Arnaud Bossy, Director, Growth Implementation Solutions

“50 Years of Growth, Innovation & Leadership”

Cash for Growth:

Releasing Capital Employed to Finance Growth

Cash for Growth:Releasing Capital Employed to Finance Growth

Market Insight

© 2013 Frost & Sullivan Page 2

When companies evaluate their growth strategies, there are times when new opportunities

arise, or when an ongoing strategy needs additional effort. Even with a strong business case,

finding the necessary funding can be extremely complicated due to the difficulty or

reluctance to increase the level of debt in a financially constrained environment.

How can organisations release capital employed in the short to medium term to

self-finance growth?

Diagram 1: How to Self-Finance Growth

It doesn’t happen on its own...

Frost & Sullivan identifies three macro levers that can be activated.

Firstly, align the payables and receivables to market and country levels. Apply this

through terms and conditions, and reinforce with rigorous processes and binding

measures to encourage their application.

Secondly, optimise work in progress and inventory through statistical stock

dimensioning, process lead-time reduction and faster innovation. To this intent,

process improvement initiatives and resources can be utilised and focussed for a

maximum impact within a three to six month period.

Finally, manage fixed assets to move them off the balance sheet, in particular with

the sale and leaseback of key buildings and equipment.

Source: Frost & Sullivan

Other Payables

ExternalPayables

Equity

Other Payables

ExternalPayables

Equity

Receivables

WIP/Inventories

Fixed Assets

Receivables

WIP/ Inventories

Fixed Assets

CASH

CASH

M€Cash Released

BEFORE AFTER

Leadership, dedicated governance, employee involvement and training are

fundamental building blocks...

Implementation of such levers needs to be carefully thought through, as they require many

changes across the operations that need to be carried out in a sustainable way. Therefore,

they need to be packaged into a program that will ensure that priority levers are translated

into actions, coordinated by a dedicated program manager, monitored by the CFO in terms

of balance sheet impact, and supported by existing business improvement resources who are

trained in leading projects. Leadership will play a key role in providing a strong focus on

“cash, cash and more cash” to all the teams involved in the program. This organisational

alignment can happen through objectives sharing, training, raising awareness and coaching

employees—from operations to purchasing, from planning to finance, from operational

excellence to front-line managers.

Diagram 2: Three Pillars for Successful Implementation

An agile sprint for early results and focus on priorities...

Implementing the levers to generate cash for growth allows companies to benefit from quick-

wins as early as the third month, with a significant impact on their capital employed within 9

to 18 months. The cash generated is typically between 30 per cent and 60 per cent of annual

sales.

Cash for Growth:Releasing Capital Employed to Finance Growth

Market Insight

© 2013 Frost & Sullivan Page 3

Source: Frost & Sullivan

CASH

Training &Coaching

Engagement andpersonal developmentof key contributors

Decision basedregular instances todeal with roadblocks

Clarity andtransparency around

initiatives

Governance High Visibility

- Project scope and objectives defined

- Balance sheet based measure of success

- Owners for initiatives

- Operational indicators in improvement phases

- Cash for Growth champions

- Cash for Growth sponsors

- Awareness sessions- Coaching ofmanagers in leadingchanges

- Involvement of staff in workshops and project teams

- Frequent communication of results

- Involvement of management team in steering committees and project sponsoring

A layered assessment is necessary to evaluate the potential benefits of a Cash for Growth

program. It is initially based on management perception at scoping stage, then financial data

for the assessment (assets productivity, days of payables, net fixed-asset turn, etc.). Finally,

there is an analysis on local operational indicators for shaping detailed initiatives and for

action planning (reduce early deliveries, sell redundant stock, review payment conditions,

increase penalties applied, chase outstanding invoices, etc.).

Diagram 3: Four Steps to Release Cash for Growth

Whilst reaching the stage when cash is available for investment in a growth strategy, it is

highly recommended to re-evaluate the investment choice as competitive, economical or

geopolitical factors may have changed the game during those months. Companies can benefit

from considering all 10 growth processes in their review in order to prioritise between

all opportunities and best invest the capital employed released. Only then can the

implementation of growth strategy begin and growth be realised.

Cash for Growth:Releasing Capital Employed to Finance Growth

Market Insight

© 2013 Frost & Sullivan Page 4

Source: Frost & Sullivan

- Assessment workshop

- Detailed roadmap self-assessment

- Prioritisation of levers based on ‘impact on business’ and ‘cost of implementation’

- Training of localchampions within business units

- Estimating impact of Cash for Growth program on balance sheet

- Use of financialdata and estimations

- Revising assessmentfigures

- Actual measurement of Key Performance Indicators (KPI)

- Actual measurement of Local OperationalIndicators

- Launch of Quick- Wins

- Implementingaction plans

- Monitoring impact on KPIs

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1

ScopingAssessment Shaping Implementation

ASSESSMENT

WORKSHOP

Diagram 4: Ten Growth Processes, Solutions Covering All Major Growth Sources

Are YOU ready to grow?

The pragmatic and insight-led approach explained above, based on our experience in a variety

of industries, can help your company identify key levers to generate capital employed. It is

key to selecting the most impactful levers based on the business’s balance sheet structure

and operational improvement areas.

With a clear path to releasing Cash for Growth, why shouldn’t your company benefit from

this extra resource to get ahead in the race for growth?

Arnaud Bossy

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients toleverage visionary innovation that addresses the global challenges and related growthopportunities that will make or break today’s market participants. For more than 50 years,we have been developing growth strategies for the Global 1000, emerging businesses, thepublic sector and the investment community. Is your organisation prepared for the nextprofound wave of industry convergence, disruptive technologies, increasing competitiveintensity, Mega Trends, breakthrough best practices, changing customer dynamics andemerging economies?

Contact Us: Start the discussion

Cash for Growth:Releasing Capital Employed to Finance Growth

Market Insight

CONTACT US • enquiries@frost.com • www.frost.com

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1Source: Frost & Sullivan

Fact

FoundationImplementation

Strategic

Options

Business

Case

Mergers & Acquisitions

New Product Development

New Product Launch

Distribution Channel Optimisation

Geographic Expansion

Vertical Expansion

Strategic Partnering

Technology Strategy

Customer Strategy

Competitor Strategy

Innovation Management

Growth Processes

Sust

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Pro

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Gro

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