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Managing Your Money, Making it Grow - Bill Gibbens


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Managing your money is something every owner and solo practitioner is doing right now, but how smart are you about it? Budgeting and basic accounting are tools every owner has to understand – and use – to be successful. By the end of this session you’ll not only budget like a CFO and develop comp plans like a sales pro, but you’ll know enough to review your financial controls to protect your assets and avoid employees walk out the door with your clients. And finally, you’ll get a look at what else you might be doing to grow your revenue.

Published in: Economy & Finance, Business
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Managing Your Money, Making it Grow - Bill Gibbens

  1. 1. Managing Your MoneyMaking it Grow
  2. 2. • Financial Analysis of Why to Hire– Investing in an Annuity• Operating at Maximum Efficiency– Analysis of Fixed Costs• Financial Considerations for Hiring– Banking and Balance Sheets
  3. 3. • Think of your investment as an annuity• The one investment you have control over• Return on investment is hugeFinancial Analysis of Why to Hire?
  4. 4. Comparing to an Annuity• So what is your investment to hire?– Draw/Salary Loss– Opportunity Loss• Your productionFinancial Analysis of Why to Hire?
  5. 5. • Draw/Salary Loss– 5 hires to find a producer– Average time of failed hire 6.4 weeks– Weekly pay $500– Average investment per failed hire is $3,200– 5 hires to find 1 = 5 * 3,200 = $16,000– HandoutFinancial Analysis of Why to Hire?
  6. 6. • Opportunity Cost?• Your loss of production– Your time is valuable– BUT, hiring reengages you and provides energy– Rookies are good for an office– Inventory creation will offset some lost productionFinancial Analysis of Why to Hire?
  7. 7. • The one investment you have control over– Managing Risk• Interviewing and selection• Accountability measures• Tracking Ratios• Training and on-boarding• Adherence to the “system”• Database development• Working tandem and defined niches• Leadership and motivationFinancial Analysis of Why to Hire?
  8. 8. • Return on Investment is Huge• Average tenure 2.2 years• Average PDA is $240,000• Average lifetime revenue per producer is $506,800vs. Hard Investment of $16,000Financial Analysis of Why to Hire?
  9. 9. Operating at Maximum Efficiency• Absorption of Fixed Costs– Fixed Costs Defined– Business expenses that are not dependent uponservices produced by the business. Often referred to asoverhead costs.– Rent, Salaries, Benefits, Business Insurance, JobBoards, Maintenance Items, Professional Services,Telephone and Internet, Utilities
  10. 10. Operating at Maximum Efficiency• Variable Costs Defined– Business expenses that are dependent upon thevolume of production.– Commissions, Incentives, Royalties, Supplies, PeakPerformer Awards, Contests
  11. 11. Operating at Maximum Efficiency• Impact of adding Production on operating profitmargins• Assume $7,000 month Fixed Costs• 1 Producer = $7,000• 2 Producers = $3,500• 3 Producers = $2,333• 4 Producers = $1,750• 5 Producers = $1,400• 6 Producers = $1,167• 7 Producers = $1,000
  12. 12. Operating at Maximum EfficiencyRevenue Gross Profit$240,000 on Production Profit / Margin1 producer = $7,000 20,000 11,000 4,000 / 20%2 producers = $3,500 40,000 22,000 5,500/37.5%3 producers = $2,333 60,000 33,000 6,667/43%4 producers = $1,750 80,000 44,000 7,250/46.25%5 producers = $1,400 100,000 55,000 7,600/48%6 producers = $1,166 120,000 66,000 7,833/49.1%7 producers = $1,000 140,000 77,000 8,000/50%
  13. 13. Financial Considerations for Hiring• Cash Reserves (Cash on Hand)• Minimum of 3 months – 5 months better• Personal and Business– All estimated monthly expenses PLUS personal expenses– Handout
  14. 14. Financial Considerations for Hiring• Banking implications ~ the “5 C’s”• Capacity• How much debt can your cash flow handle?• Cash Flow Analysis – Current Financials• Cash Flow Historical Stability – Tax Returns• Liquidity Ratio
  15. 15. • Collateral– Although cash flow / capacity is always theprimary source of repayment of a loan, banks willlook for secondary sources of repayment.Collateral represents assets which the bank couldliquidate in order to payoff the debt.• Accounts Receivable• Personal Assets
  16. 16. • Character– How well can the bank “trust” you to payback theloan.• Relationship / Communication• Past payment history /Credit Reports• References
  17. 17. • Capital– How well capitalized is your company? How muchmoney have you invested in the business?• Debt to Equity Ratios• Cash on hand - Savings
  18. 18. • Conditions– What are the current economic and marketconditions which impact upon your business?• Macro - economic environment• “Markets” to which you serve• Diversification
  19. 19. • Q & AManaging Your Money /Making it Grow