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Helping Businesses Thrivewith Fiscal Analytics
Fiscal Advantage, LLC
Roger Jacobi, CEO Dan O’Connell, VP & Founder
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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
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Please describe yourorganization?
Poll Question #1
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Fiscal Analytics
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Fiscal Analytics
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Fiscal Analytics
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Fiscal Analytics
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Fiscal Analytics
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Fiscal Analytics
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FinancialStatements
ActionableData
FiscalAnalytics
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Fiscal Analytics
Insightful data developed to understand thecomponents of profit, cash flow & business value.
Data which allows the company to make thebest decisions to improve performance.
Fiscal Analytics provides a financial roadmapfor companies that want to THRIVE.
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1 Review financial performance
2 Identify opportunities & dollars
3 Forecast & implement to thrive
Fiscal Analytics
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Income Statement ReviewCost of Goods Sold - Cost Controls
COGS at 2013level would add
$159,165 to profits
COGS at IndustryAvg of 63.6%
would add$525,444 to profits
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Income Statement ReviewOp Expenses - Cost Controls
Congratulations!* Better than Industry* Best in Recent
History
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Breakeven Point
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Breakeven Point
Historical Days to Breakeven have been increasing.
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Income Statement($ in 000) 2013 $ 2014 $ 2015 $Sales $ 4,247 $ 4,905 $ 5,721COGS ($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 $ 121Non Op Exp ($ 5) ($ 0) $ 7Profit* $ 45 1.1% $ 132 2.7% $ 128 2.2%
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Breakeven Point
Attainable Days to Breakeven estimated at 263 Days.
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Breakeven Point
Breakeven variance is consistent.
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Breakeven Point
Historical profits, excluding Owners ExcessCompensation are shown for the past 3 years.
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Breakeven Point
Based on best Operating Expense of 24.14% (2015)and best COGS of 70% (2013)
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Breakeven Point
Difference is the unclaimed profit.
The excess cost built into the cost structure.
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Breakeven Point
Difference is the unclaimed profit.
The excess cost built into the cost structure.Unclaimed profit variance high
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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.
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On average, how manyNAICS codes does it taketo accurately describe a
business?
Poll Question #2
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Income Statement: Revenue
How profitable are our new sales?
Separate the Operating Loss into portion due to ratiochanges and the portion due to sales changes
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Income Statement: Revenue
How profitable are our new sales?
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Income Statement: Growth
How profitable are our new sales?
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Income Statement ReviewPayroll to Sales
Very PositiveTrend – should godown with Salesincreases
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Income Statement ReviewSales per Employee
Shows improvedproductivity
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Income Statement ReviewProfit per Employee
Positive Trend,but slip last yearis concerning
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Income Statement ReviewCapital Expenditures
Not keeping upwith significantSales increases
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Income Statement ReviewAssets to Sales & Asset Turnover
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Income Statement ReviewIncome 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
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Balance Sheet ReviewAccounts Receivable
AR Days 26%better than peers,adding $181,462in cash flow.
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Balance Sheet ReviewAccounts Receivable
AR Days 26%better than peers,adding $181,462in cash flow.
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Balance Sheet ReviewInventory
Inventory Days29% worse thanpeers, consuming$269,636 in cashflow.
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Balance Sheet ReviewInventory
Inventory Days29% worse thanpeers, consuming$269,636 in cashflow.
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Balance Sheet ReviewAccounts Payable
AP Days morethan doublepeers, adding$211,162 cash
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Balance Sheet ReviewAccounts Payable
AP Days morethan doublepeers, adding$211,162 cash
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Balance Sheet ReviewCash Management
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Balance Sheet Review
How much working capital is neededto fund sales growth?
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Balance Sheet ReviewBalance Sheet Report Card
• Accounts Receivable• Inventory• Accounts Payable• Overall Working Capital Management
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Which area do you thinkhas the greatest need for
improvement for mostbusinesses?
