Great Ideas! Greg Crabtree's Simple Numbers, Straight Talk, Big Profits! 041012

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An overview of one of the best new books on financial management of small-to-medium sized businesses. Greg Crabtree's Simple Numbers is full of practical insights, new perspectives and accessible tools. Way worth the read!

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  • Introduce the book, Collins, L&L concept\n\nVALIDATION - clients and OSB\n
  • Collins as guru:\n\nCome to Boulder, RH framework, Growth Summit keynote\n
  • Collins as guru:\n\nCome to Boulder, RH framework, Growth Summit keynote\n
  • Explain “prequel” idea\n\nCorporate genome project -- mapping “great” organizational DNA\n
  • Explain “prequel” idea\n\nCorporate genome project -- mapping “great” organizational DNA\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
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  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Not about these companies? Not about business?!?\n\n1 thing: the timeless principals of G2G\n
  • Introduce the book, Collins, L&L concept\n\nVALIDATION - clients and OSB\n
  • Great Ideas! Greg Crabtree's Simple Numbers, Straight Talk, Big Profits! 041012

    1. 1. Great ideas!Simple Numbers,Straight Talk, Big Profits:4 Keys to Unlock Your Business Potentialby Greg CrabtreeThe Executive ForumApril 10, 2012
    2. 2. Greg Crabtree has created a valuable andaccessible approach to managing by the numbers
    3. 3. Greg Crabtree has created a valuable and accessible approach to managing by the numbers “Greg has distilled key lessons for making serious money ...More importantly, he highlights some truths I’ve yet to seearticulated in any other book on growing a business.”Verne Harnish, author of Mastering the Rockefeller Habits
    4. 4. Simple Numbers is a great companionto Ownership Thinking
    5. 5. Simple Numbers is a great companion to Ownership Thinking... and, like Ownership Thinking, is based onwork with hundreds of client companies
    6. 6. Don’t know a whole lot about Greg Crabtree
    7. 7. Don’t know a whole lot about Greg Crabtree He is a CPA
    8. 8. Don’t know a whole lot about Greg Crabtree He is a CPA and a Partner in an accounting firm based in Huntsville, AL
    9. 9. Don’t know a whole lot about Greg Crabtree He is a CPA and a Partner in an accounting firm based in Huntsville, AL The “Verne connection” is via EO
    10. 10. Don’t know a whole lot about Greg Crabtree He is a CPA and a Partner in an accounting firm based in Huntsville, AL The “Verne connection” is via EO Greg is not a celebrity business guru
    11. 11. Don’t know a whole lot about Greg Crabtree He is a CPA and a Partner in an accounting firm based in Huntsville, AL The “Verne connection” is via EO Greg is not a celebrity business guru His stuff is practical and makes a lot of sense
    12. 12. Note: the book seems primarily aimed at early stage companies with less than $5 million in Revenue
    13. 13. Note: the book seems primarily aimed at early stage companies with less than $5 million in Revenue But the vast majority of the content isreally excellent common sense stuff that very likely applies to most companies
    14. 14. Quick overview
    15. 15. The Four Keys
    16. 16. Owner’s Salary
    17. 17. Profit: Why 10% is the New Breakeven
    18. 18. Labor Productivity
    19. 19. Business Physics: The Four Forces of Cash Flow
    20. 20. Other cool concepts
    21. 21. Maximizing Labor Productivity
    22. 22. Reporting Rhythms: The Right Data at the Right Time
    23. 23. Reaching your core capital target
    24. 24. Skip the Budget, Learn to Forecast
    25. 25. Full disclosure:
    26. 26. Full disclosure: There’s stuff I’m leaving out(or cruising through pretty quickly)
    27. 27. Owner’s salary
    28. 28. Owner’s salaryTax management
    29. 29. Owner’s salary Tax managementThe Three Sources of Capital
    30. 30. Owner’s salary Tax managementThe Three Sources of Capital Economic Value
    31. 31. What we’re hoping to gain from a deep dive into Simple Numbers
    32. 32. New insights on managing via the numbers
    33. 33. An Executive Forum scorecard (monthly/bi-monthly)
    34. 34. (Possibly) weekly reports
    35. 35. (Possibly) weekly reportsCash Flow and Sales & Productivity
    36. 36. Ultimately, to tie together the main elements of Simple Numbers, Ownership Thinking and The Great Game of Business ...
