Chris James a partner with B2B CFO talks about business metrics and cash. How are they important to business growth?

1. Growth through Metrics
&
a Discussion on Cash
Chris James - Partner B2B CFO®
cjames@b2bcfo.com

2. Lack of quantifiable
objectives can lead to…
Customer churn
Weak revenue
Poor margins
Employee turnover
Low business value

3. 6 Effective Business
Metrics

4. 1
Why Metrics?
More Focus – reducing noise
Better Vision. – more insights into
your business and industry.
Better Decisions using a simple
framework

5. 2
SMART Metrics
Specific, Measurable, and Timely
Four to six is a good number
Focus team efforts
Feed company culture
Promote Success

6. 3
Key Business Objectives
Improve Business Performance
Revenue management
Cost control and reduction
Improve Organizational Performance
Quality control
Customer Satisfaction
Cycle time management

7. 4
Metrics Examples
Financial - Gross Margin, Overheads, Collections,
Cash cycle
Customer - On time delivery, Complaints, New
customers acquired
Internal Processes - Rework, Labor utilization,
Overtime
Learning - Employee satisfaction index, Number
of cross trained employees

8. 5
Managing with Metrics
Choose key performance indicators
Monitor long term trends
Compare with plans and forecasts
Dashboard for easy review
Review annually

9. Cash Forecasting is Critical
W/E 07/4 W/E 07/11 W/E 07/18 W/E 07/25
July
Wk1 Fcst Wk1 Act Wk2 Fcst Wk2 Act Wk3 Fcst Wk3 Act Wk4 Fcst Wk4 Act Total - Fcst Total - Act
Beginning Balance (189,019) (189,019) 73,739 73,739 (33,531) (33,531) 280,115 280,115 (189,019) (189,019)
Receipts
Total Receipts 1,350,000 1,300,694 571,191 562,172 893,548 883,411 727,472 - 3,473,748 2,746,277
Disbursements
To Vendors 481,887 329,756 10,000 22,931 61,992 54,476 464,727 16,865 871,890 424,028
Handchecks 50,000 71,121 50,000 114,749 50,000 45,665 50,000 15,468 281,535 247,003
Formosa costs - payroll - -
Seacoast costs - payroll 527,058 467,894 373,461 373,461 336,120 336,120 322,424 322,424 1,499,899 1,499,899
Arkansas payroll 95,000 154,164 140,598 140,598 118,503 118,503 132,735 138,199 546,000 551,464
Payroll 15,000 15,000 15,000 17,704 15,000 15,000 15,000 15,000 62,704 62,704
Bankrupcy Settlement - -
Total Disbursements 1,168,945 1,037,935 589,059 669,443 581,616 569,765 984,886 507,956 3,262,029 2,785,098
Ending Cash (7,964) 73,739 55,871 (33,531) 278,402 280,115 22,701 (227,841) 22,701 (227,841)

10. Adviant
Financial Comparison to Benchmark
This is an important metric. In fact, over This number indicates the percentage of sales
time, it is one of the more important revenue that is not paid out in direct costs
barometers that we look at. It measures how (costs of sales). It is an important statistic that
many cents of profit the company is can be used in business planning because it This metric shows G & A payroll expense
generating for every dollar it sells. Track it indicates how many cents of gross profit can for the company as a percentage of sales.
carefully against industry competitors. This be generated by each dollar of future sales.
is a very important number in preparing Higher is normally better (the company is more
forecasts. The higher the better. efficient).

11. Bright Blue Marketing
Financial Comparison to Benchmark
This is another good indicator of liquidity,
although by itself, it is not a perfect one. If
there are receivable accounts included in the
numerator, they should be collectible. Look This ratio shows the average number of
at the length of time the company has to pay This number reflects the average length of days that lapse between the purchase of
the amount listed in the denominator time between credit sales and payment material and labor, and payment for them.
(current liabilities). The higher the number, receipts. It is crucial to maintaining positive It is a rough measure of how timely a
the stronger the company. liquidity. The lower the better. company is in meeting payment
obligations. Lower is normally better.

12. Solace Networks
Financial Comparison to Benchmark
This Balance Sheet leverage ratio This ratio measures a company's Generally, this metric measures
indicates the composition of a ability to repay debt obligations from the overall liquidity position of a
company’s total capitalization -- the annualized operating cash flow company. It is certainly not a
balance between money or assets (EBITDA). perfect barometer, but it is a
owed versus the money or assets good one. Watch for big
owned. Generally, creditors prefer a decreases in this number over
lower ratio to decrease financial risk time. Make sure the accounts
while investors prefer a higher ratio to listed in "current assets" are
realize the return benefits of financial collectible. The higher the ratio,
leverage. the more liquid the company is.

13. Nitro Marketing, LLC
Financial Comparison to Benchmark
Actual thru
Measurement June 2010 Benchmark
Income Statement
Sales (Income): $ 2,138,350
Cost of Sales (COGS): 381,283
Percent of Sales 17.8% 30.4%
G & A Payroll Expense (optional): 622,092
Percent of Sales 29.1% 32.4%
Net Profit before Taxes: 196,160
Percent of Sales 9.2% 8.7%
Other Metrics:
Sales per employee $ 388,791 $ 185,868
Return on Assets 178.4% -0.1%
Comments:
G&A Payroll is increasing. Should understand why.
Are income taxes being planned for?
Is a credit line available to help address uncertainty?
Does the business owner have clarity for the future?
his appears to be a significantly valuable company. Protect yourself.
Excellent cash flow with little working capital used for the business.

14. Break
Small Groups should discuss their reports
and generate questions - 30 minutes?

15. Cash… the Lifeblood
What’s Your Pulse?

16. 4 Stages of Cash
Stage 1: Infrastructure Creation
Owner’s Activities
• Building relationships with customers
• Creating relationships with vendors
• Delegating tasks to employees or associates
• Causing sales and cash to come into the company

17. Stage 2: Infrastructure Peak
The result of Infrastructure Creation is Infrastructure Peak
• Few customer complaints
• High customer service
• Low overhead
• Company runs “lean and mean”
• Short cash collection cycles
• Personal sacrifice by the Finder

18. Stage 3: Outgrowth
Result of running lean is burn-out of owner and employees
Attitudes change, owner thinks:
“I should have a raise”
“We need more people so we can take time off”
“We need a better building”
“I need a new car/house/vacation……”
“We should buy more equipment or inventory”

19. Goal clarity
Increased profits and cash
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Seasoned partners
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20. Thank You!