Business Base Camp

Mission, vision, strategies and business objectives

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Confusion is not only between mission and vision, but also the distinction between strategic business objectives and mission are often unclear.

In the publication “ From mission and vision to objectives” will be explain what the main differences are and how, according to SMART-criteria (specific, measurable, achievable and time phased), business goals to materialize.

Business Objective: Mission

That business purpose and business mission are so rarely given adequate thought is perhaps the most important cause of business frustration and failure. – Peter F. Drucker. American management guru

A “mission statement” is a brief description of the objective where the company stands for.

To draw up a “mission statement” is answering the question, what the company wants to propagate to the outside world or in other words how the company wants to be seen and experienced by the environment? A “mission statement” must be concise and understandable for everyone, in a single sentence or at most in a few sentences the values and identity of the company summarized.

Missions of non-profit organizations as an example:

Below you will find some powerful “mission statements” of non-profit organizations. It tells you at a glance where the organization stands for.

The Red Cross: “serve the most vulnerable.”

” The World Wildlife Fund strives for a world in which man lives in harmony with nature.”

Oxfam Novib: ” A world where everyone has enough to eat, people not being exploited, every child can go to school. Everyone should be able to build up an independent existence without poverty. That is we are committed to.”

UNICEF has a mission: to ensure that each country respects the rights of children and to comply with.

What does your company stands for

Do you find loyalty and sustainability a important issue, then you can, for example, then you draft a customer-focused “mission statement” in which the enterprise does the promise to minimally meet the expectations of the customer and to deliver a durable product or service.

It is however so that it not may remain by beautiful sentences, but that everyone working in company understands and act upon it. Is the mission statement just a hollow phrase or the company is not able to deliver according the mission. Your customers will react negatively to your organization and the company gets the name unreliable.

Business Objective: Vision

You better off to perish with your own vision than with the vision of someone else. -Johan Cruijff

The vision is recorded in a five-year plan

How big is your vision for your company as the development phase is completed

Vision is what the company wants to achieve. Does your company have a turnover of five hundred thousand Euro, million, five million or more?

The vision must be checked

Market Research forms the basis in the preparation of a vision for the next five years.

It should be tested whether the sales forecast for the next five years is actually realizable. The gross and net profit are an integral part of the five-year plan. Turnover is important, but the most important thing is to make enough profit with the company. Only then shall we secure the future of the company and safe quart the income of an entrepreneur.

Turnover five-year plan

Specifies the total turnover (excluding VAT) of all products and / or services for the next five years.

If you have multiple product types in your range, then they are divided into groups and for each product group is a revenue forecast made for the next five years made​​. This makes it clear how a product group evolve over time.

Click above and make use of the example to prepare your vision. Try to make a realistic plan, thorough market research is preceded.

Company objective is revenue growth, but not at the expense of profit

It is a requirement that the company retains at least its market position, but it is highly desirable that the company strengthened its market position.

The company’s objective is the annual turnover to grow by a minimum profit percentage of sales so you do not eat into ones’s capital. In other words, if sales growth is at the expense of the profit of the company then this is the wrong strategy.

What is your turnover over the next five years? What percentage do you expect to achieve on sales growth per year? What are your production or purchase costs? What will be the gross profit and gross margin? How high are your overheads cost and finally what operating result will be achieved with the enterprise?

Trading Company

Cost structure of a trading company

Fixed costs

To be able to sell a products resources are used, these resources cost money. These are for example depreciation costs of buildings, machinery and inventory.

These costs do not vary significantly with stable turnover. Within certain limits this is permissible, but it is easy to guess what happens when only 60% of turnover is realized. The burden of fixed costs come at a 40% lower turnover causing the gross margin to evaporated. Only when the demand from the market exceeds the sales capacity of the enterprise, the enterprise have to make the decision whether or not to invest in order to extend the sales capacity.

Variable costs

In contrast, the product costs can vary greatly, depending on the quantities purchased.

Another variable, world commodity prices affect the purchasing of products. The same is true for example, water and / or energy is used, these costs may vary, and are also part of the variable cost.

Personnel costs

A third cost component, all personnel needed. who support and sell the products All staff who are directly attributable to product sales are included here.

Production Company

Cost structure of a manufacturing company

Fixed costs

To come to a final product, one is using production resources these means of production cost money.

These include depreciation costs of buildings and / or machines. These costs vary significantly as production volume increases or decreases. Within certain limits this is permissible, but it is easy to guess what happens when, for example, only 50% of capacity is utilized.The burden of production costs come at a 50% lower capacity causing the gross margin to evaporated. On the other hand when the market demand the production of the company exceeds, then the company can choose whether or not to invest to expand production capacity

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Variable costs

On the other hand the cost of production can vary widely, depending on the quantities which are produced, there are more or less raw materials required.

Another variable are the world commodity prices. The same goes for example, water and energy used, these costs may vary, and are also part of the production costs..

Personnel costs

A third component costs is the labor costs, which is required for the production. All personnel costs who are directly attributable to the production process are incorporated herein.

Gross Profit

Gross profit, direct indicator cost management

As mentioned above, the total purchase and manufacturing costs exist of fixed, variable, and personnel costs.

By grouping the cost elements one can gain insight how the gross profit is composed. When the gross profit must be raised then you analyse in which of the three groups you can save costs.

Gross margin

Gross margin is the ratio between sales and gross profit. In other words, what percentage of revenue remains as gross profit for the company.

General expenses

The general costs are costs not directly attributable to a product or service from a company.

You can think of costs incurred with the administration, computers, software, energy, telephone, training, management, etc.

Operating Result

operating result, general indicator cost management

The operating result is what remains when the overheads are deducted from gross profit.

Please note, this is the profit before interest and tax deductions. When the gross profit is to the standard and objective criteria, but the operating result is to low and not meeting the objective then the General expenses are obviously to high.

Operating profit margin

The margin is the ratio between turnover and profit. In other words, what percentage of sales is left over as profit for the company. Please note, this is the profit before interest and tax deduction.