Managing Business Growth
How to stay out of the red
Presented by Michelle Bomberger and Ron Kranz
Which direction are you headed?
3 10 years5today
Growth Strategies
Organic Growth: More of the same
Geographic Expansion: New areas
Market Niches/Segments:
Specialization
Innovation: New products & services
Merger & Acquisition: Buy your way in
Business Re-conceptualization:
Do the same thing in a different way
Conceptual Age Strategies:
Arbitrage processes
What changes as the business grows?
Culture
Risk
Formality
What are we growing?
Top line
COGS
Expenses
Bottom line
How to measure growth - methods
% Growth – 3 years
Rolling 12 months
Rate-of-Change (Growth)
2012$’s - 2010$’s2010$’s
X 100
Monthly Revenue: April 2013 back to May 2012
Rolling 12 months April 2013 - Rolling 12 months April 2012
Rolling 12 months April 2012 X 100
12/12 – 3/12 – 1/12 ANALYSIS
-150.0%-100.0%-50.0%
0.0%50.0%
100.0%150.0%200.0%250.0%
Current Client JAN 05 thru CURRENTSeries3 Series2
Series1
Chan
ge
Planning for the range of uncertainities
StartingBenchmark
shrink
desire
flat
Economic cycles for the rate of change
Best
Caution
Danger
AdvancingAdvancin
g
Rate of change is a predictive tool
JAN JAN MARAPRMAYJUNJULAUGSEPTOCTNOVDECJAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDECJAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDEC JAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDEC JANArtitudes Design A A A B B D C B B B C B C C C C B B B D C D D D D D D A A A A A A A D B B B D A A A A A A A D B B BRevolution A A A B B C C D D D B A B B A A D A C C B B B C C C B D C D D D A A A A BGateway Construction C C C C B B B C C C D D D D D D D D D D A A A A A A A A A B C C C C C C C C C C B B B B B C C C B B B B BGourmet Mixes C C C C C C C B D B D A D A A B B B B B B C B B B C B B B C B B B B B C C C C C C B C C C C C B B B B B B B B B B C C C CInterface Technology NW C B C B C B A A C B B B C C C C C D D D D D D D D A A A A A A A A A B B B B C C C C C C C C B C C C B B B B B B B B C C CTime Equipment Company C B A A A B B B B C C C C C C C C C D D D D D D A A A A A A A B B B B B C C C C C D A D B A A B B B B B B B B B C C C C CDarwin Pet Products B B B B C C C C C C C C C C C C C C C C C C C C B B B B B B B B B B B B B B B C C C C B B B B B B B B B B B B B B C B BEvergreen Beauty College C C C C C C C C B B B C C CEquinox Business Law B B B B D C B B B C B B B B C C C C C C C B C C C C C D D A B B B B B B B B
Counter- Intuitive
2012
2009
2010
2011
Planning for scenarios
Plant Seeds
The Good Life
Money Grows on Trees
Weather the Storm
INV
ESTM
EN
T
P
RIO
RIT
IES
FUNDING AVAILABILITY
Long Term
Short Term
AbundantLimited
Scenarios depend on economic cycles
Weather the Storm
Danger
Money Grows on Trees
Caution
Best
The Good Life
Advancing
Plant SeedsFUNDING AVAILABILITY
INV
ESTM
EN
T
P
RIO
RIT
IES
Long Term
Short Term
AbundantLimited
THE GOOD LIFE STRATEGY
The Good Life
Best
Pay down debt and build cash reservesImplement business re-conceptualization strategies Introduce new products/services; enter new marketsImplement exit strategy and sell now to capture high valuationFund ownership buyoutImplement a self-insurance programAccelerate training in new strategic or market areasBuild inventory and secure additional outside vendorsConsider outside manufacturingSpin off undesirable operationsImplement Corporate Social Responsibility Plan and give back
Economic forecasting tools
Understanding Economic Cycles
Rolling 12-Month Analysis
Financial Health Ratios
Key Performance Indicators
Financial Health Ratios
