How Well Did You Or Your Company Do This Year Financially? You Won’t REALLY Know the Answer Until You Listen to Bennett Stewart
It doesn’t take more than a cursory look at the calendar (or out the window) to see that 2014 is coming to an end.
For many savvy business owners, as well as astute heads of households, this is often a time of reflection, specifically, an honest, sit-down analysis of the financial data you have incurred over the past 12 months.
You break down the income and revenues. Itemize and categorize the expenses.
Economics 101 teaches you that if the former is greater than the latter, then you’ve made a profit, and it’s time to celebrate. But if the tables are turned, you maybe didn’t do as well as you would have liked this year, and it may be time to hit the drawing board for 2015.
But according to economist Bennett Stewart, the founder of EVA Dimensions, the mere idea of “making a profit” only begins to tell the tale of how well you REALLY did this year, and how you could have done even better, simply by doing a deep dive analysis into your company’s operation….every nook and cranny.
In 1982, Stewart launched his first company, a global consulting firm, Stern Stewart and Co., where he developed the signature concept that would define him for the next 30-plus years: EVA (Economic Value Added).
Building on the concept of traditional “accounting” profit (the aforementioned “revenue minus expenses” model), Stewart introduces the added dimension of “economic” profit, taking into account the “opportunity cost” of the earning potential of your assets, as opposed to their actual earnings.
(Example: If an individual employee earned “x” amount of profit for you, how much moreprofit would he or she earn if you eliminated or redirected the “busywork” that would otherwise bog down that employee from doing the more important tasks that he or she does that earn the most profit for your company?)
EVA is a revolutionary concept that has become widely embraced in the business community, but is also applicable on an individual level as well. Sure, it’s nice to watch the football game, or the finale to “Dancing With the Stars,” but what if you were able to redirect the time spent doing that towards something that made (or saved) you more money (A second job, a money-making hobby, cutting coupons)?
We all can make more money, either on our own, or by maximizing our time at our jobs in order to make more money there. On Sunday, Bennett Stewart talks with Raja about his story, the concept of EVA, and how we can look within ourselves to help achieve economic success. Plus, he also explores EVA Dimensions’ latest project, an in-depth analysis of how effectively CEO’s of S & P 500 companies are leading those companies to success, and which ones aren’t holding up their end of the company’s success.