BIG – Business Game – Second Round. Lessons from bodybuilders that can be learned by playing at being hotel entrepreneurs with a few young apprentice Managers

Quickly restored the hotel, contained costs and refocused on the core business during the first year of the new management https://www.michelevena.com/?p=1119&lang=en, it is time to set goals in the following one.

I remember an interview given by Nasser El Sonbaty, a famous bodybuilder of the ’90s, who hit me (the interview not him) in which he declared (I quote by heart): “too many people make detailed plans that fail miserably, I prefer to fail without planning it”. True to his word, Nasser participated nine times in a row in Mr. Olimpia without ever winning it.

Dorian Yates on the left and Nasser El Sonbaty on the right. Was it him to hit me and not the interview, there wouldn’t be much left of me.

In finance, however, target planning is inevitable. Usually it is the result of negotiation between ownership (those who risk their money) and top management (those who risk other people money).

If the ownership is particularly enlightened the objectives are negotiated, otherwise they are imposed. In any case it is essential that there is alignment between them and personal goals at all levels of the hierarchy. All must row in the same direction to avoid the risk of never arriving on the other side or, worse, to end up all in the water.

Unsuccesful Manager’s lesson

In the case of our hotel, with Alberto we played the role of shareholders and we insisted that even the five juniors, who therefore represented the management, not only understand but share our goals.

There is never a need for many indicators to make a good dashboard. In my role as Head of Controlling, I have always put in place an action plan to reduce their number while improving their relevance. In the automotive industry it is not surprising to find even the “number of calibrations of measuring instruments” among the indicators monitored by the Management Committee. Never having known one single decision taken on the basis of the “number of calibrations of measuring instruments” it was usually the first one I dismissed.

Unsuccessful Manager’s lesson

In our case, the most striking fact was the occupancy rate of the rooms: with important seasonal variations, the average was just over 60% for a turnover of 1.5M€ and an Ebitda of 20%.

On a horizon of the next 2 rounds that will take us to the end of the game, we want to get more than 80% occupancy rate in each month, a turnover of € 2.3M and an Ebitda of 30%.

We have defined categories of months according to their occupancy rate:
0 < BAD < 40% <
40% < AVERAGE < 60%.
60% < GOOD < 80%
EXCELLENT > 80%

Ebitda (Earnings before interests, taxes, depreciation and amortization) is generally used as the main financial indicator for three reasons;
1) it is the income statement indicator closest to the concept of cash. And, in Finance, if there is one basic rule, it is “cash is king“;
2) Often, in financial transactions, companies sell for multiples of the Ebitda. Knowing the Ebitda also means knowing the value of your company;
3) Income statement, balance sheet or cash flow indicators are partial indicators. Only by crossing them together can we obtain more complete indicators. Ebitda and also Ebit are the most useful in this kind of exercise.

Unsuccessful Manager’s lesson

The strategy we have chosen is rather that of Dorian Yates, the one who won those Mister Olimpia ahead of Nasser, carefully planning each stage of approach to the goal set: we say what we do and do what we say.

If we’re right, we’ll only find out with the time. And you ? Would you rather play it as Nasser or as Dorian ?

This is not scientific research but just the feedback of a trilingual CFO who is participating to a Business Game, who practiced bodybuilding and who is interested in Management, Change Management and Corporate Finance.