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Presented by: SCORE – Northern Nevada www.score-reno.org Revised 05/30/13 Simple Steps Workshop Watch Your Business Grow

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Simple Steps Workshop. Watch Your. Business Grow. Presented by: SCORE – Northern Nevada www.score-reno.org. Revised 05/30/13. About SCORE - Reno. “ 40 +” Experienced Executives Volunteering as Business Mentors Experienced in most Industry Sectors - PowerPoint PPT Presentation

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Page 1: Simple Steps Workshop

Presented by:SCORE – Northern Nevada

www.score-reno.org Revised 05/30/13

Simple Steps Workshop

Watch Your

Business Grow

Page 2: Simple Steps Workshop

About SCORE - Reno

“40+” Experienced Executives Volunteering as Business Mentors

Experienced in most Industry Sectors

Skilled in Marketing, Finance, Management, etc.

Seminars & Workshops: Simple Steps for Starting Your

Business Webinars

Free Mentoring: One-on-One Email

Business Resources: www.score.org www.score-reno.org SCORE–Reno Office: (775) 784-4436

Page 3: Simple Steps Workshop

Let’s Get Acquainted!

Your Name & Your Business

Name

Describe Your Business

Page 4: Simple Steps Workshop

Financial Management Workshop

This workshop design to help YOU and YOUR business

It will require your active participation during 3 formal sessions plus significant additional

outside work

You will be required to work with your SCORE Mentor in the workshop sessions and in

completing the necessary homework

Page 5: Simple Steps Workshop

Confidentiality

To make the workshop more effective you will be utilizing your

own business information with your SCORE Mentor

Keep this in mind as you participate in the session

discussions and when you make presentations during the workshop

Page 6: Simple Steps Workshop

Our Schedule

Reading and planning preparation prior to 1st session. 1st session 4 to 6 hours.

Schedule homework with your SCORE Mentor

2nd Session 4 to 6 hours to create and implement a formal plan for your business.

Follow up counseling with your SCORE Mentor. 3rd session 60 to 90 days later to review and test how

will YOUR plan is working.

Page 7: Simple Steps Workshop

Your Commitment

• Make sure you are willing to Commit to the entire workshop

• Your SCORE Mentor is there to assist you in understanding and interpreting the information presented

• However, you are the one who will actually do the homework

Page 8: Simple Steps Workshop

Financial Management

The benefit is to help you

learn to better

manage your business

To provide tools and

information to both grow and enhance

the profitability of your business

To understand

where money comes from and how it is

utilized in your business

Page 9: Simple Steps Workshop

Trusted Advisors

Accountant / CPA

Attorney

Banker

Insurance Broker

SCORE Mentor

Page 10: Simple Steps Workshop

Workshop is designed to help

Create effective relationships with

your trusted advisors

Measure your company’s

financial health (and yours)

Understand basics of Cost

Accounting

Manage Business Risks and Cash

How to utilize Cash Flow

Forecasting and Budgeting

CreateMeasureUnderstandManageUtilize

Page 11: Simple Steps Workshop

Using Financial Information

Conform to generally accepted accounting principles.

Provide information needed in dealing with outsiders – Banks, IRS, etc.

Understanding why standard accounting methodology is important.

Your Accounting System must:

Page 12: Simple Steps Workshop

Bookkeeping Methods

Cash• Recognizes income

and expenses at time received or paid

Accrual• Recognizes income

and expenses at other times

Combination

• Use of both Cash and Accrual

Page 13: Simple Steps Workshop

Income Statement(Profit or Loss)Cash Flow

Statement(The Money)

3 Key Financial StatementsYou Need to Know:

1 23

Balance Sheet(Business Overview)

Page 14: Simple Steps Workshop

Other Financial Statements

(Important for Daily Controls)

Incoming• Accounts Receivable – Daily Sales• Age Analysis, Delinquent Accounts• Accounts Collection Policy

Outgoing• Accounts Payable – Cash Requirements• Payables Days Outstanding – Purchasing Terms• Allocation of Expenses

Page 15: Simple Steps Workshop

Utilizing information

Balance Sheet – A snapshot of where you are

Cash Flow Projections – Where you need to be

Page 16: Simple Steps Workshop

Cash Flow Model

(Projections)Show inflow and outflow of

cash for a period of time

Indicates increase or decrease in available cash

Most Important – Allows for planning cash needs

Cash Flow

Page 17: Simple Steps Workshop

How to Use Probabilities

To determine realistic projections for Cash Flow

Page 18: Simple Steps Workshop

How to Estimate Sales

(Alternate Method)

