FINANCE 101

August, 2015

HOW DO WE MAKE MONEY?

WE SELL GREAT IDEAS

Big Ideas

WE SELL GREAT CREATIVE

WE SELL GREAT EXECUTION & ACCOUNT SERVICE

IS THAT ALL THERE IS TO IT?

WE NEED TO GET PAID FOR THAT GREAT WORK

Bill our clients for what we do. Prepare good estimates Use our labor wisely and

efficiently. Bill clients for all legitimate

time.

Bill for all out of pocket expenses.

Bill sooner. Collect faster.

THE PROFIT & LOSS STATEMENT

WHAT OUR P&L SHOULD LOOK LIKE

Account Teams Overhead Total Agency

Revenue $ 100 $ - $ 100

Salary & Related 45 10 55

Contribution 55 (10) 45

Operating Expenses 5 15 20

Profit Before Tax $ 50 $ (25) $ 25

WHAT CAN YOU DO?

Manage your time wisely. Minimize the use of freelance. Get estimates signed, obtain POs. Bill the client for the work we do.

HOW A LITTLE ADDS UP.

Number of billable employees 100Hours given away each week 2Total hours 200Weeks per year 52Annual hours given away 10,400 Average billing rate per hour $ 100 Value of time given away $ 1,040,000

CASH FLOW

HOW DO CASH FLOW AND PROFIT DIFFER

Cash flow is money collected less money paid out.

Cash flow is measured by our bank account.

Profit is revenue less expenses.

Profit is based on accrual accounting

to match revenue and expenses.

You could show a profit but have negative cash flow.

Cash is what we use to pay our vendors and employees.

WE PAY BEFORE WE COLLECT

On average we collect from

clients in 45+ days.

On average we pay our

vendors in 30 or less days.

We pay our employees in

15 days.

ALCONE’S SECRET MONEY TREE

WHAT WE NEED TO DO

We need to bill and collect out of pocket expenses up front.

This is Omnicom policy of sequential liability

Generally you can expect that we won’t cut checks until we are paid.

We should not spend out of pocket before we have client

purchase orders.

If we start work before the PO is approved the client has

no incentive to push for it.

We can’t bill clients without a PO.

WHAT WE NEED TO DO

We need to bill for labor as quickly as possible. Often we wait to bill until after the project is complete.

We can bill everyday of the month.

We can bill 100% up front.

We should not be hesitant to ask for the money. We are not a bank and we should be paid in a timely manner.

HOW WE MAKE MONEY!

Collect the

money

Do great work

Bill the client

THE END