Profit Mastery Financial Road Map Assessment Tools to Help Your Clients Measure and Improve Financial Performance

Transcription

1 Profit Mastery Financial Road Map Assessment Tools to Help Your Clients Measure and Improve Financial Performance September 21, :00pm - 5:15pm Orlando, FL Presented by Steve LeFever, Founder and CEO Profit Mastery Seattle, WA Business Resource Services Inc. 200 First Avenue West Suite 301 Seattle, Washington Phone Fax E mail: info@profitmastery.net Website BRS

2 Bio Steve LeFever, Chairman and Founder, Profit Mastery Finance = boring. For Steve LeFever, this equation doesn t work. With a superior command of his subject material, he makes finance compelling, interesting, and funny. Steve s unique ability to take complex topics and translate them into plain English separates him from the crowd. Our clients routinely tell us they never expected to take away so much new knowledge from a keynote speech. Steve has a rare skill being able to motivate business owners and advisors to enthusiastically explore the financial workings of a business and change the areas that need changing. Steve will make you believe that finance boring; instead you ll agree with him when he says, Finance is fun! Part comedian, part financial manager, former commercial banker, current entrepreneur, and 100% world-class presenter, Steve drives home his message with a no-nonsense, laugh-out-loud approach that makes him the toprated presenter at virtually every conference he attends. For over 20 years, Steve has combined humor and practical knowledge in hard-hitting, substantive presentations. His ratings currently rank him as the highlight of our clients conventions in a wide spectrum of industries. An internationally-recognized author and advocate for independent business, Steve s book, Profit Mastery: Knowledge-Driven Financial Performance has sold over one million copies. Steve has travelled widely, and the Profit Mastery program has been presented on three continents in eight languages over two decades to hundreds of thousands of business owners, managers, commercial bankers, accountants, and business coaches. Compelling Subject Matter - Financial management education is repeatedly cited as the single greatest need for business owners across all industries. Steve LeFever is the acknowledged expert on the subject. Our educational programs take the mystery out of the numbers. Audience members with differing levels of expertise will gain specific tools that can be applied immediately to improve the financial health of their companies. Industry Knowledge - Steve possesses a breadth of knowledge and experience in banking, finance, and small business management. His work with the Risk Management Association (RMA), the Association of Small Business Development Centers (ASBDC), and financial institutions around the globe help keep his insights sharp and his information relevant to business owners, operators, and managers. Profit Mastery 200 First Avenue West Suite 301 Seattle, WA Toll Free info@profitmastery.net Web profitmastery.net BRS Busines Resource Services

3 What Gets Measured... Gets Managed Profit Mastery Financial Performance is a three-legged stool Education establishing the foundation Benchmarking creating the yardstick Performance Groups providing the accountability and discipline 2016 BRS 1

4 Seven Steps to Business Success 1. Plan Properly before start up 2. Monitor financial position 3. Understand the relationship between price, volume, and costs 4. Manage Cash Flow 5. Manage Growth 6. Borrow Properly 7. Plan for transition Financial Operating Cycle Net Profits Income Statement Net Profit Uses of Profits: Cash Flow Balance Sheet Assets = Liabilities + Net Worth Efficiency To pay for new assets To pay off debt To pay out to the owners 2016 BRS 2

5 Answer Sheet Cascade Office Systems Ratio Analysis Spreadsheet Year 1 Year 2 Year 3 BALANCE SHEET RATIOS: Stability (or Staying Power ) Industry Composite Calculations, Trends, or Observations Current Current Assets ,100 Current Liabilities 734,400 Quick Cash + Accts. Rec ,300 Current Liabilities 734,400 Debt-to-Worth Total Liabilities ,700 Net Worth 307,300 INCOME STATEMENT RATIOS: Profitability (or Earning Power ) Gross Margin Gross Profit 21% 20% 18.5% 22.2% 400,000 2,160,000 Net Margin Net Profit Before Tax 3.5% 3.0% 0.29% 3.2% 6,300 2,160,000 ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios -to-assets ,160,000 Total Assets 1,131,000 Return on Assets Net Profit Before Tax 8.2% 6.9% 0.56% 6.9% 6,300 Total Assets 1,131,000 Return on Net Profit Before Tax 20.9% 16.5% 2.0% 15.8% 6,300 Investment Net Worth 307,300 ASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios Inventory Turnover Inventory Turn-Days Accounts Receivable Turnover Receivable Turn-Days Accounts Payable Turnover Average Payment Period Cost of Goods Sold ,760,000 Inventory 419, Inventory Turnover 4.2 Accounts Receivable ,160, , Accts. Rec. Turnover 8 Cost of Goods Sold ,760,000 Accounts Payable 310, Accts. Pay. Turnover BRS 3

