Increase Your Revenue by Engaging Your Best Clients

Fiscal Advantage, LLC

• Roger Jacobi, CEO

• Serial Entrepreneur

• Associate Professor

• MBA Finance/Marketing U of Michigan

• 30+ years business experiene

Financial Statements

Financial Statements

Client Engagement • If this was your client, observations?

• Client asks you “How am I doing?”

• If you want to offer Advisory Services, what would you recommend?

• Value Pricing: what additional services will you offer?

• You need to understand the business financials better than the business owner

• Provide a Business Performance Review

• Become a “Strategic Business Advisor”

Agenda

Phase 1: Assessment Company Breakeven Points

Key Financial Statement Account Review

Industry Comparables

Sales Analysis – Profitability & Working Capital

Phase 2: Business Valuation

Phase 3: Forecasting Income Statement

Balance Sheet & Cash Flow

Business Value

Benchmarking – implementing change

Business Performance Review

Fiscal Analytics

Fiscal Analytics

Fiscal Analytics

Fiscal Analytics

Fiscal Analytics

Fiscal Analytics

Fiscal Analytics

Insightful data developed to understand the

components of profit, cash flow & business

value.

Data which allows the company to make the

best decisions to improve performance.

Fiscal Analytics provides a financial

roadmap for companies that want to THRIVE.

Fiscal Analytics

1 Review financial performance

2 Identify opportunities & dollars

3 Forecast & implement to thrive

Income Statement Review

• Cost of Goods Sold – Cost Controls

COGS at 2013

level would add

$159,165 to profits

COGS at Industry

Avg of 63.6%

would add

$525,444 to profits

Income Statement Review

• Operating Expenses – Cost Controls

Congratulations!

Better than

Industry

Best in Recent

History

Breakeven Point

Breakeven Point

Historical Days to Breakeven have

improved slightly over time.

Income Statement ($ in 000) 2013 $ 2014 $ 2015 $

Sales $ 4,247 $ 4,905 $ 5,721

COGS ($2,973) 70.0% ($3,455) 70.4% ($4,164) 72.8%

Op Exp* ($1,224) 27.5% ($1,318) 25.8% ($1,436) 24.1%

Op Income $ 50 $ 132 $ 121

Non Op Exp ($ 5) ($ 0) $ 7

Profit* $ 45 1.1% $ 132 2.7% $ 128 2.2%

Breakeven Point

Attainable Days to Breakeven estimated at 263 Days.

Breakeven Point

Breakeven variance is consistent.

Breakeven Point

Historical profits, excluding Owners Excess

Compensation are shown for the past 3 years.

Breakeven Point

Based on best Operating Expense of 24.14% (2015)

and best COGS of 70% (2013)

Breakeven Point

Difference is the unclaimed profit.

The excess cost built into the cost structure.

Breakeven Point

Difference is the unclaimed profit.

The excess cost built into the cost structure.

Unclaimed profit variance high

Industry Comparables

What benchmarks should we use? Company’s historic best already achieved

Industry comparables – industry averages Industry sources – online

Fiscal Checkup™ uses RMA

NAICS (North American Industry Code System)

A “blended” NAICS matches the company.

Income Statement: Revenue

How profitable are our new sales?

Separate the Operating Loss into portion due to ratio

changes and the portion due to sales changes

Income Statement: Revenue

How Profitable are the new sales?

Income Statement: Growth

• How fast are we really growing?

Income Statement Review

• Payroll as Percentage of Sales

Very Positive

Trend – should go

down with Sales

increases

Income Statement Review

• Sales per Employee

Shows improved

productivity

Income Statement Review

• Profits per Employee

Positive Trend,

but slip last year

is concerning

Income Statement Review

• Capital Expenditures

Not keeping up

with significant

Sales increases

Income Statement Review

• Assets to Sales & Asset Turnover

Income Statement Review

• Income Statement Report Card

• Cost of Goods Sold

• Operating Expenses

• Sales Margin Review

• Real Growth Rate

• Payroll to Sales

• Sales per Employee

• Profit per Employee

• Capital Expenditures

Balance Sheet Review

• Accounts Receivable

AR Days 26%

better than peers,

adding $181,462

in cash flow.

Balance Sheet Review

• Accounts Receivable

AR as percentage

of Sales

continues to

decline – very

positive trend

Balance Sheet Review

• Inventory

Inventory Days

29% worse than

peers, consuming

$269,636 in cash

flow.

Balance Sheet Review

• Inventory

Ideally this should

be trending down,

but slight

improvement last

year.

Balance Sheet Review

• Accounts Payable

AP Days 50%

more than

peers, adding

$211,162 cash

Positive Trend

Balance Sheet Review

• Accounts Payable

Positive Trend

Paying bills

faster each year

Balance Sheet Review

• Cash Management

Balance Sheet Review

• How much working capital is needed to fund sales growth?