Poll Question #3
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Phase 2: Business Valuation
Provides a clear measurement of what abusiness has done right/wrong in the past
The ultimate report card Provides a basis to evaluate future
improvements
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Business Valuation - Adjustments
Adjustments to Income Statement & Balance Sheet
Excess Working Capital – a positive adjustment to the valuation.
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Business Valuation Methods
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Business Valuation - Weighted FMV
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Phase 3: Forecasting
What does the future look like if thecurrent trends continue?
What is the value of makingimprovements?
How do we implement change?
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Forecasting: Current Trends
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Forecasting: Current Trends
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Changing the Forecast
What does the future look like if weimprove the three identified areas forimprovement?
“Opportunity to Reduce COGS by$525,444”
“Opportunity to Reduce InventoryInvestment by $269,636”
Capital Expenditures underfunded
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Changing the ForecastAccount Current Industry Goal
Cost of Goods Sold 72.8% 63.6% 67.6%Inventory 106.6 days 83 days 96.6 daysCapital Expenditures 1.3% n/a 1.8%
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Changing Projections
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Annual Cash Flow PlanChange in Assumptions:
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Annual Cash Flow PlanHistorical BasedINCOME FORECAST
Override
2016 2017 2018
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Annual Cash Flow PlanINCOME FORECAST
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Annual Cash Flow PlanHistorical BasedBALANCE SHEET FORECAST
Override
2016 2017 2018
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Annual Cash Flow PlanBALANCE SHEET FORECAST
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Annual Cash Flow PlanHistorical BasedLOAN COVERAGE FORECAST
Override
2016 2017 2018
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Annual Cash Flow PlanLOAN COVERAGE FORECAST
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Annual Cash Flow PlanHistorical BasedBUSINESS VALUATION
Override
2016 2017 2018
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Annual Cash Flow PlanBUSINESS VALUATION
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Benchmarking, A Process
Benchmarking – What is it?• Compares company results to standards• Measures the gaps that exist• Develop a plan to close the gaps• Continued benchmarking to remain efficient
Benchmarking – What are the standards?• Compares company results to industry• Compares company to their best performance
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Six-Step Benchmarking Process
CommunicateWith Buy-in
GatherData
GatherNeeded Data
Benchmark &Measure Gaps
RecalibrateMonitorResults
Devise Plan &Implement
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Six-Step Benchmarking Process
CommunicateWith Buy-in
GatherData
GatherNeeded Data
Benchmark &Measure Gaps
RecalibrateMonitorResults
Devise Plan &Implement
On-going process
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Six-Step Benchmarking Process
CommunicateWith Buy-in
GatherData
GatherNeeded Data
Benchmark &Measure Gaps
RecalibrateMonitorResults
Devise Plan &Implement
On-going process
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What role doesbenchmarking play in yourbusiness or the businesses
you advise?
Poll Question #4
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Other Tools To Serve Your Business Clients?
Survey Says… 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
Source: What SMBs Want, Sleeter 2015
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Fiscal Checkup
Assist companies that want to optimize financialperformance
Empower Business Advisors who want to be acatalyst for that change
Provide a proven process to identify key financialparameters that have greatest potential impact
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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
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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
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Business Performance Review
Changeable Variables:1. Sales Growth Rate2. COGS as % of Sales3. Operating Expenses as % of Sales4. AR Days5. AP Days6. Inventory Days7. Capital Expenditures as % of Sales
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Business Performance Review
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Affordable: $495 list price Discounts & subscriptions available for Advisors
Grow Advisory Service Revenue Improve Client Retention Secure New Business Clients
www.FiscalCheckup.com
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Two Free ReportsFiscal Report Card 5 minutes AR, AP, Inventory Revenue, COGS,
Operating Expensesand Profit
Up to 5 NAICS Codes
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Two Free ReportsIndustry
Comparable Report Up to 5 NAICS Codes
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What will be yourtakeaways from this
webinar?
Poll Question #5
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Further info fromFiscal Checkup?
Poll Question #6
