This document discusses ways to increase the enterprise value of a business. It identifies key performance indicators like profit, return on assets, and productivity that can be optimized. Strategies are presented to improve indicators like increasing sales, reducing expenses, improving collection periods and inventory turns. Examples show how even small improvements to indicators can significantly increase cash flow and profits. The document advocates identifying untapped indicators, forecasting the impact of changes, and tracking investments to maximize returns.

1. Increasing the Enterprise Value of Your Business Bob Dawson, Founder The Business Group

4. The Financials Cash Flow Statement Income Statement Balance Sheet Revenue - Expenses Profit/Loss Cash In - Cash Out Change in Cash Assets = Liabilities + Equity

6. Income Statement Example 1 – 5% sales increase over baseline year Example 2 – 5% sales increase over baseline year & 10% operating expense reduction Example 3 – 5% sales increase over baseline year, COGS reduced by 2% & operating expenses increased by $400K ($000’s) Baseline Year Example 1 Example 2 Example 3 Total Sales $25,000 $26,250 $26,250 $26,250 Cost of Goods Sold $17,250 $18,113 $18,113 $17,588 Gross Profit $7,750 $8,137 $8,137 $8,662 Operating Expenses $6,775 $7,114 $6,403 $7,514 Operating Profit $975 $1,023 $1,734 $1,148 All Other Expenses $400 $420 $420 $420 Net Profit $575 $603 $1,314 $728

7. Balance Sheet Example 1 – 5% sales increase over baseline year Example 2 – 5% sales increase over baseline year & 10% operating expense reduction Example 3 – 5% sales increase over baseline year, COGS reduced by 2% & operating expenses increased by $400K ($000’s) Assets Baseline Year Example 1 Example 2 Example 3 Cash & Equivalents $1,000 $1,050 $1,050 $2,469 Trade Receivables-Net $4,100 $5,250 $5,250 $3,621 Inventory $4,300 $4,830 $4,830 $3,518 Other Current Assets $300 $315 $315 $315 Non-Current Assets $11,200 $11,359 $11,359 $11,359 Total Assets $20,900 $22,804 $22,804 $21,282 Liabilities Notes Payable-Short Term $1,475 $3,490 $3,490 $1,475 Trade Payables $1,045 $1,097 $1,097 $1,065 Other Current Liabilities $2,255 $2,299 $2,299 $2,299 Non-Current Liabilities $6,675 $5,392 $5,392 $5,392 Net Worth $9,450 $10,526 $10,526 $11,051 Total Liabilities & Net Worth $20,900 $22,804 $22,804 $21,282

8. Cash Flow Statement Example 1 – 5% sales increase over baseline year Example 2 – 5% sales increase over baseline year & 10% operating expense reduction Example 3 – 5% sales increase over baseline year, COGS reduced by 2% & operating expenses increased by $400K ($000’s) Example 1 Example 2 Example 3 Net Sales $26,250 $26,250 $26,250 Cash from Sales $25,100 $25,100 $26,729 Cash Production Costs -$18,547 -$18,547 -$16,742 Cash from Trading $6,553 $6,553 $9,987 Cash Operating Costs -$7,129 -$6,418 -$7,529 Cash After Operations -$576 $135 $2,458 Net Cash After Operations -$904 -$521 $1,802

9. Calculating the Value of Improved Key Indicators Accounts Receivable $25,000,000 in Sales / 365 days = $68,500 Baseline Collection Days = 58 Days Revised Collection Days = 51 Days Increase in Cash Flow of $479,500

10. Calculating the Value of Improved Key Indicators Inventory $17,250,000 in Materials / 4.01 Turns per Year = $4,302,000 Baseline Inventory Turns per Year = 4.01 Revised Inventory Turns per Year = 4.99 $17,588,000 / 4.99 = $3,525,000 Increase in Cash Flow of $777,000

11. Calculating the Value of Improved Key Indicators Cost of Goods Sold Baseline COGS: $17,250 / $25,000 = 69% COGS Revised COGS: $17,588 / $26,250 = 67% COGS Baseline Gross Profit = 31% Revised Gross Profit = 33% Incremental Profit Gain on Sales increase of 5% = $125,000