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Rolling ForecastsAlliance Meeting November 11, 2005

Kevin J. Martin

Partner & CFO

Johnson Ventures, Inc.

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Topics

What is it? Does a rolling forecast make sense for you? How have I successfully utilized this tool? Matters to consider when you are building a

rolling forecast model.

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What is a rolling forecast?

Dynamic financial road map. Tool for testing assumptions. A product that better links to your strategy

and the underlying initiatives. Pragmatic tool for your team Potentially a waste of time.

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Is it for you?

How is your current forecast method working? How dynamic is your business? How does your team respond to change? Who will use the information? What will they do with it?

Nothing? Buy stuff? Hire people? Get depressed about their bonus? Buy the new truck?

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How I used it…

Consolidation play Company experienced CAGR in revenue of approximately 115%

over three years Same store growth, acquisitions, greenfields We determined key revenue and cost drivers We shortened the time dedicated to preparing information about

what had happened and spent the majority of the month focused on where we were headed.

Key considerations Cash management Capacity constraints Expectations – owners, bankers, employees

We updated actual performance for a trailing twelve months, forecasted forward 12 months and once a year updated a five year plan.

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Things to consider if you adopt it… How much time do you currently spend analyzing history? Why? Identify the tangible changes in your business. What drives your business?

Pareto Rule to simplify the effort Revenue drivers Cost drivers

Evaluate whether you need to look at the rest. Consider static estimates for the rest – revisit less frequently.

What flexibility do your systems provide? Who will lead the charge? How will you train your people to utilize rolling forecasts? How will a rolling forecast impact your compensation program?

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Summary

It is not for everyone. Identify who will lead this effort. Make it an evolution not a revolution. A less frequent effort may be a better fit. Identify key revenue and cost drivers. Determine how you will compile. Determine how the information will be used.