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Financial and Business Modeling - Tips and
Tricks for Developing and Maintaining a
Model that Both Business Users and
Finance Can Use
November 14, 2016
Core Catalysts • 10500 Barkley, Suite 225, Overland Park, KS 66212 • 913.762.9400 • www.CoreCatalysts.com
FEI Professional Development
Fall Feast
10:30 – 11:20 AM Session
Property of Core Catalysts, LLC
Objectives
Core Catalysts 2
• Financial Model Anatomy
• Model Strategy
• Inputs
• Drivers
• Business Stakeholders
• Finance Stakeholders
• External Stakeholders
• Refresh Model
• Tips & Tricks
Q
u
e
s
t
i
o
n
s
Financial Model Anatomy
Core Catalysts 3
Model
Inputs
Drivers
Calculations
Reports
Model Strategy
Core Catalysts 4
• Where are you going
• Why is the model necessary
• How will the results be used
• Who are the stakeholders
• Who needs to provide Information
• When are the results needed
• What is the simplest format
Inputs
Core Catalysts 5
• Key assumptions
• Decompose formulas
• Centralized/Consistent placement
• Consistent format
Inputs - Example
Core Catalysts 6
Year 1
Widet 1 Production 100,000
Widget 1 Gross Revenue 100.00$
Widget 1 COGS 50.00$
Widget Net Revenue 50.00$
Salaries 2,500,000$
Overhead 1,000,000$
Tax Rate 20.0%
ACME Widget Co.
Pro Forma Inputs - Project Peanut Butter
Drivers
Core Catalysts 7
• Key assumption strategic impact
• Compounding
• Seasonality
• Levers & sensitivity
Drivers - Example
Core Catalysts 8
Year 2 Year 3 Year 4 Year 5
Widget 1 Production Growth 50.0% 10.0% 5.0% 5.0%
Widget 1 Gross Revenue Growth 5.0% 5.0% 5.0% 5.0%
Widget 1 COGS Growth 4.5% 4.5% 4.0% 4.0%
Annual Salary Increase 40.0% 7.0% 4.0% 3.0%
Annual Overhead Growth 5.0% 5.0% 5.0% 5.0%
ACME Widget Co.
Pro Forma Drivers - Project Peanut Butter
Calculations - Example
Core Catalysts 9
Year 1 Year 2 Year 3 Year 4 Year 5
Gross Revenue 10,000,000$ 15,750,000$ 18,191,250$ 20,055,853$ 22,111,578$
Cost of Goods Sold 5,000,000$ 7,837,500$ 9,009,206$ 9,838,053$ 10,743,154$
Net Revenue 5,000,000$ 7,912,500$ 9,182,044$ 10,217,800$ 11,368,424$
Salaries 2,500,000$ 3,500,000$ 3,745,000$ 3,894,800$ 4,011,644$
Overhead 1,000,000$ 1,050,000$ 1,102,500$ 1,157,625$ 1,215,506$
Operating Expense 3,500,000$ 4,550,000$ 4,847,500$ 5,052,425$ 5,227,150$
EBITDA 1,500,000$ 3,362,500$ 4,334,544$ 5,165,375$ 6,141,274$
Taxes 300,000$ 672,500$ 866,909$ 1,033,075$ 1,228,255$
Net Income 1,200,000$ 2,690,000$ 3,467,635$ 4,132,300$ 4,913,019$
Widget Production 100,000 150,000 165,000 173,250 181,913
Revenue Per Widget 100.00$ 105.00$ 110.25$ 115.76$ 121.55$
COGS Per Widget 50.00$ 52.25$ 54.60$ 56.79$ 59.06$
Net Revenue Per Widget 50.00$ 52.75$ 55.65$ 58.98$ 62.49$
ACME Widget Co.
Project Peanut Butter Pro Forma Income Statement
Executive Summary - Example
Core Catalysts 10
Year 1 Year 2 Year 3 Year 4 Year 5
Total Widgets 100,000 150,000 165,000 173,250 181,913
Widget Growth Rate 50% 10% 5% 5%
Net Revenue Margin 50.0% 50.2% 50.5% 50.9% 51.4%
Net Margin 12.0% 17.1% 19.1% 20.6% 22.2%
ACME Widget Co.