BALANCE SHEET RATIOS
INCOME STATEME
NT RATIOS
INVESTMENT RATIOS
ASSET MANAGEMENT
RATIOS
Stability Profitability
Overall Efficiency Working Capital
staying power earning power
roi power cashflow power
Current Ratio Gross Margin
Sales-to-Assets Ratio
Inventory Turnover Ratio
Quick Ratio Net Margin Return on Assets Ratio
Inventory Turn-Days Ratio
Debt:Equity Return on Equity Ratio
AR Turnover Ratio
AR Turn-Days Ratio
AP Turnover Ratio
AP Turn-Days Ratio
Key performance indicators
Sales/Revenue Operating Costs Profit Inbound Calls Net Cash Flow Gross Margins
Proposed
Website Visits Cash Burn Rate Per Day
Labor Efficiency
Proposals Submitted Percent Indirect Labor Billable Hours
Conversion Rates Number of Complaints Aged Receivables
Order Backlog Re-work Hours Write Downs
Work in Progress Contribution Costs Largest Expense to Sales
Machine Up Time # Overhead Employees
Items Shipped
Gross Profit per Day Purchase Orders Issued
Labor Fee Multiplier
New Accounts Opened Number Sick Days Invoices Mailed
Repeat Orders Number Working Days Machinery Down Time
Leading
Revenue/Employee
Macro economic indicators
Gross Domestic Produce US Leading Indicator
M2 Money Supply Housing Starts
After Tax Disposable Income
Retail Sales
Durable Consumer Goods Aerospace Manufacturing
Price of Oil Interest Rates
Unemployment Non-Durable Consumer Goods
Driving influences on businesses
Society Technology
Economy Energy
Politics Environment
Population Automation
Inflation Oil Majority Party
Regulations
Education Bio-Tech GNP Coal War Clean Water
Work Force
Electronics Interest Rates
Solar Terrorism Clean Air
BoomersRetiring
Wireless Dollar Value
Nuclear
IRS Endangered Species
AbundanceMentality
Hybrid Cars
BankFunds
Fusion Social Security
Global Warming
GlobalTalent
Aerospace Private Funds
Wind Regulations
Stock Market
Bio Health Care
In conclusion…
The plan rarely goes as planned
Find the predictive tools that work for you
Know the rate of change and trends
Plan for various scenarios
Measure financials
Thank you for your attention
Any questions?
WEATHER THE STORM STRATEGY
Eliminate all unnecessary expensesReduce trainingRenegotiate vendor contractsEnsure competitive banking ratesRe-finance long-term debtDevelop energy savings programsMove to a paperless environmentHire a savings consultant to review costsUse personal mileage plans for business travelVideo conference instead of travelImplement employee layoff planReduce employee benefitsOutsource and out-task
Weather the Storm
Danger
PLANTING SEEDS STRATEGYAcquire a troubled company
Upgrade key playersHire sales personBoost your marketing and advertisingRaise pricesExtend credit to loyal customersPurchase a facility or implement improvementsUpgrade or replace equipmentExpand internationallyImplement training program in core competenciesRe-conceptualize your business
Caution
MONEY GROWS ON TREES STRATEGY
Giving exuberant bonusesExcessive stock optionsPurchasing luxury automobiles, boats, and airplanesProviding unnecessary employee perks, i.e. membershipsTaking executive vacations/retreatsDraining cash reservesFunding ideas and research without sound strategySeason tickets to sporting eventsFishing or spa tripsPolitical contributions
Money Grows on Trees
Sales/Revenue February 2010 to January 2011 e.g. $1.1M
Sales/Revenue February 2009 to January 2010 e.g. $0.9M= 1.22
Sales/Revenue February 2009 to January 2010 e.g. $0.9M
Sales/Revenue February 2008 to January 2009 e.g. $1.1M= 0.82
ROLLING 12- MONTH ANALYSIS
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