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Webinar: Using Benchmark Data to Improve Financial Performance
Brian HamiltonFounder, Sageworks
December 16, 2014
ObjectivesAs a CFO, evaluating the financial health of a business can be a highly subjective affair. Are we doing ok? How do we know? Compared to what? Using benchmarks provides an effective yardstick, mitigating these concerns and adding a layer of objectivity to the financial analysis of a business.
In this webinar, Sageworks Chairman Brian Hamilton will discuss how CFOs can utilize benchmarking and industry data to make better-informed decisions, increase profitability and optimize business performance.
You will learn:
• the importance of benchmarking and how it fits into the CFO's domain
• what key metrics CFOs should be using to benchmark
• how to use benchmarking data to improve financial performance and profitability
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About Sageworks• Founded in 1998
• Headquartered in Raleigh, NC with office in NYC
• Customer base exceeds 3,000 Accounting Firms and 700 Banks / Credit Unions, plus others
• Proprietary relationships have resulted in massive database of private company financial data with over 1.4M statements and growing
• Sageworks is the ‘go to source’ for private company performance by most major media outlets (WSJ, CNBC, Forbes, Inc.)
• Sageworks Innovation Lab founded in 2014 to spearhead new product development
• New product emphasis on small to medium sized businesses
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What is Benchmarking?
• The practice of a business comparing key metrics of their operations to other similar companies.
• A scorecard to assess the relative strength of a company.
• A point of reference by which something can be measured.
• A way to compare key metrics to other businesses in the industry.
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Why Is Benchmarking Critical?• Numbers need context in order to properly assess, interpret and action.
• Benchmarking allows companies to see how well they are performing and identify ways they can become more competitive in the industry.
• Knowing how a company ranks relative to others empowers management to evaluate the company’s performance and create plans which drive improvement.
• To maximize shareholder returns, a company needs to know that they outperform their peer group and are leaders in their category.
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Sales have been growing and are up 9% in 2013
On the surface this is positive
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However, when comparing to the industry, our views change…
6%
8%9%
0%
2%
4%
6%
8%
10%
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2,000,000
4,000,000
6,000,000
8,000,000
2010 2011 2012 2013
Sales
Sales Sales Growth
Sales growth trails the industry average by nearly 2x
6%
8%9%
11%
14%
17%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2011 2012 2013
Sales Growth
Company Industry
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Why haven’t private companies used benchmarking to enhance results?
• Private companies are not required to make financial statements public.
• Getting access to good quality industry data has been a major challenge in the United States.
• Public company benchmarks are readily available but for privately held companies (representing 99% of businesses in the United States) there has not been an authoritative source.
• Until now…
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Why Sageworks Data?• Largest collection of US private company data with coverage exceeding 300,000
companies.
• Reliable and reputable data sources fuel database – Accounting Firms and Commercial Banks.
• 10+ years of history to compare metrics at different points in time and assess trend lines.
• Customize industry peer group by geography and company size.
• Customer driven product development cycle.
• Recognized for outstanding service and trusted vendor.
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How Benchmarking is Effective
When selecting benchmark data to use, seek out data with the following characteristics:
1. Accuracy and representativeness – High quality data from trusted sources is required to make actionable and impactful strategic decisions.
2. Recency of the data – Most recent data critical to account for economic cycles, seasonality and other variables
3. Frequency of update – Real-time data needed given rapidly changing business environment
4. Relevancy to the business being analyzed – Different industries, geographies and business sizes have their own trends and considerations.
5. Sample size – Peer groups should be large enough to be representative of the broader population and not skewed by any one contributor.
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Which Benchmarks?When evaluating any industry benchmark data, several factors should be considered:
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Profitability
Net Profit Margin – How many cents of profit a business extracts from each dollar it
sells.
Liquidity
Current Ratio – represents overall liquidity position.
Quick Ratio – measures a company’s very short term cash position.
Turnover
Accounts Receivable Turnover – number of days to convert accounts receivable to
cash.
Accounts Payable Turnover – number of days to pay vendors.
Inventory Days – average number of days it takes to sell inventory.
The Data
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Q&A
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Thank You
Visit http://www.Sageworks.com to learn more.
Visit https://cfo.Sageworks.com to start your trial and get access to the tools and data.
Contact us at [email protected].
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