Expenditure management
1. Pay for the best quality possible at the best value possible in critical missions ie marketing, sales generation and product development activities. This means scouting, also getting the best networks to source for the best possible value. If it’s non critical missions, consider satisficing on quality, but do not skimp on value. If it’s talent or people, we should consider generously performance-oriented payments, and should be linked to realisable returns where possible.
2. Expenditures should only relate to returns. Allocate upfront budget for benevolent works, and this should be topped-up with realizable returns at the end of year tallying. Personal related expenses should be separated, or tagged only to drawn salary. Salary should be minimum, and not exceed RM500 per month. End of year performance related allocations is possible, as is equity-related dividends on realizable valuation.
Capital expenditure
3. CAPEX should be considered where value of PPE in the event of depreciable asset should be asset-backed, and never be less than outstanding loan principal at all times. This is in regards to possible fire sale valuations.
4. Investments should always consider exits as impossibly unrealizable assets only lock up cash flow, unless there is a possibility of additional refinancing.
Revenue generation
5. Credit terms should be used sparingly. 30 day terms should be max. Take good care of government related clients, as they could be a source of pain. Delays in bureaucratic agencies, or too smart for their own arse clients withholding payment because of perceived inadequate deliverables. Insist on milestone payments, with at least 50% up front, and indulge in 5-15% delivery-related issues.
6. For services, per hour rates should be consistent with top-range professional advice of at least RM800 per hour in terms of advisory work. Training delivery can take RM1000 per day. For specific engagements, consider ranges between RM5,000 to RM8,000 for specific 2-3 day work. Engage clients with these ranges, then address discounts up to 15% for repeat work. Consider ranges at 50% rates as introductory rates.
7. For products, tally up costs first, including overheads – including sales and marketing expenditure which could be quite hefty, then add in a profit margin of 80% to final costing.
Cash flow management
8. Ensure cash burn is at 9 least months. Between 6- 9 months should be at crisis level for revenue generation and realizable accruals. Below 6 months and emergency options should be activated. Below 3 months, exit solutions should be considered and damage limitation exercise put in place to prevent corporate liabilities from encroaching into personal liabilities.
Financials management
9. Ensure at all times that the P&L and Balance Sheet items look as clean as possible. This is in anticipation for possible and potential scalable, step-wise growth of company. A strategic review must be done every quarter as short-interval reviews mean easier manipulation of problems and challenges. Opportunities to grow company 10x should be evaluated at same short intervals in the interim stages of 12-18 months.
10. At all times, doa dan tawakal pada Allah. Refer to all the ayah on charity. And Anedge should pledge first and foremost its duty and commitment to charitable deeds while ensuring its sustainability over the long run. Target should be between 2.5% minimum to 15% max.
11. Personal mindset should be that success of Anedge automatically becomes personal success for everybody involved. It is about devolving personal agendas to the success of an organizational agenda.
12. At end of day, net profit allocation should be as below, in order of importance:
· 15% to benevolent causes
· 25% to directors, management and staff
· 15% to capital sources, either equity partners or loan repayment
· 30% to be reinvested
· 15% up to RM150,000 to business owner and founder
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