    37. 37. Ultimately, to tie together the main elements of Simple Numbers, Ownership Thinking and The Great Game of Business ... ... in order to ...
    38. 38. Teach financial literacy, drive performance improvement and increase the value of your business
    39. 39. And, of course: tie in “What happens to a dollar?”
    40. 40. Are we good with that?
    41. 41. The deep dive
    42. 42. The Four Keys
    43. 43. Owner’s Salary
    44. 44. “Paying taxes is a good thing. The higher your tax bill, the better your business is doing.”
    45. 45. Your number one key performance indicator
    46. 46. Your number one key performance indicatorYou can always find a way to pay less taxes, but you can’t do it and build wealth at the same time
    47. 47. Don’t focus on reducing your taxes; focus on increasing your profit
    48. 48. The Four Keys: Profit
    49. 49. “Profit is like oxygen -- your business can’t hold its breath very long without it.”
    50. 50. Some definitions
    51. 51. Profit = Pretax ProfitAll of your Revenue - all of your costs, before you pay taxes
    52. 52. Leave labor costs out of your Gross Profit calculation (to understand your true economic engine)
    53. 53. Focus on Gross Profit, before working on Pretax Profit
    54. 54. Gross Profit matters most,followed by how your arrive at your Pretax Profit
    55. 55. According to Greg Crabtree
    56. 56. 5% Pretax profit or less puts your business on life support
    57. 57. 10% Pretax profit indicates a good business
    58. 58. 15% or more Pretax profitmeans you have a great business
    59. 59. The 8 functional areas in any business
    60. 60. The Most Challenging Level of Profitability: $2 million to $3.5 million in Revenue
    61. 61. The need to put a management structure in place first appears
    62. 62. Hiring with care
    63. 63. “Been there, done that credentials” (10% success rate!)
    64. 64. “Been there, done that credentials” (10% success rate!) Consultants-to-executives - the Dell example
    65. 65. “Been there, done that credentials” (10% success rate!) Consultants-to-executives - the Dell example (Yikes)
    66. 66. “Been there, done that credentials” (10% success rate!) Consultants-to-executives - the Dell example (Yikes) Hiring young and investing in their education
    67. 67. Your capital safety net
    68. 68. The Four Keys: Labor Productivity
    69. 69. “Getting the required productivity for every dollar you spend on labor.”
    70. 70. “Focus on your Gross Profit per labor dollar as your key indicator of labor productivity.”
    71. 71. Cost creep (very often) = Labor creep
    72. 72. Hiring smart to avoid labor creep
    73. 73. Hiring
    74. 74. HiringReassigning
    75. 75. HiringReassigningOutsourcing
    76. 76. HiringReassigningOutsourcing Training
    77. 77. Growth can put tremendous stress on your management team
    78. 78. Growth can put tremendous stress on your management teamLabor productivity is the key metric to watch
    79. 79. The Salary Cap
    80. 80. The Salary CapStart with Revenue and Pretax Profit, then work your way back
    81. 81. “Managing the salary cap is the key to improving profit.”
    82. 82. When you exceed your salary cap, you have to:
    83. 83. When you exceed your salary cap, you have to: Freeze wages and work on profitability
    84. 84. When you exceed your salary cap, you have to: Freeze wages and work on profitability Cut staff or
    85. 85. When you exceed your salary cap, you have to: Freeze wages and work on profitability Cut staff or a bit of both
    86. 86. The Four Keys: The Four Forces of Cash Flow
    87. 87. The four forces help to explain the difference between Profit and Cash Flow
    88. 88. When profit disappears
    89. 89. The Four Forces
    90. 90. Paying your taxes Repaying debtReaching your core capital target Taking distributions
    91. 91. The Simple Numbers rule of thumb:Your core capital target = 2 months of operating expenses, without using your Line of Credit
    92. 92. But you need to come up with the right metric for your company and situation
    93. 93. Having the data and doing the calculations helps you make the right decisions
    94. 94. “Businesses that have cash and no debt attract magical things.”
