Only 20% of companies create structural value, are you one of them?

Why is this relevant?

The WACC, or Weighted Average Cost of Capital, indicates how much it costs a company on average to attract financing. This can involve debt, such as bank loans, or equity, such as shareholder capital. The higher the WACC, the riskier the company is perceived by capital providers.

You only create real economic value when the return on invested capital, or ROIC (Return On Invested Capital), is structurally higher than the WACC. Only then do your investments yield more than they cost.

Imagine an entrepreneur invests one million euros in their company. They finance this partly with a bank loan at 5% interest and partly with their own funds, for which they expect a return of 10%. The average financing cost, or WACC, comes out at 8%. This means that this investment must yield at least €80,000 per year to avoid losing value. For every euro the company invests, it must pay an average of 8% interest (cost of the capital you use).

This WACC is therefore a useful indicator for financing decisions. It helps determine whether it is more interesting to use own funds or to take out a bank loan. Today, the interest rate on bank financing averages around 3 to 4%. Is that lower than your WACC? Then it may be financially advantageous to use external financing instead of using your own capital.

If the company only makes €50,000 profit annually, the company is profitable, but insufficiently profitable in relation to the invested capital. In that case, value destruction occurs, despite the profit. This phenomenon often goes unnoticed in many companies.

This is not a theoretical concept. Recent studies by McKinsey, KPMG, and EY show that the average WACC in Europe is still around 8 to 9%, depending on the sector and risk profile. To actually create value, a company must structurally achieve at least 2% above that WACC with its ROIC. A return that just breaks even with the cost of capital yields profit on paper, but no economic added value.

Structural causes: performance gaps and opportunity gaps

According to a blog post by Harvard Business School Online from December 2024 on Gap Analysis, structural underperformance is often the result of two interconnected gaps:

1. Performance gaps refer to measurable underperformance relative to one’s financial or strategic objectives. Think of low margins, insufficient cash flow, or operational inefficiency.
2. Opportunity gaps explain why those performances lag. They arise when organizations fail to seize opportunities that could have strengthened their performance or competitive position. This is not only about missing new technology or market trends but also about not fully utilizing existing levers such as pricing strategies, organizational design, economies of scale, or digitization.

Often, multiple opportunity gaps underlie one or more performance gaps. These structural blind spots ensure that companies underperform their potential, even if they make a profit. The result is limited growth, reduced value creation, and a decrease in attractiveness to investors or buyers.

How can B-Strategy help?

At B-Strategy, we look beyond the numbers. We not only analyze how you perform today but also why certain results are lacking and where opportunities remain untapped. We clearly map out:

1. Where you are currently underutilizing your resources, such as margins, EBITDA, and cash flow;
2. Which parts of your organization, such as people, processes, structure, or digitization, are underperforming;
3. Where strategic opportunities or efficiency gains remain untapped.

Based on these insights, we develop a tailored and feasible strategic action plan together. This sets your company in motion structurally, towards more profit, more value, and a future-proof organization. Additionally, we guide you in realizing these structural improvements. This way, plans do not just remain on paper but translate into concrete results.

Ready to belong to the top 20%?

The question is not whether you make a profit. The question is: do you create enough value in relation to the capital and resources you use? And how much potential growth are you still leaving untapped today?

Questions about this topic? Our team is here to help. Feel free to get in touch.

¹ Sources:
• McKinsey Global Institute. (2019). Measuring the impact of capital investment. McKinsey & Company.
• McKinsey & Company. (2022). The power of through-cycle ROIC. Strategy and Corporate Finance Insights.
• Harvard Business Review. (2025). How capital efficiency drives shareholder value. Harvard Business Publishing.
• EY. (2023). Earning the right to grow: Capital efficiency and total shareholder return. Ernst & Young Global Limited.
• KPMG. (2024). Cost of Capital Study – Europe 2024. KPMG International.