“The Number” – How much do you want to earn?

Published in LaZOOZ - Strategy, Marketing and Innovation Newsletter, Issue 76, By Ari Manor, CEO, ZOOZ

When you conduct a strategic discussion and plan your business development for the coming years, you should start with what we at ZOOZ call “the number”. This is a financial goal that you want to attain. For most, “the number” is the profit that you will want to earn in the future, like 5 years’ time.

There’s no correct formula for calculating the number, since it’s based on subjective desires. Often, in strategic discussions with other executives, the goal is to double profits within 5 years. But in certain cases, the corporate environment is difficult and management settles for less. However, in other cases, a much more ambitious goal is set, such as ten-fold growth within 5 years.

And why is it important to start a discussion about business strategy for the coming years with a determination of “the number”? First, because it helps all members of management coordinate their expectations. Second, because once you agree on “the number”, it’s clear what the quantitative goals that everyone needs to achieve are. Third, and most importantly, the number enables us to choose appropriate directions, and disqualify inappropriate ones.

For example – if double growth is required within 5 years, and we cannot grow at this rate in our current market, then we will need to find a new business domain, in other words, a new market that can bring the majority of the desired growth.

In addition, the new market that we choose needs to be large enough for there to be a chance to earn enough in it. For example, in a global market that we estimate will earn 10 billion dollars revenue annually in five years, with a net profitability of 10%, the annual net profit for all the competitors is one billion NIS. If we succeed in becoming a significant player in such a market (5% or greater market segment), we will be able to earn at least 50 million NIS in it. If, according to the “the number” that we decided, our profit needs to grow by another 50 million NIS within 5 years, entering such a market may be the right thing for us.

Financial Goal – The Key to Business Strategy

True – it’s not only about money. It’s important to develop in directions that match the organization’s values and core capabilities. We won’t be able to succeed in a large market that is unsuited to our talents and disposition. But deciding on “the number” makes it possible to focus on suitable opportunities, and to quantitatively disqualify unpromising directions. Therefore, instead of avoiding money discussions, you should and must define “the number” as soon as you start discussing your business strategy for the upcoming years.