An essential element in the success of the business is its continuous development. Due to the fact that there are no standard recipes for development in entrepreneurship and because "live" trials are too expensive, it is very useful to have a tool that allows us to virtually simulate different key parameters of the business we want to launch.
For example, using the business simulator in Adaptive Management Financial, we can specifically simulate an increase in capacity to understand its impact on revenues and expenses, especially since certain expenses, such as rent, equipment leasing or services externalities, may in fact not be affected. The increase in capacity would certainly also lead to a decrease in the cost per Unit of Added Value due to the distribution of costs to a greater number of units (hours, customer, number of pieces) that end up being monetized. The logic seems simple, but it is necessary to understand exactly "by how much" the financial result changes in case of capacity increase at different levels.
Another relevant business parameter that is recommended to be included in any simulation is that of the efficiency of the main process. Increasing efficiency will certainly improve the bottom line and allow us to either increase revenue (if the market allows us) or reduce costs by reducing resource consumption (if the market does not allow us to sell more). In both situations, we gain in terms of competitiveness, allowing us to be more combative in relation to the competition in the market in which we operate.
Similar to the previous situation regarding the increase in production capacity, it is extremely important to understand the impact on the bottom line of each percentage increase in efficiency or, in the case of negative scenarios, each percentage decrease in efficiency.
The third representative parameter, on the basis of which it is recommended to do business simulations, is that of the effective income per Unit of Added Value. In this context it is useful to understand what is the maximum and minimum margin in the market so that we also understand how much we can realistically estimate to amplify the prices. Thus, we can not only understand how much an increase of a few percent of the actual income influences the final result, but we can also detect the impact of a decrease of a few percent, resulting for example, following a reduction or discount campaign.
For possible more advanced scenarios, we can make simulations involving only 2 or all 3 parameters described above; some parameters can be increased, others can be reduced in different percentages thus identifying how we can compensate for possible unwanted decreases in capacity or income.
It is extremely useful and even necessary to be able to perform valid virtual financial simulations from which we can deduce the results of potential changes in key business parameters.
Through the business simulator integrated in Adaptive Financial Management we can rigorously anticipate potential negative scenarios and also adopt the most effective growth management decisions in case of positive scenarios.
Therefore we get a clear and precise vision of the turnover we can generate as well as the profit we can expect. Good planning exponentially increases our chances of generating very good financial results! For this reason, we have developed this function within AMF and it also allows you to compare two simulations with different parameters - this aspect is highly appreciated by current users of the software.
From our perspective, success is a decision and successful decisions must be made based on the numbers.