Post on 20-Aug-2020
Increase Your Revenue by Engaging Your Best Clients
Fiscal Advantage, LLC
• Roger Jacobi, CEO
• Serial Entrepreneur
• Associate Professor
• MBA Finance/Marketing U of Michigan
• 30+ years business experiene
Financial Statements
Financial Statements
Client Engagement • If this was your client, observations?
• Client asks you “How am I doing?”
• If you want to offer Advisory Services, what would you recommend?
• Value Pricing: what additional services will you offer?
• You need to understand the business financials better than the business owner
• Provide a Business Performance Review
• Become a “Strategic Business Advisor”
Agenda
Phase 1: Assessment Company Breakeven Points
Key Financial Statement Account Review
Industry Comparables
Sales Analysis – Profitability & Working Capital
Phase 2: Business Valuation
Phase 3: Forecasting Income Statement
Balance Sheet & Cash Flow
Business Value
Benchmarking – implementing change
Business Performance Review
Fiscal Analytics
Fiscal Analytics
Fiscal Analytics
Fiscal Analytics
Fiscal Analytics
Fiscal Analytics
Fiscal Analytics
Insightful data developed to understand the
components of profit, cash flow & business
value.
Data which allows the company to make the
best decisions to improve performance.
Fiscal Analytics provides a financial
roadmap for companies that want to THRIVE.
Fiscal Analytics
1 Review financial performance
2 Identify opportunities & dollars
3 Forecast & implement to thrive
Income Statement Review
• Cost of Goods Sold – Cost Controls
COGS at 2013
level would add
$159,165 to profits
COGS at Industry
Avg of 63.6%
would add
$525,444 to profits
Income Statement Review
• Operating Expenses – Cost Controls
Congratulations!
Better than
Industry
Best in Recent
History
Breakeven Point
Breakeven Point
Historical Days to Breakeven have
improved slightly over time.
Income Statement ($ in 000) 2013 $ 2014 $ 2015 $
Sales $ 4,247 $ 4,905 $ 5,721
COGS ($2,973) 70.0% ($3,455) 70.4% ($4,164) 72.8%
Op Exp* ($1,224) 27.5% ($1,318) 25.8% ($1,436) 24.1%
Op Income $ 50 $ 132 $ 121
Non Op Exp ($ 5) ($ 0) $ 7
Profit* $ 45 1.1% $ 132 2.7% $ 128 2.2%
Breakeven Point
Attainable Days to Breakeven estimated at 263 Days.
Breakeven Point
Breakeven variance is consistent.
Breakeven Point
Historical profits, excluding Owners Excess
Compensation are shown for the past 3 years.
Breakeven Point
Based on best Operating Expense of 24.14% (2015)
and best COGS of 70% (2013)
Breakeven Point
Difference is the unclaimed profit.
The excess cost built into the cost structure.
Breakeven Point
Difference is the unclaimed profit.
The excess cost built into the cost structure.
Unclaimed profit variance high
Industry Comparables
What benchmarks should we use? Company’s historic best already achieved
Industry comparables – industry averages Industry sources – online
Fiscal Checkup™ uses RMA
NAICS (North American Industry Code System)
A “blended” NAICS matches the company.
Income Statement: Revenue
How profitable are our new sales?
Separate the Operating Loss into portion due to ratio
changes and the portion due to sales changes
Income Statement: Revenue
How Profitable are the new sales?
Income Statement: Growth
• How fast are we really growing?
Income Statement Review
• Payroll as Percentage of Sales
Very Positive
Trend – should go
down with Sales
increases
Income Statement Review
• Sales per Employee
Shows improved
productivity
Income Statement Review
• Profits per Employee
Positive Trend,
but slip last year
is concerning
Income Statement Review
• Capital Expenditures
Not keeping up
with significant
Sales increases
Income Statement Review
• Assets to Sales & Asset Turnover
Income Statement Review
• Income Statement Report Card
• Cost of Goods Sold
• Operating Expenses
• Sales Margin Review
• Real Growth Rate
• Payroll to Sales
• Sales per Employee
• Profit per Employee
• Capital Expenditures
Balance Sheet Review
• Accounts Receivable
AR Days 26%
better than peers,
adding $181,462
in cash flow.
Balance Sheet Review
• Accounts Receivable
AR as percentage
of Sales
continues to
decline – very
positive trend
Balance Sheet Review
• Inventory
Inventory Days
29% worse than
peers, consuming
$269,636 in cash
flow.
Balance Sheet Review
• Inventory
Ideally this should
be trending down,
but slight
improvement last
year.
Balance Sheet Review
• Accounts Payable
AP Days 50%
more than
peers, adding
$211,162 cash
Positive Trend
Balance Sheet Review
• Accounts Payable
Positive Trend
Paying bills
faster each year
Balance Sheet Review
• Cash Management
Balance Sheet Review
• How much working capital is needed to fund sales growth?
