Posts on ROIC, working capital, operational due diligence, and capital-disciplined decision making.
Too low and you're lost in details. Too high and you're lost in theory. The best operating partners hover at 3,000 feet — where ROIC acts as the altimeter.
The board sees declining EBITDA. The instinct is to cut costs. But the real problem is rarely in the P&L — it's in the balance sheet, where capital sits trapped and unproductive.
Customer concentration is not a commercial problem. It is a capital risk that destroys ROIC in a matter of months — and most business owners do not quantify it until it is too late.
Intrinsic scalability is not measured in revenue. It is measured by whether each additional dollar of invested capital generates more return than the last.
EBITDA measures if you sold well. Cash flow, if you collected. ROIC, if it was worth it. Monitoring only one creates predictable blind spots.
The most dangerous risks for an industrial company are not in the P&L. They are in the balance sheet — and in the decisions no one is measuring.
Most industrial companies optimize activity and ignore return. The difference between working harder and working smarter is measured in ROIC.
EBITDA measures accounting profitability. Cash measures reality. The difference lives in three balance sheet lines that most ignore.
You do not need a sophisticated financial model. You need the right data and to know what to include in invested capital — and what to leave out.
Most buyers review adjusted EBITDA. Few review actual working capital. That is where the real problems hide.