When to use: At the start of strategic planning, before entering a new market, and as the bridge between environmental scanning and option generation.

Balanced Scorecard

Kaplan and Norton's performance management system that translates strategy into objectives, measures, targets and initiatives across four linked perspectives.

When to use: When strategy needs to be executed and measured beyond financial results, and to align departmental objectives to corporate strategy.

Porter's Five Forces

An industry structure analysis that explains long-run profitability through five competitive forces rather than through individual rivals.

When to use: Before entering or exiting an industry, in annual strategy reviews, and when explaining why an attractive-looking market is structurally unprofitable.

OKR (Objectives and Key Results)

A quarterly goal-setting system pairing a qualitative, inspirational Objective with 3-5 quantitative Key Results that prove it was achieved.

When to use: When strategy must be turned into focused quarterly execution with transparent measurement, especially in fast-moving product organisations.

Formulas library

Every formula with variables, interpretation thresholds and a worked example.

Return on Investment

ROI = ((Gain - Cost) / Cost) x 100

Gain: Total benefit or return (USD)
Cost: Total investment cost (USD)

ROI > 20 — Strong return
0 - 20 — Marginal return
ROI < 0 — Value destroying

Worked example

A CRM rollout costs $250,000 and is expected to generate $340,000 of margin over three years.

ROI = ((340,000 - 250,000) / 250,000) x 100 = 36%

A 36% cumulative return, but spread over three years — check the annualised figure before approving.

Try: A CRM rollout costs $250,000 and is expected to generate $340,000 of margin over three years.

Net Present Value (level annual cash flow)

NPV = -C0 + CF x [1 - (1 + r)^-n] / r

C0: Initial investment (USD)
CF: Annual net cash inflow (USD)
r: Discount rate (% per year)
n: Number of years (years)

NPV > 0 — Accept
NPV = 0 — Indifferent
NPV < 0 — Reject

Worked example

An automation programme costs $500,000 up front and saves $150,000 a year for five years. The corporate discount rate is 10%.

NPV = -500,000 + 150,000 x [1 - 1.1^-5] / 0.10 = -500,000 + 568,618

Positive NPV at a 10% hurdle rate — the programme creates roughly $69k of value in today money.

Try: An automation programme costs $500,000 up front and saves $150,000 a year for five years.

Internal Rate of Return (rate-guess method)

IRR = the rate r where NPV = 0

C0: Initial investment (USD)
CF: Annual net cash inflow (USD)
n: Number of years (years)
r: Guessed rate (% per year)

NPV > 100 — Guess too low
-100 to 100 — Close to IRR
NPV < -100 — Guess too high

Worked example

The same automation programme: $500,000 out, $150,000 a year for five years. Guessing 15%.

NPV at 15% = -500,000 + 150,000 x [1 - 1.15^-5] / 0.15 = +2,822; at 15.3% NPV is about zero

The IRR comfortably clears a 10% hurdle rate, confirming the positive NPV decision.

Try: The same automation programme: $500,000 out, $150,000 a year for five years.

Payback Period

Payback = Initial investment / Annual net cash inflow

C0: Initial investment (USD)
CF: Annual net cash inflow (USD per year)

< 2 — Fast payback
2 - 4 — Typical payback
> 4 — Slow payback

Worked example

A warehouse automation cell costs $420,000 and cuts $140,000 of labour cost a year.

Payback = 420,000 / 140,000 = 3.0

Capital is recovered in three years; pair with NPV to judge the value created afterwards.

Try: A warehouse automation cell costs $420,000 and cuts $140,000 of labour cost a year.

Break-Even Point (units)

BEP = Fixed costs / (Price per unit - Variable cost per unit)

FC: Total fixed costs (USD)
P: Selling price per unit (USD)
VC: Variable cost per unit (USD)

> 0 — Break-even volume
< 0 — Invalid contribution

Worked example

A training business has $60,000 of fixed cost per cohort cycle, charges $1,200 per seat and incurs $450 of variable cost per seat.

BEP = 60,000 / (1,200 - 450) = 80

Eighty enrolments cover all costs; every seat beyond that contributes $750 of profit.

Try: A training business has $60,000 of fixed cost per cohort cycle, charges $1,200 per seat and incurs $450 of variable cost per seat.