Project Peanut Butter Executive Summary
Business Stakeholders
Core Catalysts 11
• Who should be involved
• Model goal transparency
• Communicate their value
• Facilitated meetings
• Edit vs. Create
• Focused agenda
Finance Stakeholders
Core Catalysts 12
• Understand all stakeholder needs
• Own the model
• Integrate appropriate protections
• Facilitate when possible
• Understand financial relationships
• Minimize errors
• Preview and prep output
• Integrate brand if appropriate
External Stakeholders
Core Catalysts 13
• Are there any
• What is their role
• When should they interact
• What are their expectations
• What do they need
• What are their levers
• What can assist their decision
Refresh Model
Core Catalysts 14
• Understand the data cadence
• Update weekly, monthly, as
needed, etc.
• Correlate milestones
• Meet stakeholder expectations
• Use time stamps
Tips & Tricks
Core Catalysts 15
• Executive summary page
• Dynamic formulas
• Consistent formatting
• Form impacts substance
• Validations & checks
• Focus on material concepts
• Output summary near inputs/drivers
• Version control
• Headers & footers matter
Questions
Core Catalysts 16
About the Presenter
Core Catalysts
Greg Wallman is an experienced financial executive, and is focused on leading the operations
team of Core Catalysts, LLC. Core Catalysts, LLC is a mid-west based management consulting
company, focused on strategic projects within multiple industries relating to many different client
needs. Greg’s background is accounting, with experience at Deloitte, McCaffree Financial
Corporation, and National Bank of Kansas City. He added an MBA and refocused on professional
services with Experis (formerly Jefferson Wells) and has been the operations leader at Core
Catalysts from day 1, 5 years ago. Greg deals will all aspects of business, including business plan
development and financial modeling, operational improvement and efficiency, Enterprise Risk
Management, SOX, and project and team leadership. Greg has diverse industry experience
focused on financial services, but also has great experience in health care, manufacturing,
telecommunications, and aerospace.
The Core Catalysts team is composed of seasoned team members typically with “Big 4” or large
consulting firm backgrounds, combined with practical industry experiences.
www.CoreCatalysts.com
Greg.Wallman@CoreCatalysts.com
816-520-1029
17

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Core Catalysts - FEI Business Model Presentation Nov. 2016

  • 1. Financial and Business Modeling - Tips and Tricks for Developing and Maintaining a Model that Both Business Users and Finance Can Use November 14, 2016 Core Catalysts • 10500 Barkley, Suite 225, Overland Park, KS 66212 • 913.762.9400 • www.CoreCatalysts.com FEI Professional Development Fall Feast 10:30 – 11:20 AM Session Property of Core Catalysts, LLC
  • 2. Objectives Core Catalysts 2 • Financial Model Anatomy • Model Strategy • Inputs • Drivers • Business Stakeholders • Finance Stakeholders • External Stakeholders • Refresh Model • Tips & Tricks Q u e s t i o n s
  • 3. Financial Model Anatomy Core Catalysts 3 Model Inputs Drivers Calculations Reports
  • 4. Model Strategy Core Catalysts 4 • Where are you going • Why is the model necessary • How will the results be used • Who are the stakeholders • Who needs to provide Information • When are the results needed • What is the simplest format
  • 5. Inputs Core Catalysts 5 • Key assumptions • Decompose formulas • Centralized/Consistent placement • Consistent format
  • 6. Inputs - Example Core Catalysts 6 Year 1 Widet 1 Production 100,000 Widget 1 Gross Revenue 100.00$ Widget 1 COGS 50.00$ Widget Net Revenue 50.00$ Salaries 2,500,000$ Overhead 1,000,000$ Tax Rate 20.0% ACME Widget Co. Pro Forma Inputs - Project Peanut Butter
  • 7. Drivers Core Catalysts 7 • Key assumption strategic impact • Compounding • Seasonality • Levers & sensitivity
