Key Financial Indicators for Business Success

1. Presented by
Richard Wilbert
and

2. Are You Running Your Business
or
Is Your Business Running You?
A frank discussion on managing
your business for success

3. The Business Plan

4. Goals of the Webinar
• Discuss the key ingredients to running a
successful business
• What to watch and track as the owner/
manager
• Key elements
– Strategic Plan
– Budgets
– Key indicators

6. Developing a Strategic Plan
• The Strategic Plan is your operating guide
for your business with a future looking
forecast

7. Elements of the Strategic Plan
• Vision Statement
– A statement of where the company will be in 3
to 5 years

8. Elements of a Strategic Plan
• Mission Statement
– Statement of the business you want to be,
express your values, overall characteristics of
the company
– Express the values and attitudes of the
stakeholders
– Stakeholders are: Employees, customers,
vendors and the community in which you
operate

9. Elements of a Strategic Plan
• Goals
– Goals are ongoing and what we strive for long
term.
– Example of a goal: To increase market share
in the maintenance business.

10. Elements of a Strategic Plan
• Objectives
– Goals and objectives go hand in hand
– The Objective is the subset of the goal which
should be measurable and have a timeline
– An example is: Increase the market share in
the Maintenance business 10% by June I,
2012

11. Elements of a Strategic Plan
• Action Plan is created for each objective
– Who, what, by when?
– A chart is developed to assist with
measurement of the actions. Track your
progress.

12. Elements of a Strategic Plan
• Risk Analysis
– Evaluate the risk of each goal from internal
and external factors
– Develop contingency plans if the risk is to
great to the business
– Track the progress

13. Elements of a Strategic Plan
• Market and competitive analysis
– Who are the competitors and where do they
rank in your market place
– Entry and exit barriers to your goal
– Is your pricing structure reasonable?
– Evaluate yourself using the eyes of
competition, customers and suppliers
– What resources are necessary to move,
people, finances, technology, facilities, etc

14. Elements of a Strategic Plan
• Financials
– Develop a budget based on your plan and
evaluate the reality of the budget and
resources available.

15. Budgeting

16. Budget
• The Budget is your financial road map and
is used to determine whether you are on
track or not.
– Annual budgets are spread over 12 months of
the fiscal year
– Based on the projected revenues of each
month and business activities of each month
– Example: May is most likely busier than
December, your budget should reflect that
activity

17. Budget
• Start by creating a Chart of Accounts:
– Most software packages will assist with the
Chart of Accounts, but make it unique to your
company.
– Planet has sample Charts of Accounts in it’s
publications available for you to purchase.

18. Budget
• Budget layout:
– Revenues or Sales
– Costs of Goods- Direct labor, Materials,
– Gross Margin – Sales minus COGS
– Expenses – Rent, Insurance, Office expenses
– Net Margin (Profit)- Gross margin minus
Expenses

19. Budgets
• Create a list of costs that you include in
each account item for future reference
• Once annualized, create a monthly
spreadsheet based on fiscal year- 12
budgets by month
• This becomes the outline for your Profit
and Loss Statement or Income Statement

20. Profit and Loss Statement

21. Profit and Loss Statement
• A Profit and Loss Statement is sometimes
called the Income Statement or the P&L
• This is your Chart of Accounts with actual
numbers added to the document.

22. Profit and Loss Statement
• The P&L serves as the report card of your
company’s performance each month.
• Many software packages will compare the
P&L to previous years/months, year to
date and offer percentages for easy
comparison of numbers.

23. Profit and Loss Statement
• The P&L can lead to a number of other
financial ratios such as: Return on
Investment (ROI), Return on Assets
(ROA) and many others that we will not
discuss at this time, but be aware that
these calculations are important to
investors and bankers.

24. Key Financial Indicators
• These Financial Indicators are important
to managing your business and can
provide a quick look at your business and
tell you about your company’s
performance.

25. Key Financial Indicators
• Direct Labor
– Labor is your largest expense in most cases
– Create benchmarks from past years to
compare your labor percentage to your
current statement
– Watch the percentage as it moves up or
down, it is a good indicator of the health of
your business and whether you are making a
profit.

26. Key Financial Indicators
• Material Expense
– Materials are an expense in the Design Build
and Bid Build world that can create large
swing in your P&L
– Look at this number percentage on the yearly
average, compare to your monthly statement
– This number can indicate whether you missed
something in monthly invoices, or over
expensed a budget item on a project or mis-
coded an account for an item.

27. Key Financial Indicators
• Gross Margin
– This is direct cost minus revenue
– Most landscape contractors are running
between 45 % to 55% depending the mix of
work.

28. Key Financial Indicators
– Operating Profit
• Funds remaining after all expenses are paid
• This can range from 0% to as much as 10% or
more for good companies
• The average Landscape company is between 3%
and 5%

29. Key Financial Indicators
• Job costing
– This is a report of how a specific job is doing against budget
– Construction contractors should be running this information
weekly on large projects
– 2 keys elements again are labor and materials
– This information is gathered from daily time sheets from the field
– You need to know your financial position on project to determine
issues that may be out there
– Labor overruns and material overruns are what you are looking
for on this report.
– You want the opportunity to make correction before the project is
complete.

30. Key Financial Indicators
• Job Costing
– Maintenance contractors should review
projects on a monthly basis to determine labor
issues.
– Materials are not as important on
maintenance projects.
– You need to determine how detailed you want
to be on your projects, whether it is just man
hours or to be broken down by job function:
such as Mowing, Pruning, Weeding??

31. Key Financial Indicators
• Payables
– What you owe the suppliers and vendors for the goods
purchased for a project.
– Most vendors and suppliers offer terms of net 30. Thirty days
from date of purchase they expect payment
– You need to develop a rolling chart of when you can make your
payment to them, referred to as cash flow report.
– Include such things as payroll, taxes, equipment payments
– Knowing when and where the funds are coming from to make
these payment is a necessary part of your business.

32. Key Financial Indicators
• Receivables or Aging
– These are the payments from your customers to you sometimes
referred to as aging.
– This will help determine when you can make your payments
– Knowing how your customers pay is important in you meeting
your obligations to your suppliers, employee and good ole Uncle
Sam.
– Watching this closely is a method of knowing if there may be an
issue with a customer.
– Most contractors will invoice net 30 or pay in 30 days
– If you allow this number to grow from 30 days it will cost you
money
– It is important to get on top of these numbers and collect the
money owned your company

33. Key Financial Indicators
• Days of Sales Outstanding (DSO)
– This term refers to the number of days from
invoice to collection.
– The longer the days outstanding the slower
the customers are paying you.
– This needs to be monitored by someone in
your office

34. Are you Running your Business or
is your Business running you?
• Running a business is not an a science it
is an art!

35. Are you Running your Business or
is your Business running you?
• But being prepared to manage your
business will make it much easier

36. Are you Running your Business or
is your Business running you?
• Use the tools that we have discussed and
it will be easier to manage. Have a plan.

37. Are you Running your Business or
is your Business running you?
• You can run a successful Business using
the right tools

38. SiteSource Business Coaching
and Consulting
• Richard Wilbert
Email: sitesource@live.com
www.sitesourcebusinesscoaching.com
303-909-0798