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Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
Introduction To The Financial Fence (Business)
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Introduction To The Financial Fence (Business)

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Many business owners wish they could see their whole business on one page and a set of numbers which made intuitive sense. The Financial Fence® does this and brings a financial overview of the whole …

Many business owners wish they could see their whole business on one page and a set of numbers which made intuitive sense. The Financial Fence® does this and brings a financial overview of the whole business

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  • 1. INTRODUCTION TO THE FINANCIAL FENCE® © Copyright One Sherpa Pty Ltd 2008
  • 2. The Financial Fence® Way of Thinking © Copyright One Sherpa Pty Ltd 2008
  • 3. • Many people who see The Financial Fence® have thought it is simply a new technique and way of reporting the numbers. © Copyright One Sherpa Pty Ltd 2008
  • 4. • It is however a completely different way of thinking about the numbers which changes the paradigm around how you and measure its performance. fund a business © Copyright One Sherpa Pty Ltd 2008
  • 5. Why use a fence? 1. Fences are made of two parts : A. Posts that anchor the fence into the ground at a point AND B. Rails that carry the fence over a distance. 2. Fences incorporate Milestones (Posts) and Activity (Rails) in the same analogy. 3. Financial statements have these two parts : A. “Milestones” - Balance Sheet. B. “Activity” – Profit & Loss Account & Cash Flow Statement. 4. Fences provide a boundary and security. © Copyright One Sherpa Pty Ltd 2008
  • 6. The Standard two rail fence M M I I ACTIVITY L L E E S S ACTIVITY T T O O N N E E © Copyright One Sherpa Pty Ltd 2008
  • 7. The Financial Fence® THE TWO MILESTONES ON THE FINANCIAL FENCE ® Capital Capital Debt Debt Funding Equity Equity © Copyright One Sherpa Pty Ltd 2008
  • 8. The Financial Fence® THE THREE ACTIVITIES ON THE FINANCIAL FENCE ® Infrastructure Interaction with Capital Capital Customers Expenses Investment in Business Debt Debt Equity Equity © Copyright One Sherpa Pty Ltd 2008
  • 9. The Financial Fence® PERFORMANCE MONITORING ON THE FINANCIAL FENCE ® Infrastructure Interaction with Capital Capital Customers Expenses Investment in Business Debt Debt Key Performance Equity Equity Indicators © Copyright One Sherpa Pty Ltd 2008
  • 10. The Financial Fence® SINGLE DIRECTION OF MANY NON FINANCIAL EXECUTIVES Infrastructure NET Interaction with Customers Expenses PROFIT © Copyright One Sherpa Pty Ltd 2008
  • 11. The Financial Fence® DIRECTIONS REQUIRED FOR TRADING THE FINANCIAL FENCE ® Infrastructure Interaction with Capital Capital Customers Expenses Investment in Business Debt Debt Key Performance Equity Equity Indicators © Copyright One Sherpa Pty Ltd 2008
  • 12. The Financial Fence® Way of Thinking WORKING WORKING CAPITAL CAPITAL INFRASTRUCTURE NET CONTRIBUTION COST SALES EXPENSES PROFIT MARGIN OF INTERACTION FIXED FIXED CAPITAL CAPITAL MOVEMENT MOVEMENT NET OPERATING NET IN WORKING IN FIXED PROFIT CASH FLOW CASHFLOW CAPITAL CAPITAL DEBT DEBT EQUITY EQUITY © Copyright One Sherpa Pty Ltd 2008
  • 13. The Financial Fence® - Example Company BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 $190,000 EQUITY EQUITY $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 14. The Financial Fence® - Example Company BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 $190,000 EQUITY EQUITY $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 15. The Financial Fence® - Example Company BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 Milestone check $190,000 $90,000 + $350,000 = $440,000 EQUITY EQUITY $175,000 + $265,000 = $440,000 $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 16. The Financial Fence® - Example Company BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 Top rail check $190,000 $265,000 + $150,000 = $415,000 EQUITY EQUITY $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 17. The Financial Fence® - Example Company BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 Bottom rail check $190,000 $175,000 - - $15,000 = $190,000 EQUITY EQUITY $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 18. PERFORMANCE MEASUREMENT Let’s look at a couple of our measurements © Copyright One Sherpa Pty Ltd 2008