6 2016 BRS 4

7 Understand the Relationship Between Price, Volume, and Costs The Cup Theory The Concept of Contribution Margin Variable Cost Cup Contribution Margin Fixed Cost Cup Net Profit Cup 2016 BRS 5

8 PROFIT PLAN / CASH BUDGET FOR OLYMPIC FLOORING A/R Collection Period : 60 days made during the last two months of Prior Year November : 53,900 December : 64,800 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALS 1 Total 71,500 85, , , , , , , , ,100 85,800 71,500 1,430,000 2 Cost of 53,600 64,300 96, , , ,700 96,600 96,600 75,100 75,100 64,300 53,600 1,072,600 3 Gross Profit (line 1-2) 17,900 21,500 32,100 42,900 46,500 42,900 32,100 32,100 25,000 25,000 21,500 17, ,400 4 Gen. Oper. Expenses 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25, ,200 5 Depreciation ,200 6 Total Operating Expenses (line 4 + 5) 26,200 26,200 26,200 26,200 26,200 26,200 26,200 26,200 26,200 26,200 26,200 26, ,400 7 Operating Profit (line 3-6) (8,300) (4,700) 5,900 16,700 20,300 16,700 5,900 5,900 (1,200) (1,200) (4,700) (8,300) 43,000 8 Other Income (Expense) PROFIT PLAN 2016 BRS 6 9 Net Profit Before Tax (line 7 + 8) (8,300) (4,700) 5,900 16,700 20,300 16,700 5,900 5,900 (1,200) (1,200) (4,700) (8,300) 43, Tax 6, Net Profit After Tax (line 9-10) 36,300 Purchases made during the last two months of Prior Year : November : 47,600 December : 57, Purchases 89, , , ,700 89,600 89,600 68,100 68,100 57,300 47,600 62,000 82,000 1,029, BEGINNING CASH 6, ,700 1,200 1,900 4,200 2,900 2, ,300 3,500 CASH INFLOWS: 14 Collections: Accts. Receiv. 53,900 64,800 71,500 85, , , , , , , , , Other Income (Expense) 16 Total Cash Available (line ) 60,700 65,300 71,900 90, , , , , , , , ,600 CASH OUTFLOWS: 17 Accounts Payable 47,600 57,300 89, , , ,700 89,600 89,600 68,100 68,100 57,300 47, Past Due: Accounts Payable 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 3, General Expenses 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25,600 25, Capital Purchases 15, Taxes 3,100 CASH BUDGET 22 Principal: Long-Term Debt Other 24 Total Cash Outflow (lines 17 thru 23) 80, , , , , , , , ,700 99,700 85,900 76, CASH POSITION (line 16-24) (19,500) (39,600) (50,300) (63,800) (38,100) 19,200 67,900 52,300 30,300 29,300 18,500 27, MONTHLY Short-Term Loan 20,000 40,000 55,000 65,000 40,000 (15,000) (65,000) (50,000) (30,000) (25,000) (15,000) (20,000) 27 MONTHLY Long-Term Loan 28 ENDING CASH (line ) ,700 1,200 1,900 4,200 2,900 2, ,300 3,500 7, TOTAL Short-Term Loan 0 20,000 60, , , , , ,000 90,000 60,000 35,000 20, TOTAL Long-Term Loan 165, , , , , , , , , ,00 135,00 132, ,000 LOANS

9 OLYMPIC FLOORING CASH BUDGET GRAPH $ 240,000 $ 200,000 $ 160,000 $ 120,000 SALES $ 80,000 $ 40,000 CASH 0 PROFITS ($ 40,000) ($ 80,000) ($ 120,000) DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV 2016 BRS 7

