Unlock Your Profitability KLEVE KEE, OMEP MANAGING CONSULTANT JEFFERSON PETERS, KEY BANK EQUIPMENT FINANCE OFFICER

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1 Unlock Yor Profitability KLEVE KEE, OMEP MANAGING CONSULTANT JEFFERSON PETERS, KEY BANK EQUIPMENT FINANCE OFFICER

2 Qick Table Introdctions In 30 seconds Introdce yorself & yor company Where yo re located How long yo have been in bsiness Nmber of employees yo have An interesting fact abot yo or yor bsiness yo wold like to share

3 Assessing Yor Bsiness Potential Market Driven & Alignment Qestions Operational Observations Bsiness Systems & Prodction Leadership s Urgency & Organization s Openness for Change & Help Financial Analysis What Do Yor Nmbers Tell Us

4 Decisions on Deploying Limited Resorces Determines Sccess RAW MATERIALS MANUFACTURING ASSETS Manpower Methods Machines Materials PRODUCT SALES PROFITS

5 Decision Making Bsiness is abot Choices and Decision Making How do yo make decisions What resorces help yo make decisions Financial Understanding and Modeling What Yor Nmbers Tell Us

6 Fact or Fiction In 10 mintes Discss each statement Decide as a table grop whether the statement is Fact or Fiction Mark answer on Table Grop Fact or Fiction Worksheet Designate a table representative to record answers on Flip Chart at Front of room Play along, mst choose Fact or Fiction

7 Fact or Fiction Shades of Grey Let s Discss Beliefs abot these statements impact decision making Options and Information Importance of Data and Modeling

8 Smmit Manfactring: Owner s Qandary Sales Director 1.2 million opportnity that reqires a 200,000 discont, one time opportnity. Marketing Director 100,000 marketing campaign per year to spport 10% per year growth. Engineering Director 80,000 atomated line to redce total labor cost by 15 percent, one time cost. Prodction Manager 100,000 on Lean Implementation, 50,000 per year for 2 years 10 percent more prodctive per year.

9 Smmit Manfactring Profile Copy of Financials at Each Table; Profit and Loss Manfactrer that makes many different parts and assemblies. Materials are a mix of client spplied parts, internally prodced parts, and otsorced parts. Departments inclde Prodction Assembly Packaging Which reqest shold the Owner approve?

10 Bsiness Model Assessment Company Name Date: Base Year 1 % 2 % 3 % Gross Sales Revene 100.0% 100.0% 100.0% Cstomer Disconts & Retrns V Net Sales Revene (Net less Retrns & Allowances) Cost of Good Sold Raw Materials Manfactring Labor Expenses (Total No Owner's wages or draws) Direct Labor V Direct Labor Benefits Expenses V Indirect Labor F Indirect Labor Benefit Expense F Contract Temporary Labor (All) Prodction Spplies,Consmables, Repairs, etc Other Manfactring Costs Cost/ Goods Sold (COGS) Gross Profit Operating Expenses Sales Payroll & Commissions V Sales Payroll Benefits Expense V Payroll, Other (Marketing, Acconting, IT, Admin, Engrg, Prodct Development) F Payroll, Other Benefits Expense F Interest Paid, Mortgage, Bsiness Loans F Principle Payment, Mortgage & Bsiness Loans F Depreciation Amortization NA NA All Remaining Operating Expenses (not acconted for above) F Total Operating Expenses Earning Before Tax (Tax Basis) Inventory Year End Year ending Inventory Vale Inventory Level based on Sales Demand Days Sales Breakeven Calclation (Owners are drawing no money from bsiness) Fixed Expenses Bsiness Model Improvement Projections Fixed Operating Expenses Interest Expense Loan Principle Expense Total Fixed Expenses Exp Type Financial Model Review Improvement New Sales vs. Cost Redction Translate Operational Improvements to Financial Impact (Revene Variable Expenses) Revene 0.0% 0.0% 0.0% Sales Revene Reqired to Break Even Cash Generated From Bsiness Sales Redction % before reaching Breakeven 0.0% 0.0% 0.0% Earnings Before Tax Depreciation (tax dedction not a cash expense) (Add Back) Amortization (tax dedction not a cash expense) (Add Back) Interest Expense (tax/asset mangement strategy) (Add Back) Loan Principle Paid (tax/asset mangement strategy) (Add Back) Mortgage/Rent Market Rate Adjstment (Dedct) Identify Sales & Cost Levers Cash Generated by Bsiness Prodct Cost & Shop Rate Impacts from Maximizing Capacity % Change % Change Work Days/Year Available 0 0 Nmber of Normal Operating Shifts 0 0 Work Hors/Shift 0 0 Crrent Estimated Operating Capacity Level 0% 0.0% 0% 0.0% Nmber of Units Prodced Annally 0 0 Bsiness Improvement 'What If' Projections from Assessment Sales Revene (% change pls or mins) 0% 0% Sales Disconts (% change pls or mins) 0% 0% Raw Material Expense (% change pls or mins from previos year's revene ratio) 0% 0% Direct Labor (% change [Prodctivity] pls or mins from previos year's revene ratio) 0% 0% Indirect Labor Expense YOUR OMEP CONSULTANT WILL COMPLETE THE SECTION BELOW Capacity Increase Snap Shot COGS Indirect Labor (Annal salary changes for projected head cont changes) SALES PAYROLL Annal salary changes for projected head cont changes OE Wages, Other (Annal salary changes for projected head cont changes) Variable Expenses, nonpayroll (% change pls or mins from the previos year's revene ratio) 0% 0% Fixed Expenses, nonpayroll (% change pls or mins from the previos year's expense vale) 0% 0% Maximize Asset Utilization (Capacity)

11 Unlock Yor Profitability Align operations and bsiness systems to meet market demand for vale Discover where sales or operational opportnities are Understand yor impact levers to increased profitability Maximize existing capacity

12 Intition not necessarily enogh need model Understanding cost strctre, fixed vs. variable Understanding leverage and componding Smmit Manfactring TAKEAWAYS

13 QUESTIONS & ANSWERS