  • 8. Drivers - Example Core Catalysts 8 Year 2 Year 3 Year 4 Year 5 Widget 1 Production Growth 50.0% 10.0% 5.0% 5.0% Widget 1 Gross Revenue Growth 5.0% 5.0% 5.0% 5.0% Widget 1 COGS Growth 4.5% 4.5% 4.0% 4.0% Annual Salary Increase 40.0% 7.0% 4.0% 3.0% Annual Overhead Growth 5.0% 5.0% 5.0% 5.0% ACME Widget Co. Pro Forma Drivers - Project Peanut Butter
  • 9. Calculations - Example Core Catalysts 9 Year 1 Year 2 Year 3 Year 4 Year 5 Gross Revenue 10,000,000$ 15,750,000$ 18,191,250$ 20,055,853$ 22,111,578$ Cost of Goods Sold 5,000,000$ 7,837,500$ 9,009,206$ 9,838,053$ 10,743,154$ Net Revenue 5,000,000$ 7,912,500$ 9,182,044$ 10,217,800$ 11,368,424$ Salaries 2,500,000$ 3,500,000$ 3,745,000$ 3,894,800$ 4,011,644$ Overhead 1,000,000$ 1,050,000$ 1,102,500$ 1,157,625$ 1,215,506$ Operating Expense 3,500,000$ 4,550,000$ 4,847,500$ 5,052,425$ 5,227,150$ EBITDA 1,500,000$ 3,362,500$ 4,334,544$ 5,165,375$ 6,141,274$ Taxes 300,000$ 672,500$ 866,909$ 1,033,075$ 1,228,255$ Net Income 1,200,000$ 2,690,000$ 3,467,635$ 4,132,300$ 4,913,019$ Widget Production 100,000 150,000 165,000 173,250 181,913 Revenue Per Widget 100.00$ 105.00$ 110.25$ 115.76$ 121.55$ COGS Per Widget 50.00$ 52.25$ 54.60$ 56.79$ 59.06$ Net Revenue Per Widget 50.00$ 52.75$ 55.65$ 58.98$ 62.49$ ACME Widget Co. Project Peanut Butter Pro Forma Income Statement
  • 10. Executive Summary - Example Core Catalysts 10 Year 1 Year 2 Year 3 Year 4 Year 5 Total Widgets 100,000 150,000 165,000 173,250 181,913 Widget Growth Rate 50% 10% 5% 5% Net Revenue Margin 50.0% 50.2% 50.5% 50.9% 51.4% Net Margin 12.0% 17.1% 19.1% 20.6% 22.2% ACME Widget Co. Project Peanut Butter Executive Summary
  • 11. Business Stakeholders Core Catalysts 11 • Who should be involved • Model goal transparency • Communicate their value • Facilitated meetings • Edit vs. Create • Focused agenda
  • 12. Finance Stakeholders Core Catalysts 12 • Understand all stakeholder needs • Own the model • Integrate appropriate protections • Facilitate when possible • Understand financial relationships • Minimize errors • Preview and prep output • Integrate brand if appropriate
  • 13. External Stakeholders Core Catalysts 13 • Are there any • What is their role • When should they interact • What are their expectations • What do they need • What are their levers • What can assist their decision
  • 14. Refresh Model Core Catalysts 14 • Understand the data cadence • Update weekly, monthly, as needed, etc. • Correlate milestones • Meet stakeholder expectations • Use time stamps
  • 15. Tips & Tricks Core Catalysts 15 • Executive summary page • Dynamic formulas • Consistent formatting • Form impacts substance • Validations & checks • Focus on material concepts • Output summary near inputs/drivers • Version control • Headers & footers matter
  • 17. About the Presenter Core Catalysts Greg Wallman is an experienced financial executive, and is focused on leading the operations team of Core Catalysts, LLC. Core Catalysts, LLC is a mid-west based management consulting company, focused on strategic projects within multiple industries relating to many different client needs. Greg’s background is accounting, with experience at Deloitte, McCaffree Financial Corporation, and National Bank of Kansas City. He added an MBA and refocused on professional services with Experis (formerly Jefferson Wells) and has been the operations leader at Core Catalysts from day 1, 5 years ago. Greg deals will all aspects of business, including business plan development and financial modeling, operational improvement and efficiency, Enterprise Risk Management, SOX, and project and team leadership. Greg has diverse industry experience focused on financial services, but also has great experience in health care, manufacturing, telecommunications, and aerospace. The Core Catalysts team is composed of seasoned team members typically with “Big 4” or large consulting firm backgrounds, combined with practical industry experiences. www.CoreCatalysts.com Greg.Wallman@CoreCatalysts.com 816-520-1029 17