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
Developing a Strategic Plan• The Strategic Plan is your operating guide for your business with a future looking forecast
Elements of the Strategic Plan• Vision Statement – A statement of where the company will be in 3 to 5 years
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
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.
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
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.
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
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
Elements of a Strategic Plan• Financials – Develop a budget based on your plan and evaluate the reality of the budget and resources available.
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
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.
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
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
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.
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.
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.
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.
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.
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.
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.
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%
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.
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??
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.
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
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
Are you Running your Business or is your Business running you?• Running a business is not an a science it is an art!
Are you Running your Business or is your Business running you?• But being prepared to manage your business will make it much easier
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.
Are you Running your Business or is your Business running you?• You can run a successful Business using the right tools
SiteSource Business Coaching and Consulting • Richard Wilbert Email: email@example.com 303-909-0798