10 Sample Balance Sheet 1 Projected...$ 900,000 Projected NPAT...$27,000 PERCENT OF SALES* Cash... $ 36,000 4% Note Payable... $ 126,000 PERCENT OF SALES* Financial Gap Accts. Receivable ,000 18% Accounts Payable ,000 15% Inventory ,000 26% Accruals... 63,000 7% Total Total Current Assets... $ 432,000 Current Liabilities... $ 324,000 Equipment ,000 25% Long-Term Liabilities ,000 Land/Building ,000 Total Liabilities ,000 Total Fixed Assets ,000 Net Worth ,000 (old Net Worth* = 286,000) Total Liabilities Total Assets... $ 777,000 and Net Worth... $ 777,000 BALANCE SHEET RATIOS At $600,000 At $900,000 Current Quick Debt-To-Worth BRS 8

11 Managed Balance Sheet at $900K If the company was able to implement the efficiency improvements listed above and achieved its target sales level of $900,000, with a net profit after tax of $27,000 its balance sheet would look like this: PERCENT OF SALES* Cash... $ 36,000 Note Payable... $ 0 PERCENT OF SALES* Financial Gap Accts. Receivable ,500 Accounts Payable... 75,000 Inventory ,000 Accruals... 63,000 Total Total Current Assets... $ 306,000 Current Liabilities... $ 138,000 Equipment ,000 Long-Term Liabilities ,000 Land/Building ,000 Total Liabilities ,000 Total Fixed Assets ,000 Net Worth ,000 Total Liabilities Total Assets... $ 651,000 and Net Worth... $ 651,000 BALANCE SHEET RATIOS At $600,000 At $900,000 At $900,000 Managed Current Current Assets Current Liabilities Quick Cash + A/R Current Liabilities Debt-To-Worth Total Liabilities Net worth 2016 BRS 9

12 Borrow Properly Seasonal WC Cash Inv A/R Credit Card Cash Flow Line of Credit A/P Permanent WC Cash / Inv / A/R Net Profits Int. Debt 3-5 year Long Term Debt Fixed Assets Leasehold Imp, Equip, Building Retained Earnings Net Profits plus Depreciation Time Plan for Transition 2016 BRS Valuation Sell or Merge Liquidate Continue Business...Associates or Heirs 10

13 Strategic Planning Road Map 1 Plan Properly Where are you now? Ratio Analysis 3 years of Historical Data Cause-and-Effect Analysis of Current Relationship 2 3 Variable Cost Fixed Cost Target Profit Management Action How much sales? Needed 4 Marketing Plan Cash Flow A S S E T S How much capital? Assets Required Sources of Capital 6 5 Financial Gap Required Bank Loan 7 Plan for Transition 2016 BRS 11

14 Seven Steps to Business Success 1. Plan Properly before start up 2. Monitor financial position 3. Understand the relationship between price, volume, and costs 4. Manage Cash Flow 5. Manage Growth 6. Borrow Properly 7. Plan for transition Financial Operating Cycle Net Profits Income Statement Net Profit Cash Flow Balance Sheet Assets = Liabilities + Net Worth Efficiency Uses of Profits: To pay for new assets To pay off debt To pay out to the owners 2016 BRS 12

15 Statements and Ratio Analysis DEFINITION...Financial position refers to the economic condition of your business in comparison to its own past performance and to other companies of similar size. REVIEW...Section One reviewed the basic legal and tax issues affecting all businesses. The information in this section actually provides the means for a critical analysis of management roles and business organization in relation to both tax and non-tax issues. IMPACT...Determining your financial position is crucial to fine tuning your management decisions. It provides the level of detail a business owner needs to make sound choices. RESULTS...The information derived from financial position calculations lets you focus your attention on the causes of your business financial strengths and weaknesses. With this information you can take positive action to keep what is working and to improve what isn t. The Goal: Determining your solvency, risk, and efficiency The Tools: Statement Spread Sheets Financial Management Ratios Cause and Effect Road Map 2016 BRS 13

