Welcome & Introductions

Transcription

1 2009 International Builders Show Lessons Learned from the Crisis: Ten Guiding Numbers To Manage Your Business Presented by: Steven W. Hays, Sr., CPA Steve Maltzman, CPA Felicia M. Malter, CPA Welcome & Introductions About RubinBrown Firm St. Louis and Kansas City Midwest National Home Builders Services Group Assurance Services Tax Planning and Compliance Business Performance Analysis Benchmarking Information 1

2 Welcome & Introductions About SMA Consulting Firm Redlands, California Orlando, Florida National Home Builders Consulting Consulting Education Personnel Financial Measurements 2

3 Importance of NAHB Chart Of Accounts What Goes Where? Based on NAHB Chart of Accounts Costs of Construction Developed Lot Costs Direct Construction Costs Indirect Construction Costs Operating Expenses Financial Costs Selling Expenses General and Administrative Expenses What Goes Where 3

4 Example Common Sized Income Statement Number of Units Closed 100 Sales $ 22,500, % Costs of Construction Developed Lot Costs 4,550, Direct Construction Costs 12,990, Direct Costs of Construction 17,540, Gross Margin 4,960, Indirect Construction Costs 756, Gross Profit 4,204, Operating Expenses Financial Costs 823, Selling Expenses 1,370, Total Operating Expenses 2,193, Income from Operations Before General and Administrative and Income Taxes 2,011, General and Administrative Expenses 1,243, Net Income Before Income Taxes $ 768, % Average Selling Price $ 225,000 The Top Ten Numbers 1. Gross Profit Percentage Gross Profit Net Sales A measure of gross profit dollars generated by each dollar of sales. 4

5 The Top Ten Numbers 2. Operating Expense Percentage Total Operating Expenses Net Sales A measure of operating expense dollars generated by each dollar of sales. The Top Ten Numbers 3. Net Income (Profit) Percentage [Return on Sales] Net Income Net Sales A measure of net income dollars generated by each dollar of sales. 5

6 The Top Ten Numbers 4. Break-Even Fixed Costs or Expenses (Unit Price - Variable Unit Cost) Number of units that must be closed in order to cover all costs and expenses of the Company. This calculation assumes zero profit. Example Balance Sheet Assets Liabilities and Equity Real Estate and Construction in Progress $ 25,000,000 Mortgage Notes Payable $ 18,852,000 Accounts Payable 3,342,000 Cash 515,000 Accrued Expenses 1,276,000 Accounts Receivable 32,000 Total Liabilities 23,470,000 Prepaid Expenses 223,000 Fixed Assets, net 964,000 Equity 3,264,000 Total Assets $ 26,734,000 Liabilities and Equity $ 26,734,000 6

7 The Top Ten Numbers 5. Debt to Equity * Includes all liabilities Total Debt* Total Equity Measures a Company s reliance on lender or creditor financing as well as the business s indebtedness compared to the amount invested by its owners. The Top Ten Numbers 6. Working Capital Current Assets (Current Liabilities) Working Capital Measures how much in liquid assets a company has available to build its business. 7

8 Operational Measurements The Top Ten Numbers 7. Efficiency and Productivity Ratios Productivity Ratio Total sales / number of FTE Employees WIP turnover Total Direct Construction Costs / Average Work In Process Balance Variance PO % - Direct cost variance from budget as a percentage of total budgeted direct cost Average number of days each warranty service request is open 8

9 The Top Ten Numbers 8. Sales and Marketing Measurements Referral Rates Total sales or traffic / number of customer referrals Advertising cost / Total sales or traffic Fallout ratio Cancellations / Sales Conversion ratio - Traffic / Sales The Top Ten Numbers 9. Quality Measurements Quality of Service - Open service requests/number of homes under warranty Quality of Product -Total service request items/number of homes under warranty Q&C Scores - Number of punch list items as measured by a professional at consistent time 9

10 The Top Ten Numbers 10. Schedule and Construction Ratios Time of construction - Measured consistently from point A to point Z Measurement of annualized production gain - Specialized industry measurement to gauge the production within any period, location, crew, etc. Contacts Steve Hays, CPA RubinBrown LLP Partner-in-Charge Home Builders Services Group steve.hays@rubinbrown.com Felicia Malter, CPA RubinBrown LLP Partner Home Builders Services Group felicia.malter@rubinbrown.com Steve Maltzman, CPA SMA Consulting President and Founder smaltzman@smaconsulting.net