Economic Value Added (EVA) is a little-known, but impressively effective measure to boost your profitability.

https://www.youtube.com/watch?v=b317Ifo_2kI

Coca-Cola, AT&T, Quaker Oats, CSX, and Briggs and Stratton helped the term rise to prominence when they adopted economic profit, or EVA, in the 80s and 90s.  Focus on this insightful accounting measure resulted in an overwhelming increase in business value, stock price, and profits.

Because of attention to increasing EVA, Quaker Oats shifted their production schedule. Rather than using big sales promotions to spike production at each quarter's end, they leveled out with more consistent production.  Then, instead of requiring large warehouse volume they more efficiently used their real estate, by stocking more consistently. With fewer warehouses and staff, they reduced costs. This put their company on the map as they launched into long-term sustainability.

CSX implemented Economic Value Added by shrinking labor and fuel costs, along with the number of containers, trailers and locomotive fleet. At the same time, they boosted freight volume, significantly enhancing profits. 

In each case, the shift to improving EVA had more invested capital working harder, more of the time. This increased the productivity of each dollar at work.

Over time, different consulting firms have called this profit measurement by different names. But Stern Stewart & Co. of New York City popularized the term Economic Value Added.

Table of contentsArticle OverviewWhere Economic Value Added Fits into the Cash Flow SystemWhat Is Economic Value Added?The Disparity in the Expectations of Debt Financing and Cash PurchasesView Cash as Investor CapitalThe Interest PrincipleWhy Is Economic Value Added Important to Me and My Business?How Do I Determine the Cost of Capital?Breaking Down the Economic Value Added (EVA) CalculationWhat Should I Do to Increase My Economic Value Added and Profitability?What Is the Connection Between the Infinite Banking Concept and Economic Value Added?How does Infinite Banking improve EVA?Loaning Personal Capital To Your BusinessYour Next Steps to Using Economic Value Added

Article Overview

What does it mean and why does this matter to you?  Well, if you want to put more dollars in your pocket, there’s a better way than spending a bunch of money and believing the expansion will create additional production that generates revenue and hopefully turns a profit.

In today’s article, we’ll answer:

What is Economic Value Added?

Why is it important to me and my business?

How do I determine the cost of capital?

What should I do to increase my EVA and profitability?

What is the connection between the Infinite Banking Concept and Economic Value Added?

How does Infinite Banking improve EVA?

Economic Value Added will help you accurately assess and increase your real profitability. It will also increase the value of your company and give you a competitive advantage in your market.  This conversation will show you how.

Where Economic Value Added Fits into the Cash Flow System

Profit maximization is just one part of the bigger picture of building time and money freedom.

That’s why we have created the 3-step Business Owner’s Cash Flow System.  It’s your roadmap to take you from just surviving, to a life of significance, purpose and financial freedom.

The first step is keeping more of the money you make by fixing money leaks, becoming more efficient and profitable. 

Then, you’ll protect your money with insurance, legal protection, and Privatized Banking. 

Finally, you’ll put your money to work, increasing your net income with cash-flowing assets.

When you increase your cash flow from current income, it’s like you have more gas feeding your financial freedom machine. And this accelerates your results.

So, let’s get more gas flowing into your Cash Flow System, shall we?

What Is Economic Value Added?