16 Key Terms Assets... Everything that the business owns including such items as cash, inventory, prepaid expenses, and vehicles. Balance Sheet... A statement of financial position that shows the assets, liabilities and net worth of the business. Current Assets... Liabilities... Current Liabilities... Long-Term Debt... Net Worth... Retained Earnings... Leverage... What the business owns that s expected to be turned into cash within one year such as accounts receivable and inventory. What the business owes to creditors to the people who supply funds that must be repaid. Debt is another term for liability. Obligations that are due to be repaid within one year. Obligations that are scheduled to be repaid in a period greater than one year. What the business owes to the owners the investment that the owners have in the company. Also called owners equity. The net profits (positive or negative) from the income statement that are left to accumulate in the business. The increased rate of return that is made on net worth by using debt to acquire assets. Income Statement... The summary of the revenues, costs and expenses of a company that are recognized during an accounting period. Gross Profit... Net Profit... minus the Cost of Goods Sold, which is the cost of buying raw materials and producing finished goods. The amount remaining after all expenses have been met. The difference between total sales and total costs and expenses BRS 14

17 Case Study Cascade Office Systems Cascade Office Systems originally opened in ten years ago when John Thomas began manufacturing custom wood office furniture for a select clientele. (He had just taken early retirement from a major manufacturer, where he had been a successful sales rep for over 20 years.) The new business was a gradual success on the strength of Mr. Thomas's reputation and his ability to deliver quality furniture at a reasonable price. Mr. Thomas semi-retired from the business four years ago, turning it over to his daughter and son-in-law, Laura and Rob. Both of them perceived a growing market opportunity revolving around the production of custom office furniture for computers. While not forsaking the existing business, they implemented an impressive development campaign two years ago, including an expansion of the existing building. A year ago, they began their marketing effort with an aggressive promotion based on price and quality. It's now the end of their most recent fiscal year and they have come to you for financial assistance. They are flushed with excitement, telling you things will be great if they can just get the funds they need to get over the hump. They brush off any talk of problems as only temporary. What observations can you offer? ACTION STEPS: Step 1. Step 2. Step 3. Step 4. Step 5. Step 6. Step 7. Gather accurate financial information. Package the information so you can see relationships. Calculate financial ratios. Record your industry composites (if available). Compare your results. Analyze the possible causes of problems. Take action formulate a plan, implement it, and monitor the results BRS 15

18 Cascade Office Systems Balance Sheet Spreadsheet as of November 30 Two Years Ago One Year Ago Most Recent Year ASSETS Cash 41,700 16,500 12,300 Accounts Receivable 169, , ,000 Inventory 212, , ,000 Other A/R officer 3,000 Prepaid 10,700 16,700 24,800 Other Total Current Assets 437, , ,100 Leasehold Improvements Vehicles 25,700 30,700 30,700 Furniture/Fixtures/Office Equip 24,300 28,300 59,700 Equipment 108, , ,300 Buildings 130, , ,700 Land 20,000 20,000 30,000 Accumulated Depreciation (85,000) (106,000) (132,000) Fixed Assets (net) 223, , ,400 Other patent acquisition 28,500 Total Assets 660, ,000 1,131,000 LIABILITIES & NET WORTH Notes Payable bank 52,800 63, ,400 Current Portion long-term 32,500 30,000 25,000 Accounts Payable trade 99, , ,100 Accruals 44,100 55,200 67,300 Other 26,700 33,400 49,600 Other Total Current Liabilities 255, , ,400 Long-Term Debt 144, ,300 89,300 Mortgages Other Total Long-Term Liabilities 144, ,300 89,300 Total Liabilities 400, , ,700 Trends Capital Stock 60,000 60,000 60,000 Additional Paid-In Capital Retained Earnings 200, , ,300 Net Worth 260, , ,300 Total Liabilities and Net Worth 660, ,000 1,131, BRS 16