    95. 95. The ideal scenario:
    96. 96. Consistent profit builds equityThe ideal scenario:
    97. 97. Consistent profit builds equity The core capital target is hit and there is cashThe ideal scenario:
    98. 98. Consistent profit builds equity The core capital target is hit and there is cash Distributions without guiltThe ideal scenario:
    99. 99. Consistent profit builds equity The core capital target is hit and there is cash Distributions without guiltThe ideal scenario: True wealth building
    100. 100. How to Maximize Your Labor Productivity
    101. 101. The middle ground between paying too much and paying too little
    102. 102. Remember: Gross Profit per labor dollar is your second most important KPI
    103. 103. Anyone recall the most important?
    104. 104. Anyone recall the most important?
    105. 105. Labor productivity is the #1 thingthat determines whether or not you are profitable
    106. 106. The key metric: 10% Pretax Profit
    107. 107. If you are not there:You either need to cut labor or add Gross Profit
    108. 108. Balancing Culture and Productivity
    109. 109. Holding people accountable (yourself included) and encouraging honest feedback
    110. 110. Document it, so that you can live it and maintain it
    111. 111. Beware the “family atmosphere”
    112. 112. Beware the “family atmosphere”Where a great culture ... leads to low or no profit
    113. 113. Evaluationsshould be used to drive culture and productivity
    114. 114. Identify the top 3-5 skills sets for critical positions 5 key questions for evaluations
    115. 115. Incentive plans are dealt with betterin Ownership Thinking and The Great Game of Business
    116. 116. Simple Numbers suggests (helpfully) that you continuously forecast Gross Profit and labor productivity
    117. 117. In line with Ownership Thinking andThe Great Game of Business, Simple Numbers insists:
    118. 118. In line with Ownership Thinking and The Great Game of Business, Simple Numbers insists:“Design incentive plans that guarantee Net Profit increases.”
    119. 119. Reporting RhythmsThe Right Data at the Right Time
    120. 120. Daily, Weekly and Monthly Reports
    121. 121. Daily Report: Cash Balance
    122. 122. Weekly ReportsCash Flow Forecast: to make sure you can pay your billsSales and Productivity: tying labor productivity to sales
    123. 123. Sales and Productivity
    124. 124. Sales and Productivity Understanding “the pulse of your business”through the two numbers that matter most:
    125. 125. Sales and Productivity Understanding “the pulse of your business”through the two numbers that matter most: Gross Profit and the cost of all labor
    126. 126. Measure weekly, but view month-to-month and YTD Aim for labor efficiency of 2.0 or better
    127. 127. Monthly Report: Monthly and Rolling 12 Profit & Loss
    128. 128. The newscorecard?
    129. 129. “You have to understand and be responsible for your data.”
    130. 130. Keep in simple!No more than 7 or 8 lines of data
    131. 131. Show whether you made money by looking at Revenue, Costs, Expenses and, ultimately, Net Income
    132. 132. Focus on two calculations:Labor Productivity and Salary Cap
    133. 133. The unique feature of this perspectiveis that (all) labor is captured as an Operating Expense, rather than as part of Cost of Goods Sold
    134. 134. The Cliffs Notes Summary
    135. 135. 10% is the new breakeven
    136. 136. Labor Productivity = Gross Profit/all labor dollars
    137. 137. Labor Productivity = Gross Profit/all labor dollars And is your second most important KPI
    138. 138. Labor Productivity and Salary Capare two very useful new P&L calculations
    139. 139. Reporting rhythms: the right data at the right time
    140. 140. Establish and achieve your core capital target
    141. 141. Establish and achieve your core capital target(generally 2 months of Operating Expenses and no draw on your line of credit)
    142. 142. Greg Crabtree has written a really valuable book
    143. 143. Greg Crabtree has written a really valuable book It’s practical
    144. 144. Greg Crabtree has written a really valuable book It’s practical filled with tools
    145. 145. Greg Crabtree has written a really valuable book It’s practical filled with tools some interesting new perspectives
    146. 146. Greg Crabtree has written a really valuable book It’s practical filled with tools some interesting new perspectives and is right up our alley, right now
    147. 147. Great ideas!Simple Numbers,Straight Talk, Big Profits:4 Keys to Unlock Your Business Potentialby Greg CrabtreeThe Executive ForumApril 10, 2012

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