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8 Metrics for Creative Service Companies

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The most important financial metrics / KPIs for creative service companies. Know what numbers matter for you and your service-based business.

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8 Metrics for Creative Service Companies

  1. 1. METRICSFOR CREATIVE SERVICE COMPANIES JODY GRUNDEN & JAMIE NAU, SUMMIT CPA Owners Camp • Seattle• May 2016
  2. 2. METRICSFOR CREATIVE SERVICE COMPANIES JODY GRUNDEN & JAMIE NAU, SUMMIT CPA Owners Camp • Seattle • May 2016
  3. 3. 3 Introduction **This presentation will be available for download** Jody Grunden, CPA Summit CPA Group JAMIE NAU, CPA Summit CPA Group
  4. 4. 4 43%More effective by knowing and understanding their metrics. Why You’re Here High performing companies are Source: "Predictive Business Analytics: Forward Looking Capabilities to Improve Business Performance,” Lawrence Maisel, Gary Cokins
  5. 5. Revenue & Net Income Per Producer 5 What is the Story? 192,000 185,070 180,000 182,000 184,000 186,000 188,000 190,000 192,000 194,000 January February March April May June July August September October November December Act - Rev/Producer
  6. 6. Revenue & Net Income Per Producer 6 What is the Story? 192,000 185,070 16.7% 17.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 180,000 182,000 184,000 186,000 188,000 190,000 192,000 194,000 January February March April May June July August September October November December Act - Rev/Producer Act - NI/Producer
  7. 7. 7 Cash 4321 Effective Rate Net Income Capacity to Contract
  8. 8. 8 4321 Cash
  9. 9. How Much Cash Should I Keep on Hand? 9 Cash Reserve Minimum of 10-30% of Revenue Tax Reserve 40% of Forecast Net Income
  10. 10. How Much Cash Should I Keep on Hand? 10 Cash Reserve Minimum of 10-30% of Revenue Tax Reserve 40% of Forecast Net Income
  11. 11. 11 How Much Cash Should I Keep on Hand? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total % of Inc Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 3,744,000 100% Production Expense 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 1,804,608 48% Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 1,939,392 52% Administrative Expense 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 786,240 21% Marketing Expense 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 336,960 9% Facility Expense 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 168,480 4.5% Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 647,712 17.3% Profit & Loss
  12. 12. 12 How Much Cash Should I Keep on Hand? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total % of Inc Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 3,744,000 100% Production Expense 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 1,804,608 48% Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 1,939,392 52% Administrative Expense 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 786,240 21% Marketing Expense 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 336,960 9% Facility Expense 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 168,480 4.5% Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 647,712 17.3% Profit & Loss 3,744,000 x 10% 374,400 3,744,000 x 30% 1,123,200 Cash Reserve
  13. 13. How Much Cash Should I Keep on Hand? 13 Cash Reserve Minimum of 10-30% of Revenue Tax Reserve 40% of Forecast Net Income
  14. 14. 14 How Much Cash Should I Keep on Hand? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total % of Inc Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 3,744,000 100% Production Expense 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 1,804,608 48% Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 1,939,392 52% Administrative Expense 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 786,240 21% Marketing Expense 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 336,960 9% Facility Expense 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 168,480 4.5% Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 647,712 17.3% Profit & Loss 647,712 x 40% 259,084 Tax Reserve
  15. 15. 15 Is This Company Adequately Funded? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Assets Operating Cash 200,000 217,800 149,600 177,400 205,200 143,000 223,600 251,400 205,200 293,000 320,800 348,600 Cash Reserve 36,800 36,800 92,800 92,800 92,800 92,800 100,000 100,000 100,000 100,000 100,000 100,000 Total Cash 236,800 254,600 242,400 270,200 298,000 235,800 323,600 351,400 305,200 393,000 420,800 448,600 Tax Reserve - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 Accounts Receivable 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Net Fixed Assets 50,000 49,000 48,000 47,000 46,000 45,000 44,000 43,000 42,000 41,000 40,000 39,000 Total AssetsTotal Assets 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 Liabilities & Equity Accounts Payable 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Line of Credit 50,000 40,000 - - - - - - - - - - Total Liabilities 90,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Equity Partners Equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 Net Income 46,800 93,600 140,400 187,200 234,000 280,800 327,600 374,400 421,200 468,000 514,800 561,600 Distributions - - - (60,000) (60,000) (150,000) (150,000) (150,000) (224,000) (224,000) (224,000) (224,000) Total Equity 346,800 393,600 440,400 427,200 474,000 430,800 477,600 524,400 497,200 544,000 590,800 637,600 Liabilies and Equity 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 Balance Sheet