19 Cascade Office Systems Income Statement Spreadsheet for the 12-months ending November 30 Two Years Ago One Year Ago Most Recent Year 1,520,000 1,670,000 2,160,000 Trends Cost of Goods Sold 1,200,000 1,336,000 1,760,000 Gross Profit 320, , ,000 Expenses Salary 152, , ,900 Payroll Taxes 16,400 16,900 27,000 Advertising 2,000 10,500 12,200 Rent Utilities 4,800 5,200 6,100 Office Supplies 5,500 4,500 5,000 Insurance 7,800 8,200 8,800 Bad Debts 4,000 4,000 8,000 Depreciation 19,000 21,000 26,000 Vehicles 8,600 6,400 5,200 Accounting 5,800 6,200 6,800 Travel / Entertainment 9,500 4,700 1,200 Shop Supplies 5,500 5,500 7,000 Taxes 4,000 4,500 7,000 Other 2, ,000 Other Total Expenses 247, , ,200 Operating Profit 73,000 77,700 53,800 Other Income/(Expense) Interest (26,600) (27,600) (49,500) Other Income 8,000 2,000 Net Profit Before Taxes 54,400 50,100 6,300 Tax 9,500 8, Net Profit After Tax 44,900 41,800 5, BRS 17

20 Notes 2016 BRS 18

21 Cascade Office Systems Ratio Analysis Spreadsheet 2 Years Ago 1 Year Ago Most Recent Year Industry Composite Calculations, Trends, or Observations BALANCE SHEET RATIOS: Stability (or Staying Power ) 1. Current 2. Quick 3. Debt-to-Worth Current Assets Current Liabilities Cash + Accts. Rec. Current Liabilities Total Liabilities Net Worth INCOME STATEMENT RATIOS: Profitability (or Earning Power ) 4. Gross Margin 5. Net Margin Gross Profit Net Profit Before Tax ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios 6. -to-assets 7. Return on Assets 8. Return on Investment Total Assets Net Profit Before Tax Total Assets Net Profit Before Tax Net Worth 21% 20% 3.5% 3.0% % 6.9% 20.9% 16.5% ASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios Inventory Turnover Inventory Turn-Days Accounts Receivable Turnover Accounts Receivable Turn-Days Accounts Payable Turnover Average Payment Period Cost of Goods Sold Inventory 360 Inventory Turnover Accounts Receivable 360 Accts. Rec. Turnover Cost of Goods Sold Accounts Payable 360 Accts. Pay. Turnover BRS 19

22 Monitor Financial Position 2016 BRS 20

23 0-1MM 55 % MM 62 Simulated RMA Data Page for Cascade Office Systems Manufacturers Wood Furniture -- Except Upholstered SIC #2511 % Current Data 10-50MM 26 % MM 2 ALL 145 % % Asset Size Number of Statements Assets Total Liabilities Comparative Historical Data Net Worth Total Liabilities & Net Worth Income Data Net 4 Gross Profit 5 Profit Before Taxes Ratios Current 1 Quick 2 / Receivables 12 and 11 Cost of / Inventory 10 and (48) 20.8 (61) (137) Debt / Worth 3 %Profit before Taxes/Tangibles Net worth %Profit before Taxes/Total Assets / Total Assets BRS 21

24 2016 BRS 22

25 Low Gross Margin (Ratio #4) COGs $1,760, ,000 Labor $1,000,000 Purchases $500,000 Extend discounts X.02 Discounts $10,000 in missed discounts COGS $1,760,000-1,000,000 Purchases $760,000 Labor X.05 Low Productivity $38,000 Inefficiency Poor buying and poor pricing If he can manage just a 1% improvement in each of these areas: Buying: 1% x $1,000,000 = $10,000 Pricing: 1% x $2,160,000 ~ $22, BRS 23

26 Too Much Inventory? (Ratio #9 & #10) Industry achieves 4.9 turns Actual COGS was $1,760,000 COGS Inventory COGS Turnover COGS Targeted Turnover = Turnover = Inventory = Targeted Inventory COGS Target Inv. Turn = $1,760, = $359,000 Actual Inventory $419,000 -Targeted Inventory - $359,000 Excess Inventory $60,000 The cost of 1 Day = $60,000 / 12 days = $5,000 Primary Impact: Cash 2016 BRS 24

27 Too Much A/R? (Ratios #11 and #12) Targeted Turnover $2,160,000 = = $254, Actual A/R = $270,000 Targeted A/R = $254,000 $16,000 in Excess A/R The cost of 1 day = $16,000/2 = $8,000 Primary Impact : CASH 2016 BRS 25

