bottom-line profitability. Here is the way it works. Simply, double sales revenue using the same working capital investment. At first this may sound impossible, and many business executives are often reminded about funding the negative cash flow that might hold them back and prevent the desired growth.

Consider a business that is anticipating doubling its sales revenue in the next year. The Two Times Strategy in this case would imply that the business would use the same working capital investment in twice the number of business transactions. This suggests the working capital requirement per transaction is reduced by half. The other half of the COGS per transaction would be funded by external financial investment in the transaction. The benefit to the business owner is that the business grows twice as much without any additional investment.

There are at least two transaction oriented financial instruments that permit the Two Times Strategy to flourish, and a more detailed explanation of those instruments follows in the next section of this publication. The chart below reflects how the Two Times Strategy works. The 2X strategic alternative uses the same working capital investment as the Typical strategic alternative, and the 4X strategic alternative uses only half as much capital investment. The ensuing profit for the business is 66% invoking the 2X strategic alternative and 52% using the 4X strategic alternative. Therefore, using the Two Times Strategy increases the bottom line profitability of the company from 40% to either 66% or by 52%.

This chart below underscores the overriding stratagem for all of the strategic alternatives that business owners and executives can choose to follow. Understanding this stratagem is paramount to comprehending the discussion of the quantitative analysis for each of the strategic alternatives that follow.

Strategic Alternatives for Business
Strategic Alternatives using Financing

3W Internet Corporation commits its resources to support every alternative financial specialty that is described in this primer. Although all the computations featured in this document have been thoroughly checked and tested, there may be some functions that rely upon other financial concepts methods, strategies and ideas using software, and protocols not developed by 3W Internet Corporation. 

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