Balance Sheet Review
• Balance Sheet Report Card
• Accounts Receivable
• Inventory
• Accounts Payable
• Overall Working Capital Management
Business Performance Review
Phase 2: Valuation
• Why?
• Owner’s unrealistic opinion of value
• Report Card – clear measurement of value of past efforts
• Basis to measure future improvements
• Sophisticated computer based Valuation
• Financial Statement Adjustments
• Company specific Discount Rates
• Cash flows estimated based on past trends
Phase 2: Valuation
Discounted Cash Flow Capitalization of Earnings Multiple of EBITDA Multiple of Book Value Multiple of Earnings
… and a blended value that is validated
Phase 2: Valuation
Phase 3: Forecasting
Changeable Variables:
1. Sales Growth Rate
2. COGS as % of Sales
3. Operating Expenses as % of Sales
4. AR Days
5. AP Days
6. Inventory Days
7. Capital Expenditures as % of Sales
Forecasting: Current Trends
Forecasting: Current Trends
Forecasting Improvements
• Cost of Goods Sold • Recommendation: $525,444 profit improvement
potential if industry average could be achieved
• Inventory • Recommendation: $269,636 cash flow improvement
potential if industry average could be achieved
• Capital Expenditures • Observation: Capital Expenditures not keeping up with
Sales growth
Forecasting Improvements
Account Current Industry Goal
Cost of Goods Sold 72.8% 63.6% 67.6%
Inventory 106.6 days 83 days 96.6 days
Capital Expenditures 1.3% n/a 1.8%
Income Statement Forecast Historical Based
Override
2016 2017 2018
Income Statement Forecast
Balance Sheet Forecast Historical Based
Override
2016 2017 2018
Balance Sheet Forecast
Loan Coverage Forecast Historical Based
Override
2016 2017 2018
Loan Coverage Forecast
Business Valuation Historical Based
Override
2016 2017 2018
Business Valuation
Role of Business Advisor
• Facilitator/Catalyst for Change/Leader • Give visibility to the opportunities for improvement
• Help develop a plan to solve the problems - Benchmarking
• Help hold people accountable – if allowed
• Become a Strategic Business Advisor
• Role of the Expert • The expert might bee YOU
• Often employees are key to solving problems
• You may need to identify external experts
Benchmarking
• Benchmarking – What is it? • Compares company results to a standard
• Measures the gaps that exist
• Develops a plan to close the gaps
• Continued Benchmarking to remain efficient
• Benchmarking – What are the Standards? • Compares the company results to the industry
• Compares the company to their best performance
Communicate
With Buy-in
Gather Data
Gather Needed Data
Benchmark & Measure Gaps
Recalibrate Monitor Results
Devise Plan & Implement
Benchmarking, 6-step Process
Benchmarking, 6-step Process Communicate
With Buy-in
Gather Data
Gather Needed Data
Benchmark & Measure Gaps
Recalibrate Monitor Results
Devise Plan & Implement
On-going process
Benchmarking, 6-step Process
Communicate With Buy-in
Gather Data
Gather Needed Data
Benchmark & Measure Gaps
Recalibrate Monitor Results
Devise Plan & Implement
On-going process
Survey Says ….
• What SMB’s Want, Sleeter 2015
• 55% Top priorities are financial
• 49% Need help to accomplish priorities
• 44% Accounting Firm is having low or no impact
• 12% Plan to seek a new accounting firm
Fiscal Checkup Mission
• Assist companies that want to optimize financial performance
• Empower Business Advisors who want to be a catalyst for that change
• Provide a proven process to identify key financial parameters that have greatest potential impact
Business Performance Review
Cost of Goods Sold Operating Expenses Capital Expenditures Margin Analysis Payroll as % of Sales Break Even Analysis 54 Financial Ratios Payables to COGS Profit per Employee
Accounts Receivable Accounts Payable Inventory Growth Rates Revenue per Employee Working Capital Mgmt Inventory to Sales Net Fixed Assets to Sales Margin on New Sales
Operating Expenses per Employee
Business Performance Review
Discounted Cash Flow Capitalization of Earnings Multiple of EBITDA Multiple of Book Value Multiple of Earnings
… and a blended value that is validated
Business Performance Review
1. Changeable Variables: 2. Sales Growth Rate 3. COGS as % of Sales 4. Operating Expenses as % of Sales 5. AR Days 6. AP Days 7. Inventory Days 8. Capital Expenditures as % of Sales
Business Performance Review
Fiscal Checkup
• Affordable: $495 list price
• Discounts & subscriptions available for Advisors
• Grow Advisory Service Revenue
• Improve Client Retention
• Secure New Business Clients
www.FiscalCheckup.com
Increase Your Revenue by Engaging Your Best Clients
Questions ?
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