  • 19. RETURN ON SALES © Copyright One Sherpa Pty Ltd 2008
  • 20. Return on Sales BALANCE SHEET Sales Return “AS AT” PROFIT & LOSS ACCOUNT WORKING WORKING “FOR THE PERIOD” CAPITAL CAPITAL INFRASTRUCTURE NET CONTRIBUTION COST SALES EXPENSES PROFIT MARGIN OF INTERACTION FIXED CASH FLOW STATEMENT FIXED “FOR THE PERIOD” CAPITAL CAPITAL MOVEMENT MOVEMENT NET OPERATING NET IN WORKING IN FIXED PROFIT CASH FLOW CASHFLOW CAPITAL CAPITAL DEBT DEBT DEFINITION NET PROFIT divided by SALES EQUITY EQUITY © Copyright One Sherpa Pty Ltd 2008
  • 21. The Financial Fence® $150,000/$1,750,000*100=8.6% THE FINANCIAL FENCE ® PROFIT & LOSS ACCOUNT “FOR THE PERIOD” INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 ACTIVITY OF BUSINESS PROFIT TO SALES 8.6% © Copyright One Sherpa Pty Ltd 2008
  • 22. RETURN ON CAPITAL © Copyright One Sherpa Pty Ltd 2008
  • 23. The Financial Fence® Primary measure BALANCE SHEET Return Capital “AS AT” PROFIT & LOSS ACCOUNT WORKING WORKING “FOR THE PERIOD” CAPITAL CAPITAL INFRASTRUCTURE NET CONTRIBUTION COST SALES EXPENSES PROFIT MARGIN OF INTERACTION FIXED CASH FLOW STATEMENT FIXED “FOR THE PERIOD” CAPITAL CAPITAL MOVEMENT MOVEMENT NET OPERATING NET IN WORKING IN FIXED PROFIT CASH FLOW CASHFLOW CAPITAL CAPITAL DEBT DEBT DEFINITION NET PROFIT divided by TOTAL CAPITAL EQUITY EQUITY © Copyright One Sherpa Pty Ltd 2008
  • 24. The Financial Fence® BALANCE SHEET BALANCE SHEET $150,000/($230,000+ $375,000)*100=24.8% “AS AT” “AS AT” THE FINANCIAL FENCE ® WORKING WORKING PROFIT & LOSS ACCOUNT CAPITAL CAPITAL “FOR THE PERIOD” $90,000 $230,000 INFRASTRUCTURE NET CONTRIBUTION SALES COST EXPENSES PROFIT MARGIN OF INTERACTION $200,000 $150,000 $350,000 $1,750,000 -$1,400,000 FIXED FIXED CASH FLOW STATEMENT CAPITAL CAPITAL “FOR THE PERIOD” $350,000 $375,000 NET WORKING OPERATING FIXED NET PROFIT CAPITAL MVT CASH FLOW CAPITAL MVT CASHFLOW $150,000 -$140,000 $10,000 -$25,000 -$15,000 DEBT DEBT $175,000 $190,000 KEY TOP LEVEL MEASURE RETURN ON CAPITAL 24.8% EQUITY EQUITY $265,000 $415,000 © Copyright One Sherpa Pty Ltd 2008
  • 25. High level review EXAMPLE COMPANY RETURN ON SALES 8.6% RETURN ON CAPITAL 24.8% © Copyright One Sherpa Pty Ltd 2008
  • 26. The Financial Fence® Primary measure •Which measure sounds best? 8.6% or 24.8% © Copyright One Sherpa Pty Ltd 2008
  • 27. The Financial Fence® Primary measure •Which measure encourages the business owner to keep going? •Which measure helps the business owner appreciate the real value of what he or she is doing? © Copyright One Sherpa Pty Ltd 2008
  • 28. The Financial Fence® Primary measure RETURN ON Return Capital CAPITAL BECAUSE WORKING OFTEN IT’S BIGGER CAPITAL NET PROFIT FIXED CAPITAL BUT also a far more powerful measure for the business © Copyright One Sherpa Pty Ltd 2008
  • 29. Today we can only touch the tip of the iceberg Today’s presentation The depth of our business © Copyright One Sherpa Pty Ltd 2008
  • 30. How to get started • The most effective way we have found is by taking the ‘live’ information from a business and ‘putting it on the fence’ • This allows you to see first hand how it gives a completely different perspective on your business and its performance • Until you take this step, your journey is educational but theoretical. • Until you see your own information on the fence it is impossible to have a business experience with the fence. © Copyright One Sherpa Pty Ltd 2008
  • 31. The Advantages To You…… • Understand the financial outcome of interacting with your customers A D V • Make sure you get your fair ‘share of the A N pie’ by not being squeezed by both T customers and suppliers A G E • Reduce your business risk as a result of S improved decision making • Maximize the cash in your pocket • Allows you to spend less time working in your business © Copyright One Sherpa Pty Ltd 2008
  • 32. Some Typical Real Benefits …… • Peace of mind that your business is a great investment • More discretionary time to spend with your family / friends / personal interests • Having the freedom to make decisions and not feel squeezed by everyone • Don’t feel like you’re always the last in line to get paid • Having the freedom to do the enjoyable parts of your business © Copyright One Sherpa Pty Ltd 2008
  • 33. The Financial Fence® © Copyright One Sherpa Pty Ltd 2008
  • 34. Contact us Email: service@onesherpa.com www.thefinancialfence.com www.onesherpa.com© Copyright One Sherpa Pty Ltd 2008

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