28 Hidden Costs Inventory Excess Inventory x 25% = $60,000 x.25 = $15,000 A/R Excess A/R x 25% = $16,000 x.25 = $ 4,000 Total Hidden Costs = $19,000 Primary Impact : Profit Proper Financing Balance Sheet Structure Relates to upper left box on Roadmap Use Cascade Balance Sheet: Year 1 Year 2 Year 3 Total Current Assets $435,000 $365,000 - Total Current Liabilities -$255,900 $309,800 = Working Capital $181,000 $55,000 Working Capital Decrease $126,000 How did this occur? Buildings $130,000 $267,700 L/T Debt $144,000 $114,300 N/P Bank (S/T) $63,400 $282,400 The issue? Match the term of the loan with the life of the asset ---- period BRS 26

29 Profit Mastery Assessment (PMA) SUMMARY REPORT Cascade Office Systems 1. Inventory Hidden Costs & Interest 2. A/R Hidden Costs & Interest 3. Labor 4. Buying 5. Pricing 6. Cash Discount 7. Refinance Building 8. Other: 9. Other: 10. Other: Totals Cash NPBT 2016 BRS 27

30 Why Doesn t This Happen? BRS 28

31 Mark-Up Versus Margin: Clarifying the Issue There are many people who believe mark-up and margin are the same thing and sometimes they are. But generally they're not. The issue is how to arrive at a target selling price when you know the cost. The important concern here is the amount of gross profit dollars contributed from sales to cover general overhead. Here's a simple example to illustrate the point: Item selling price: $ 1.50 Item cost: $ 1.00 Does this price-cost relationship represent 50% mark-up or 33% mark-up? Regardless of your answer, we can safely say that this example represents a gross profit margin of 33%. The standard income statement format gives us the following: Gross Profit Margin = Gross Profit Dollars (GPM) Total Since: Total $1.50 Cost of Goods Sold 1.00 Gross Profit.50 Gross Profit Margin % =.50 =.33 = 33 1 / 3 % BRS 29

32 The Real Question Is: what mark-up does this represent? Or, stated another way, how much do you have to mark up a product over cost to produce a 33 1 / 3 % gross profit margin? The answer here depends on how you define mark-up. Here are the two possible definitions: Definition A (the common definition): Mark-Up = Selling Price Cost Cost = = 50% Definition B (as defined by retailers): Mark-Up = Selling Price Cost Selling Price = = 33 1 / 3 % It's important to note that either definition of mark-up leads to a 33 1 / 3 % gross profit margin. Using the more conventional definition, it requires a 50% mark-up to produce a 33 1 / 3 % gross profit margin, but retailers would say it requires a 33 1 / 3 % mark-up. In other words, mark-up and margin are the same thing when using the retail definition. We believe that confusion and errors! arise when you hear someone say the mark-up and the margin are the same (Definition B), then conclude that you simply multiply the cost by the mark-up (Definition A) to get the margin BRS 30

33 Here's an example: you assume that you can get a 40% margin by using a 40% markup (Definition A), so you do the following with an item costing $1.00: WRONG! $ % = $0.40 mark-up Selling Price = $1.40 But this does not yield a 40% margin: $1.40 Cost 1.00 Gross Profit $0.40 Gross Profit Margin = Cost = = 28.6% As you can see, marking up the cost 40% produces only a 28.6% gross profit margin. Such a mistake would produce a shortfall of 12% or $120,000, if sales were $1,000,000. The moral: understand how to set prices; it's the gross profit you need. Mark-up only represents a concept to produce gross profit. If you confuse these issues, it can cost you dearly in dollars and cents. Standard (Definition A) MARK-UP/MARGIN Table COST MARGIN % MULTIPLIER MARK-UP % 66 2 / 3 % % 60% % 50% % 33 1 / 3 % % 25% / 3 % Now try a few examples using a cost of $1.00 to verify that it works and how it works BRS 31