Page 19: Simple Steps Workshop

Cash Flow

Revenue Projections

Page 20: Simple Steps Workshop

Cash Flow

Operating Expense Projections

Page 21: Simple Steps Workshop

Cash Flow

Financial ProjectionsFINANCING (Description) Month 1 Month 2

(s) Loan Principal Payment(t) Capital Purchases [Specify](u) Other Start-up Costs(v) Reserve and/or Escrow [Specify](w) Owner's Withdrawal 3,000$ 3,000$

6. TOTAL CASH PAID OUT

[Total 5a thru 5w] 30,223$ 34,314$ 7. CASH POSITION

[End of month] (4 minus 6) 9,272$ 10,055$

Page 22: Simple Steps Workshop

Cash Flow

Example of ProjectionsMonthly Cash Flow Projection

Enter Company Name Here

Enter Date Here

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 TOTAL1. CASH ON HAND[Beginning of month]

$10,000 $ 9,272 $10,055 $ 9,298 $ 8,879 $ 5,830 $ 2,151 $ (912) $ (1,710) $ (63) $ 4,357 $ 8,005 2. CASH RECEIPTS

(a)Sales (45% of Sales) $12,500 $13,875 $14,290 $15,750 $ 16,785 $ 17,525 $ 18,525 $ 17,650 $ 17,325 $ 16,350 $ 15,675 $ 13,250 189,500 (b) Collections from Credit Accounts (55% of Previous Mo Sales) $16,995 $16,222 $19,303 $19,851 $ 21,231 $ 20,909 $ 21,139 $ 21,815 $ 21,706 $ 21,467 $ 22,174 $ 20,817 243,629 (c) Loan or Other Cash Injection $ - $ 5,000 $ 2,500 $ 3,000 $ - $ - $ - $ - $ - $ 2,500 13,000

3. TOTAL CASH RECEIPTS [2a + 2b + 2c=3] $29,495 $35,097 $36,093 $38,601 $ 38,016 $ 38,434 $ 39,664 $ 39,465 $ 39,031 $ 40,317 $ 37,849 $ 34,067 446,129

4. TOTAL CASH AVAILABLE [Before cash out] (1 + 3) $39,495 $44,369 $46,149 $47,900 $ 46,895 $ 44,263 $ 41,815 $ 38,553 $ 37,321 $ 40,254 $ 42,206 $ 42,072 5. CASH PAID OUT

(a) Purchases (Merchandise, Inventory, Raw Materials) $11,798 $14,039 $16,242 $17,371 $ 19,008 $ 19,217 $ 19,832 $ 18,943 $ 17,564 $ 16,127 $ 15,140 $ 15,330 200,610 (b) Gross Wages (excludes withdrawals) $ 7,500 $ 8,500 $ 8,500 $ 9,000 $ 9,250 $ 9,500 $ 9,500 $ 8,000 $ 8,000 $ 8,000 $ 7,500 $ 7,500 100,750 (c) Payroll Expenses (Taxes, Benefits, etc.) $ 2,625 $ 2,975 $ 2,975 $ 3,150 $ 3,238 $ 3,325 $ 3,325 $ 2,800 $ 2,800 $ 2,800 $ 2,625 $ 2,625 35,263 (d) Outside Services $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 1,200 (e) Supplies (Office and operating) $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 1,200 (f) Repairs and Maintenance $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 6,000 (g) Advertising $ 1,500 $ 2,000 $ 2,250 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,000 $ 2,000 $ 2,000 $ 1,500 25,750 (h) Auto, Delivery, and Travel $ 150 $ 150 $ 200 $ 300 $ 350 $ 350 $ 350 $ 300 $ 300 $ 250 $ 200 $ 150 3,050 (i) Accounting and Legal $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (j) Rent $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 18,000 (k) Telephone $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 3,000 (l) Utilities $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 6,000 (m) Insurance $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 2,400 (n) Taxes (Real Estate, etc.) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (o) Interest on LOC $ - $ - $ 33.33 $ 50.00 $ 70.00 $ 70.00 $ 70.00 $ 70.00 $ 70.00 $ 70.00 $ 86.67 $ 86.67 677 (p) Other Expenses [Specify each] $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 6,000

-

(q) Miscellaneous [Unspecified] - (r) Subtotal $27,223 $31,314 $33,850 $36,021 $ 38,065 $ 38,612 $ 39,227 $ 36,263 $ 34,384 $ 32,897 $ 31,201 $ 30,842 409,899 (s) Loan Principal Payment - (t) Capital Purchases [Specify] - (u) Other Start-up Costs - (v) Reserve and/or Escrow [Specify] - (w) Owner's Withdrawal $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,500 $ 3,500 $ 4,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 38,000

