Using company finance to guide the operation and management of electric business

ROIC and growth rates are commonly used in corporate finance to evaluate the value of a company's projects. So how to evaluate the electricity business network? How to have practical significance of the guidance of the website operation? Below I briefly introduce, provide a kind of train of thought for everybody reference.

First, a few nouns explain:

1. What is ROIC?

The rate of return on capital invested is the return on all capital invested in the project, where it is noted that not all capital is investment, but only directly and indirectly related to the project.

2. Growth rate

Nothing is income growth rate, profit growth rate, UV growth rate, http://www.aliyun.com/zixun/aggregation/10733.html "> Registered user Growth rate and so on."

Second, let's break down two indicators to see what the impact and determinants are. And how to guide our website operation.

See figure below:

Look at the growth rate first.

We are all concerned about the following growth rates

1, the growth rate of income (attention at any stage)

2, service fee (gross margin) growth rate (site operation initially not too concerned about, in the late will be very concerned)

3, Registered user growth rate (site early, medium-term are very concerned about)

And what are the effects and determinants?

Take a look at revenue, service charges and the split factor for registered users:

Revenue = Single product selling quantity

It can be seen that income growth can increase the price of a single product and increase the number of sales

Focus on the increase in sales volume, that is, increase sales

In order to increase sales, there are several aspects to be considered in the Electronic Business website:

1, improve the website UV

2, improve the number of registered users of the website

3, improve the conversion rate of the website

4, increase the number of Web site products

5. Carry out marketing activities (including affiliate marketing)

This is not an analysis.

We are looking at the service charge (gross margin).

Service charge (Gross Profit) = sales (revenue) * Service rate (gross profit)

As a result, the increase in service charges depends on the growth of sales (revenue) and service rates (gross profit margins).

Income growth we have analyzed, the service rate (gross profit margin) of the growth depends on the bargaining power with suppliers, in group buying site depends on the floor salesman and business negotiation ability, also depends on the overall marketing services for businesses. In the traditional electric business network depends on the bargaining power with the commodity supplier.

The number of subscribers depends on the number of new visitors to the site, the attractiveness of the site's goods or services, and website marketing activities.

Now look at Roic.

In the Roic tree, a factor on the right side is the profit/earnings before tax, which can be understood as pre-tax margin;

It can be seen that pre-tax gross margin depends mainly on:

Cost/income of goods SOLD

Management fees/Revenue

Depreciation/income (in the Electricity business Network This item can be ignored)

Therefore, in order to raise pre-tax gross profit, the electric business website can control the cost of goods sold, reduce the cost of management, and thus improve the margin index.

Then look at the income/investment capital, this indicator mainly measures the turnover of funds, the faster the capital turnover is better.

This indicator depends on the operating capital/income fixed assets/income and so on.

Finally, let's look at the ROI of the savings group from March 2011 to June.

Because the stations do not strictly standardize the financial indicators, therefore, not using ROIC to measure, we temporarily use ROI to measure.

Among them, the station expense includes the personnel salary, the office expense, the marketing expense apportionment; The gross profit is the service charge.

The following figure:

We can see that the ROI of 2011 3-June stations continued to be good, from the March average ROI minus 86% to the minus 55%.

What have we done during this time?

1 March split Operation Center, reorganize website product Department and marketing department, define the responsibilities of each department;

The most important thing is to optimize the website platform.

April after the optimization of the site, the chain March, the highest conversion rate increased by 70%.

2 April continuous optimization of website platform, team running-in.

3 May introduced a new version, the conversion rate significantly increased, and launched a large-scale online marketing activities.

4 June continuous site optimization, increase the launch of national merchandise, reduce the integration of ROI difference, and the limited marketing resources to a few good ROI points.

Of course, the introduction of ROIC and ROI indicators, our goal is only to more rational to guide the operation of the site, not the full value of the evaluation of a project, after all, the value of the evaluation and the actual operation of the site is a different difference.