34 $126K (C) $10K (P) $38K (P) $80K (P) $60K (C) $16K (C) $10K (P) $22K (P) $19K (P) 2016 BRS 32

35 Answer Sheet Cascade Office Systems Ratio Analysis Spreadsheet 2 Years Ago 1 Year Ago Most Recent Year Industry Composite Calculations, Trends, or Observations BALANCE SHEET RATIOS: Stability (or Staying Power ) 1. Current Current Assets Current Liabilities , , Quick Cash + Accts. Rec ,300 Current Liabilities 734, Debt-to-Worth Total Liabilities ,700 Net Worth 307,300 INCOME STATEMENT RATIOS: Profitability (or Earning Power ) 4. Gross Margin Gross Profit 21% 20% 18.5% 22.2% 400,000 2,160, Net Margin Net Profit Before Tax 3.5% 3.0% 0.29% 3.2% 6,300 2,160,000 ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios to-assets Return on Assets Return on Investment Total Assets Net Profit Before Tax Total Assets Net Profit Before Tax Net Worth ASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios Inventory Turnover Inventory Turn-Days Accounts Receivable Turnover Accounts Receivable Turn-Days Accounts Payable Turnover Average Payment Period Cost of Goods Sold Inventory 360 Inventory Turnover Accounts Receivable 360 Accts. Rec. Turnover Cost of Goods Sold Accounts Payable 360 Accts. Pay. Turnover ,160,000 1,131, % 6.9% 0.56% 6.9% 6,300 1,131, % 16.5% 2.0% 15.8% 6, , ,760, , ,160, , ,760, , BRS 33

36 Profit Mastery Assessment (PMA) SUMMARY REPORT Cascade Office Systems Cash Profit 1. Inventory $60,000 Hidden cost & Interest $15, A/R $16,000 Hidden cost & Interest $4, Labor Productivity $38, Buying $10, Pricing $22, Cash Discount $10, Refinance Building $126, Other: 9. Other: 10. Other: Totals $202,000 $99,000 The Profit Mastery Assessment (PMA) process utilizes the Roadmap to develop an action plan that is measurable and creates accountability BRS 34

37 Profit Mastery University Normally $695, just $395 for you! This is the next level of financial management: a world-class online program designed to help you achieve greater profitability and efficiency. Today s session with Steve LeFever represented just a brief selection of the excellent content presented by Profit Mastery. You now have a small taste of how powerful a tool Profit Mastery can be in making businesses more profitable. Here is your opportunity to see the entire Profit Mastery curriculum in an online, high-definition streaming video format (watching it feels like you re there in the classroom with Steve). Total running time: 9.5 hours Total program length with coursework: 17 hours Special Offer To order, or to preview the video series, visit brs-seattle.com/pmu Click Add to Cart and use coupon code PL30016 to receive your $300 off discount. Profit Mastery profitmastery.net info@profitmastery.net 2016 Business Resource Services 35

38 Profit Mastery University Syllabus Profit Mastery Module 1: Introduction: Creating a Foundation for Change Identify the seven components of a complete Fiscal Physical Understand the interrelationships in the Financial Operating Cycle Know the primary uses for net profits in a business Profit Mastery Module 2: Financial Analysis Understand the critical need to consistently monitor financial position Create a practical process, using ratios, to assess financial performance: identifying strengths, weaknesses, and areas of opportunity Appreciate the dynamic relationships that exist between the balance sheet and income statement Profit Mastery Module 3: Price-Volume-Costs Determine how cost patterns affect profits, and analyze the present to make better decisions about the future Determine the profitability of individual products or services to determine appropriate pricing strategies Utilize "what if" scenarios to calculate and substantiate specific expansion, pricing, and purchasing decisions Profit Mastery Module 4: Cash Flow Develop a profit plan and cash budget forecast Identify the effects of short-term and long-term financial cycles Determine the differences between net profit and cash flow Profit Mastery Module 5: Financial Gap Analysis Accurately determine the future asset needs of the company Identify key issues of financial leverage and debt structuring Find the money needed to pay for growth Identify inefficiencies that soak up cash Profit Mastery Module 6: Financial Planning & Planning for Transition Identify different types of asset needs and match them to means of financing Understand what specific sources are used to repay specific types of debt Identify the 5 "C's" of Credit Understand what information financing partners need in order to fairly evaluate a loan request brs-seattle.com/pmu Profit Mastery 200 First Avenue West Suite 301 Seattle, WA info@profitmastery.net profitmastery.net 2016 BRS 36