Balance Sheet Review

• Balance Sheet Report Card

• Accounts Receivable

• Inventory

• Accounts Payable

• Overall Working Capital Management

Business Performance Review

Phase 2: Valuation

• Why?

• Owner’s unrealistic opinion of value

• Report Card – clear measurement of value of past efforts

• Basis to measure future improvements

• Sophisticated computer based Valuation

• Financial Statement Adjustments

• Company specific Discount Rates

• Cash flows estimated based on past trends

Phase 2: Valuation

Discounted Cash Flow Capitalization of Earnings Multiple of EBITDA Multiple of Book Value Multiple of Earnings

… and a blended value that is validated

Phase 2: Valuation

Phase 3: Forecasting

Changeable Variables:

1. Sales Growth Rate

2. COGS as % of Sales

3. Operating Expenses as % of Sales

4. AR Days

5. AP Days

6. Inventory Days

7. Capital Expenditures as % of Sales

Forecasting: Current Trends

Forecasting: Current Trends

Forecasting Improvements

• Cost of Goods Sold • Recommendation: $525,444 profit improvement

potential if industry average could be achieved

• Inventory • Recommendation: $269,636 cash flow improvement

potential if industry average could be achieved

• Capital Expenditures • Observation: Capital Expenditures not keeping up with

Sales growth

Forecasting Improvements

Account Current Industry Goal

Cost of Goods Sold 72.8% 63.6% 67.6%

Inventory 106.6 days 83 days 96.6 days

Capital Expenditures 1.3% n/a 1.8%

Income Statement Forecast Historical Based

Override

2016 2017 2018

Income Statement Forecast

Balance Sheet Forecast Historical Based

Override

2016 2017 2018

Balance Sheet Forecast

Loan Coverage Forecast Historical Based

Override

2016 2017 2018

Loan Coverage Forecast

Business Valuation Historical Based

Override

2016 2017 2018

Business Valuation

Role of Business Advisor

• Facilitator/Catalyst for Change/Leader • Give visibility to the opportunities for improvement

• Help develop a plan to solve the problems - Benchmarking

• Help hold people accountable – if allowed

• Become a Strategic Business Advisor

• Role of the Expert • The expert might bee YOU

• Often employees are key to solving problems

• You may need to identify external experts

Benchmarking

• Benchmarking – What is it? • Compares company results to a standard

• Measures the gaps that exist

• Develops a plan to close the gaps

• Continued Benchmarking to remain efficient

• Benchmarking – What are the Standards? • Compares the company results to the industry

• Compares the company to their best performance

Communicate

With Buy-in

Gather Data

Gather Needed Data

Benchmark & Measure Gaps

Recalibrate Monitor Results

Devise Plan & Implement

Benchmarking, 6-step Process

Benchmarking, 6-step Process Communicate

With Buy-in

Gather Data

Gather Needed Data

Benchmark & Measure Gaps

Recalibrate Monitor Results

Devise Plan & Implement

On-going process

Benchmarking, 6-step Process

Communicate With Buy-in

Gather Data

Gather Needed Data

Benchmark & Measure Gaps

Recalibrate Monitor Results

Devise Plan & Implement

On-going process

Survey Says ….

• What SMB’s Want, Sleeter 2015

• 55% Top priorities are financial

• 49% Need help to accomplish priorities

• 44% Accounting Firm is having low or no impact

• 12% Plan to seek a new accounting firm

Fiscal Checkup Mission

• Assist companies that want to optimize financial performance

• Empower Business Advisors who want to be a catalyst for that change

• Provide a proven process to identify key financial parameters that have greatest potential impact

Business Performance Review

Cost of Goods Sold Operating Expenses Capital Expenditures Margin Analysis Payroll as % of Sales Break Even Analysis 54 Financial Ratios Payables to COGS Profit per Employee

Accounts Receivable Accounts Payable Inventory Growth Rates Revenue per Employee Working Capital Mgmt Inventory to Sales Net Fixed Assets to Sales Margin on New Sales

Operating Expenses per Employee

Business Performance Review

Discounted Cash Flow Capitalization of Earnings Multiple of EBITDA Multiple of Book Value Multiple of Earnings

… and a blended value that is validated

Business Performance Review

1. Changeable Variables: 2. Sales Growth Rate 3. COGS as % of Sales 4. Operating Expenses as % of Sales 5. AR Days 6. AP Days 7. Inventory Days 8. Capital Expenditures as % of Sales

Business Performance Review

Fiscal Checkup

• Affordable: $495 list price

• Discounts & subscriptions available for Advisors

• Grow Advisory Service Revenue

• Improve Client Retention

• Secure New Business Clients

www.FiscalCheckup.com

Increase Your Revenue by Engaging Your Best Clients

Questions ?

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