budgeting, forecasting, & p&l - rab.com
TRANSCRIPT
Budgeting, Forecasting, & P&L
Talking Numbers Knowing how to read (or getting comfortable with
reading) budgets, P&L’s and other financial reports gives you a leg up. Managers who
learn how to understand and interpret financial
reports will progress further in their careers.
In order to learn, take the initiative! Go through the proper channels at your organization to seek out
this information.
Your controller is your friend!
Talking Numbers
Budget Basics
The biggest challenge of budgeting is that we have limited resources – and unlimited wants.
Budget Basics
Relate the budgeting process to something you already know:
Personal Budget
Your paycheck is your NET Revenue (top line)
Your Operating Expenses are your mortgage, electric, gas, water, clothing, entertainment, etc. These may include items that you incur every month (mortgage) - or items that are unexpected or infrequent (car repair, Louboutins).
Your “Bottom-Line Profit” (or loss) = your paycheck – operating expenses
From your GM, to your Controller, to your Department
Heads to your Sales People… YOU ARE A TEAM.
Budget Basics
Do you get your annual budget from Corporate? Or is it self-defined?
Do you get an annual percent increase? Or a Hard Dollar increase?
What are the Key Focus Areas as directed by Corporate Initiatives?
Integrated Marketing/NTR Digital Local National New Business Multi-platform Sales
Cluster Opportunities Political Automotive Event/ On-Site Sponsorships New Sponsorships Other Synergies
Budget Basics
See a Budget as a “Road Map”
When you plan a road trip, you think Big Picture:
“Where do I ultimately want to go?”
“What route will I take to get there?””
“What if I go the wrong way?”
“How will I course correct?”
Budget should be an educated guess
Budget Basics
Think “Big Picture,” but start small (so as not to be intimidated)
Create a “3-Liner”
NET Revenue line
Operating Expenses line
Profit/ (Loss)
Budget Basics
Market Growth
• Historical Data • Xray • Miller Kaplan
Competitive Landscape • Anticipating a new competitor? • Internal Format Changes • Other stations in the marketplace • Talent considerations
Ratings Goals and Implications
Budgeting Basics – Start with Assumptions
Assumptions (continued)
Pricing Strategies • What is your typical rate of sellout? • What are your inventory challenges?
Staffing Concerns • Is the staffing level appropriate? • Are there performance concerns? • Review and strategize plan for individual
AE enterprises
Economic Environment • Retail/Auto sales as indicators
Expense Considerations • Fixed costs/contractual increases
Budgeting Basics – End with Threats/Concerns/Keys to Success
Threats & Concerns
• If Station X Flips formats • Pricing strategy at Y Company could
make competitive landscape difficult • Risk of losing John Doe
Keys to Success • I really need those dollars in my digital
budget to support this level of revenue growth
• New sales assistant is necessity to support overloaded sales staff
So….how do we know how we’re doing?
On a very basic level, a P&L is just a summary of the actual financial activity of your
business:
Revenue Less: Expenses
Profit
So….how do we know how we’re doing?
Why Prepare a P&L? It answers the question, “Are we making money?”
• It’s reviewed by the Controller/Market Manager/DOS regularly to monitor operations
• It supplies Senior Management with timely and important information regarding revenues and expense
• It allows them to determine if adjustments might be necessary to recoup losses or decrease expense
• It provides data by which managers and investors can evaluate your company’s profitability
What Comprises a P&L?
1) Revenue “Top Line”
2) Operating Expenses
3) NET Profit (Loss) “Bottom Line”
Sample Radio Station P&L – JULY 2016 Revenues BUDGET ACTUAL VARIANCE
Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311
National Revenue $ 500,684 $ 356,744 $ (143,940)
NTR $ 237,540 $ 215,600 $ (21,940)
Digital $ 103,450 $ 156,930 $ 53,480
Network $ 53,263 $ 50,000 $ (3,263)
Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648
Local Agency Commission $ 187,757 $ 201,655 $ 13,898
National Agency Commission $ 75,103 $ 53,512 $ (21,591)
Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341
Operating Expenses
Technical $ 103,874 $ 163,980 $ (60,106)
Programming $ 459,336 $ 452,676 $ 6,660
Promotions $ 75,689 $ 80,555 $ (4,866)
Sales $ 939,255 $ 1,034,865 $ (95,610)
Digital $ 43,925 $ 44,966 $ (1,041)
G&A $ 387,215 $ 401,742 $ (14,527)
Total Expense $ 2,009,294 $ 2,178,784 $ (169,490)
Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149)
Profit Margin 33.14% 29.82%
The P&L is a great way to review what’s already happened…
But how do we anticipate and plan for future results?
FORECAST!
Revenue
• Ideal – 90 days • Real – 30-60 days • Pending, Activity, Booked Business • Changes in Marketplace
Expense
• What has changed since our budget? • Where is our revenue performance?
‐ Revenue-related expense ‐ Spend More/Pull Back
• Any items we know are going to be different?
Forecasting Basics
FORECAST Revenues BUDGET FORECAST VARIANCE
Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311
National Revenue $ 500,684 $ 356,744 $ (143,940)
NTR $ 237,540 $ 215,600 $ (21,940)
Digital $ 103,450 $ 156,930 $ 53,480
Network $ 53,263 $ 50,000 $ (3,263)
Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648
Local Agency Commission $ 187,757 $ 201,655 $ 13,898
National Agency Commission $ 75,103 $ 53,512 $ (21,591)
Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341
Operating Expenses
Technical $ 103,874 $ 163,980 $ (60,106)
Programming $ 459,336 $ 452,676 $ 6,660
Promotions $ 75,689 $ 80,555 $ (4,866)
Sales $ 939,255 $ 1,034,865 $ (95,610)
Digital $ 43,925 $ 44,966 $ (1,041)
G&A $ 387,215 $ 401,742 $ (14,527)
Total Expense $ 2,009,294 $ 2,178,784 $ (169,490)
Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149)
Profit Margin 33.14% 29.82%
Budget = Educated Guess
• Make your Controller your friend • Work with your team on goal and strategy • Use Assumptions (history, Miller Kaplan, other data) to create your road map • Have a plan for the unplanned
Forecast & P&L • Be aware of your performance • Be educated about changes that will shift your projections • Work with your team to resolve issues quickly
Budgeting/Forecasting/P&L - Takeaways
If you need any additional tips, guidance, etc. Feel free to reach out to me at any time! Erika Sylvia
Market Controller, Emmis Communications
Budgeting, Forecasting, & P&L