6. TOTAL CASH PAID OUT [Total 5a thru 5w] $30,223 $34,314 $36,850 $39,021 $ 41,065 $ 42,112 $ 42,727 $ 40,263 $ 37,384 $ 35,897 $ 34,201 $ 33,842 447,899

7. CASH POSITION [End of month] (4 minus 6) $ 9,272 $10,055 $ 9,298 $ 8,879 $ 5,830 $ 2,151 $ (912) $ (1,710) $ (63) $ 4,357 $ 8,005 $ 8,230

Page 23: Simple Steps Workshop

Cash Flow

TemplateMonthly Cash Flow Projection

Enter Company Name Here

Enter Date Here

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 TOTAL1. CASH ON HAND[Beginning of month]

$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 2. CASH RECEIPTS

(a)Sales (45% of Sales) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (b) Collections from Credit Accounts (55% of Previous Mo Sales) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (c) Loan or Other Cash Injection $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -

3. TOTAL CASH RECEIPTS [2a + 2b + 2c=3] $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -

4. TOTAL CASH AVAILABLE [Before cash out] (1 + 3) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 5. CASH PAID OUT

(a) Purchases (Merchandise, Inventory, Raw Materials) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (b) Gross Wages (excludes withdrawals) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (c) Payroll Expenses (Taxes, Benefits, etc.) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (d) Outside Services $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (e) Supplies (Office and operating) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (f) Repairs and Maintenance $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (g) Advertising $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (h) Auto, Delivery, and Travel $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (i) Accounting and Legal $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (j) Rent $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (k) Telephone $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (l) Utilities $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (m) Insurance $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (n) Taxes (Real Estate, etc.) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (o) Interest on LOC $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (p) Other Expenses [Specify each] $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -

-

(q) Miscellaneous [Unspecified] - (r) Subtotal $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - (s) Loan Principal Payment - (t) Capital Purchases [Specify] - (u) Other Start-up Costs - (v) Reserve and/or Escrow [Specify] - (w) Owner's Withdrawal $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -

6. TOTAL CASH PAID OUT [Total 5a thru 5w] $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -

7. CASH POSITION [End of month] (4 minus 6) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Page 24: Simple Steps Workshop

Income Statement

Less Adjustments Minus Cost of Goods Sold Equals Gross Profits

Various Expense Categories Equals Net Operating Income

Incoming Revenue:

Minus Outgoing Expenses:

Page 25: Simple Steps Workshop

Income Statement

INCOME STATEMENT (in thousands) 2010 2011 2012

Sales Revenue

Less: Cost of Goods Sold

Gross Profits

Less: Operating Expenses:

Selling Expense

General / Admin. Exp.

Lease Expense

Depreciation Expense

Total Operating Expenses

Operating Profits

Less: Interest Expense

Net Profits Before Taxes

Less: Taxes

Net Profit After Taxes

Template

Page 26: Simple Steps Workshop

Balance Sheet

Total Assets = Total Liabilities + Total Equity

Current Assets + Long Term = Total Assets

Current Liabilities + Long Term = Total Liabilities

EquityTotal Assets - Total Liabilities = Total Equity

Page 27: Simple Steps Workshop

Balance Sheet

BALANCE SHEET ($000)

Current Assets: 2010 2011 2012 2013 2014 2015

Cash

Accounts Receivable

Inventories            

Total Current Assets $0 $0 $0 $0 $0 $0

Gross Fixed Assets (at cost):

Land & Buildings

Machinery and Equipment

Furniture & Fixtures

Vehicles

Other (Inc. Fin. Leases)            

Total Gross Fixed Assets $0 $0 $0 $0 $0 $0

Less: Accumulated Depreciation            

Net Fixed Assets $0 $0 $0 $0 $0 $0

Other Assets $0 $0 $0 $0 $0 $0

Total Assets $0 $0 $0 $0 $0 $0

Current Liabilities: 2010 2011 2012 2013 2014 2015

Accounts Payable

Notes Payable

Taxes Payable

Other Current Liabilities            

Total Current Liabilities $0 $0 $0 $0 $0 $0

L / T Debt (Inc. Financial Leases)            

Total Liabilities $0 $0 $0 $0 $0 $0

Common Stock

Paid-In Capital In Excess of Par

Retained Earnings            

Total Stockholders' Equity $0 $0 $0 $0 $0 $0 Total Liabs. & Stockhldrs' Equity $0 $0 $0 $0 $0 $0

