Mumbai, 18th November 2024: Practus, India’s premier Performance Improvement and Business Transformation solution provider, is helping business owners build value in their businesses by scaling and professionalizing them.
Conscious and continuous cash flow allocation is a critical, though often neglected lever in boosting a company’s enterprise value. By managing cash flow strategically, Owner-Managers can ensure they are positioned not only to meet immediate operational demands but also to invest in growth opportunities that enhance their long-term value, particularly when they are considering seeking private equity funding or floating an IPO for the enterprise.
Owner Managers of a mid-sized Pharmaceutical CDMO company, for instance, implemented a cashflow allocation waterfall model, which directed surplus cash to growth initiatives and projects, based on measurable parameters. This helped the company improve its RoCE from 12% to 23%, profitability by 300bps, and Operating Cash Flow to PAT ratio from 68% to 91%
S Venkat, Co-Founder at Practus, threw more light on the company’s unique cash flow management proposition, “Several Owner-Managers often inadvertently overlook cash flow management despite it being pivotal to business success. Enterprises spend ample time budgeting for revenue, profits, and devising strategies to improve cashflow velocity, without dwelling on how the cash needs to be deployed. For a company to not only survive but thrive in today’s competitive landscape, a conscious approach to how cash is utilized can significantly enhance its enterprise value. We help such enterprises by formulating a conscious, documented, and well-articulated cash flow plan that prepares the business for different situations and prevents ad-hoc cash flow allocation.”
A multi-unit, multi-specialty healthcare service provider, for instance, crafted a more predictable path towards improving its debt-equity ratio from 0.80 to 0.63, while being able to invest in new capex improving operating capacity by 23%, over 24 months. The company improved Enterprise Valuation by 8x over 4 years, attributable to a large extent to a more scientific cashflow allocation process.
Over the last 15 years, Practus has successfully assisted over 1,000 companies in various sectors, such as Pharmaceuticals, Chemicals, IT Services, SaaS, E-commerce, Education, Hospitality, Engineering, Infrastructure, and Healthcare in unlocking efficiency through better cash flow management strategies.