Question 1

What better operations could add to the long-term value of your business

Accepted Answer

Two parts, added together. First, the profit you could recover each year, multiplied by your EBITDA multiple, because long-term value tracks a multiple of profit. Second, the value tied up in owner dependency, what is at risk when a business leans on a few people. Indicative, and realised over time, not on day one.

Question 2

Profit you are not capturing each year

Accepted Answer

Two parts. Margin leakage is the headroom between your operational delivery and a world-class cost of poor quality of about 4 percent of sales (Juran). Team engagement is counted three ways, all as headroom above an engaged organisation (Gallup): lost productivity against the wage bill, lost output across the business as a share of revenue, and the cost of the extra people who leave when a team is disengaged. The parts can overlap, so we treat the total as indicative.

Question 3

Why headroom, and not the full cost of poor quality?

Accepted Answer

The published cost of poor quality can run 15 to 20 percent of sales, but no business reaches zero. Charging only the gap to best-in-class is the honest, recoverable figure, and keeps the tool fair to a sceptical reader.

Question 4

Can I change the assumptions?

Accepted Answer

Yes. The EBITDA multiple and the loaded staff cost are sliders in the Assumptions group. Operating margin is used as a proxy for EBITDA, which understates it slightly and so is conservative.

What is the way you run today costing you?

A number on the wall is a start. A plan is the point.