Template

Page 28: Simple Steps Workshop

Profit or <Loss> from Business

Page 29: Simple Steps Workshop

Utilizing information

Balance Sheet – A snapshot of where you are

Cash Flow Projections – Where you need to be

Page 30: Simple Steps Workshop

Simple Steps Workshop

Work with your SCORE Mentor

Page 31: Simple Steps Workshop

Financial Ratios

RATIO ANALYSIS 2010 2011 2012

Current Ratio 1.06 1.16 1.40

Quick Ratio 0.64 0.63 0.77

Inventory Turnover 6.90 5.39 5.20Average Collection Period 24.96 35.30 33.88

Fixed Asset Turnover 11.72 11.74 12.59

Total Asset Turnover 3.06 2.80 2.93

Debt Ratio 0.78 0.73 0.57

Debt-to-Equity 0.37 0.25 0.05

Times Interest Earned 3.70 3.07 7.20

Gross Profit Margin 33.33% 33.55% 38.82%

Operating Profit Margin 5.67% 5.74% 12.71%

Net Profit Margin 3.47% 3.10% 10.06%

Return on Total Assets (ROA) 10.61% 8.68% 29.43%

Return on Equity (ROE) 47.71% 31.58% 68.40%

Earnings Per Share $0.10 $0.10 $0.34

Price/Earnings Ratio 29.41 52.08 16.08

Various ratios are

available to help you compare

where you stand with your plan

Common Ratios

You can compare your plan

with others in similar

businesses

Your SCORE Mentor can

help you understand

where comparative

data is available

Page 32: Simple Steps Workshop

Clarify Definitions

Current Assets

Current RatioCurrent Liabilities Current Ratio

Page 33: Simple Steps Workshop

Profitability Ratios

Gross Profit

Margin

Return on

Assets

Return on

Equity

Page 34: Simple Steps Workshop

Gross Profit Margins

Gross Sales - Cost of Goods Sold

Gross Sales

Gross Profit Margin %

What is a realistic Gross Profit Margin for your business?

Page 35: Simple Steps Workshop

Efficiency Ratios

Effect of these on your Business and your Cash Flow

A/R Days Outstanding

Days of Inventory

A/P Days Outstanding

Page 36: Simple Steps Workshop

Key Cost Accounting Terms

Breakeven analysis

General and Administrative

expenses

Depreciation

Key Cost Accounting

Terms

Page 37: Simple Steps Workshop

Making Changes

Increase Revenue - Profitability

Reduce Costs - Profitability

Increase Productivity - Efficiencies

Forecasting Models - Projections

Page 38: Simple Steps Workshop

Simple Steps Workshop

Work with your SCORE Mentor

Page 39: Simple Steps Workshop

Assignment

Develop Your Action Plan

Review 1-3 years of business history

Set specific items to track. Bring a 12 month budget. Plan to share your work

with the group

Schedule a tracking mechanism and use it.

Example reports, Dashboards

Meet with your SCORE Mentor to discuss plans and come prepared to discuss at next session

Page 40: Simple Steps Workshop

Action Plan

ITEM 1

ITEM 2

ITEM 3

ITEM 4

ITEM 5

Page 41: Simple Steps Workshop

Action Plan Example

• Develop Cash Flow Projections for 12 months1• Possibly reduce inventory over 9 months2• Model Employee Productivity3• Determine Actual Profit Margins of (X) products4• Have Fun5

Page 42: Simple Steps Workshop

Review Week 1

Do you understand assignment?

Do you understand where needed information is?

Do you have forms to fill out?

Do you have an assigned SCORE Mentor?

Have you worked out a schedule with your SCORE Mentor?

Let’s Review

Page 43: Simple Steps Workshop

Any Questions?

Do you have necessary forms?

Come prepared with Goals, Data and filled out forms

Page 44: Simple Steps Workshop

Next Session in 2 Weeks

Basic review of terminologyReview your work – 3 Specific

goalsDevelop forward Projections /

TrackingDevelop an Action Plan for your

businessFinal meeting is 90 days from 2nd

session to review progress.

Page 45: Simple Steps Workshop

Follow Up Session

To Review Your Plan Identify Success Stories Take Action on other items Redefine Goals and forward

Projections Develop your Action Plan for the

future

Page 46: Simple Steps Workshop

Thank You for Attending

www.score.orgwww.score-reno.org

(775) 784-4436

SCORE – Reno Financial Management

Workshop