39 $103,333 (3) $296,667 (1) Payable Aging LOW CASH Too Much Inventory Too Much Customer Credit $5,000 (6) No Cash Discounts on Payables Poor Inventory Control Are You Missing Out on Hidden Cash and Profits in Your Business? Profit Gap our amazing new analysis tool is the answer. Get your first month for free, with no strings attached! Remember how cool the Profit Mastery tools were when you took the course? If you thought the course was good, you'll love Profit Gap. Profit Mastery s Profit Gap financial reporting system is a tool that automatically and securely extracts your financial information from your QuickBooks file to produce a custom report with your business numbers. Profit Gap will provide you with a full report for the first month for free. If it does not find what you are looking for, simply cancel with no liability to pay for anything. Why not?! You have nothing to lose, and possibly a lot of cash to be gained! See your Scorecard, Road Map, Break-Even Analysis, and Financial Gap all come to life! What could you do with $30,000 or even $200,000 more cash? Not only does Profit Gap do all your Profit Mastery calculations, but it also does the math to find hidden cash that most companies do not know they have. The Profit Gap reports that we have run have often revealed large amounts of cash hidden within most businesses. Profit Gap has rarely found less than $30,000 of hidden cash, and often finds more than $200,000, depending on the size of the business. Profit Gap usually finds 10%-20% of a company s annual revenue in hidden cash. brs-seattle.com/profitgap The company whose data is shown the picture at the top of this page (showing part of the Profit Road Map), is not efficiently managing their Payables and their Inventory levels, indicating nearly $400,000 of hidden cash! Profit Mastery profitmastery.net info@profitmastery.net 2015 Business Resource Services 2016 BRS 37

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41 Seminar Evaluation Practical Tools for Control, Survival, and Success If you are a CPA using this program for CPE credits, please fill out the other side. 1. Please rate the overall session: Excellent Good Fair 2. Please rate the instructor overall: Excellent Good Fair 3. Would you recommend the seminar to others? Yes No 4. Do you belong to any trade association/corporate/franchise network that might be interested in a similar presentation at an upcoming meeting? Would you be interested in sponsoring a similar seminar for your company? If so, fill in your name at the bottom of the page so we can follow-up. Organization City State Contact Name 5. Which future seminars would be of interest to you? Business Valuation Planning for Transition/Estate Planning Strategic Planning (incorporating marketing and financial issues) 6. Are there any additional comments you wish to make about the course content, teaching materials, or the instructor? 7. May we use your name in future publicity for this program? Yes No 8. Please fill in your name, address, and phone number below. NAME COMPANY NAME STREET ADDRESS CITY STATE ZIP PHONE: FAX Please sign me up for the free Profit Mastery e-zine. Be sure to complete your address above! (You can also sign up at BRS 39

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43 Cascade Office Systems Ratio Analysis Spreadsheet 2 Years Ago 1 Year Ago Most Recent Year Industry Composite Calculations, Trends, or Observations BALANCE SHEET RATIOS: Stability (or Staying Power ) 1. Current 2. Quick 3. Debt to Worth Current Assets Current Liabilities Cash + Accts. Rec. Current Liabilities Total Liabilities Net Worth INCOME STATEMENT RATIOS: Profitability (or Earning Power ) 4. Gross Margin 5. Net Margin Gross Profit Net Profit Before Tax ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios 6. to Assets 7. Return on Assets 8. Return on Investment Total Assets Net Profit Before Tax Total Assets Net Profit Before Tax Net Worth 21% 20% 3.5% 3.0% % 6.9% 20.9% 16.5% ASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios Inventory Turnover Inventory Turn Days Accounts Receivable Turnover Accounts Receivable Turn Days Accounts Payable Turnover Average Payment Period Cost of Goods Sold Inventory 360 Inventory Turnover Accounts Receivable 360 Accts. Rec. Turnover Cost of Goods Sold Accounts Payable 360 Accts. Pay. Turnover BRS 19