  16. 16. 16 Is This Company Adequately Funded? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Assets Operating Cash 200,000 217,800 149,600 177,400 205,200 143,000 223,600 251,400 205,200 293,000 320,800 348,600 Cash Reserve 36,800 36,800 92,800 92,800 92,800 92,800 100,000 100,000 100,000 100,000 100,000 100,000 Total Cash 236,800 254,600 242,400 270,200 298,000 235,800 323,600 351,400 305,200 393,000 420,800 448,600 Tax Reserve - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 Accounts Receivable 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Net Fixed Assets 50,000 49,000 48,000 47,000 46,000 45,000 44,000 43,000 42,000 41,000 40,000 39,000 Total AssetsTotal Assets 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 Liabilities & Equity Accounts Payable 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Line of Credit 50,000 40,000 - - - - - - - - - - Total Liabilities 90,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Equity Partners Equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 Net Income 46,800 93,600 140,400 187,200 234,000 280,800 327,600 374,400 421,200 468,000 514,800 561,600 Distributions - - - (60,000) (60,000) (150,000) (150,000) (150,000) (224,000) (224,000) (224,000) (224,000) Total Equity 346,800 393,600 440,400 427,200 474,000 430,800 477,600 524,400 497,200 544,000 590,800 637,600 Liabilies and Equity 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 448,600 ÷ 3,744,000 12.9% of Revenue Cash Reserve Balance Sheet
  17. 17. 17 Is This Company Adequately Funded? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Assets Operating Cash 200,000 217,800 149,600 177,400 205,200 143,000 223,600 251,400 205,200 293,000 320,800 348,600 Cash Reserve 36,800 36,800 92,800 92,800 92,800 92,800 100,000 100,000 100,000 100,000 100,000 100,000 Total Cash 236,800 254,600 242,400 270,200 298,000 235,800 323,600 351,400 305,200 393,000 420,800 448,600 Tax Reserve - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 Accounts Receivable 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Net Fixed Assets 50,000 49,000 48,000 47,000 46,000 45,000 44,000 43,000 42,000 41,000 40,000 39,000 Total AssetsTotal Assets 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 Liabilities & Equity Accounts Payable 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Line of Credit 50,000 40,000 - - - - - - - - - - Total Liabilities 90,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Equity Partners Equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 Net Income 46,800 93,600 140,400 187,200 234,000 280,800 327,600 374,400 421,200 468,000 514,800 561,600 Distributions - - - (60,000) (60,000) (150,000) (150,000) (150,000) (224,000) (224,000) (224,000) (224,000) Total Equity 346,800 393,600 440,400 427,200 474,000 430,800 477,600 524,400 497,200 544,000 590,800 637,600 Liabilies and Equity 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600 Tax Reserve 40,000 + 224,000 264,000 40% of Net Income Balance Sheet
  18. 18. 18 4321 Effective Rate
  19. 19. What is Weekly Expectation and Utilization Rate? 19 Weekly Expectation # of Weekly Billable Hours Utilization Rate Total Available Hours per week # of Weekly Billable Hours Total Hours Paid (Annual expectation less company culture)
  20. 20. 28 30 32 34 36 Billble Hours per Week 2,080 2,080 2,080 2,080 2,080 Total Hours Paid Company Culture (72) (72) (72) (72) (72) Holidays 9 days (120) (120) (120) (120) (120) Vacation 3 weeks (40) (40) (40) (40) (40) Bureau Events 1 week (40) (40) (40) (40) (40) Company Retreat 1 week (272) (272) (272) (272) (272) Hours Not Worked 1,808 1,808 1,808 1,808 1,808 Net Available Hours 70.0% 75.0% 80.0% 85.0% 90.0% Weekly Expectation 1,266 1,356 1,446 1,537 1,627 Chargeable Hour per Year 60.8% 65.2% 69.5% 73.9% 78.2% Target Utilization 20 What is Weekly Expectation and Utilization Rate? 1,356 ÷ 2,080 65.2% Utilization Utilization Rate Target
  21. 21. What is Standard Rate, Average Billable Rate and Effective Rate? 21 Standard Rate $ Per Hour Avg. Billable Rate Total Revenue Effective Rate That You Charge for your Service # Billable Hours Total Revenue # Hours Paid
  22. 22. 28 30 32 34 36 Billable Hours per Week 2,000 2,000 2,000 2,000 2,000 Monthly Billable Hours 175.00 175.00 175.00 175.00 175.00 Standard Billable Rate 350,000 350,000 350,000 350,000 350,000 Gross Revenue (50,000) (50,000) (50,000) (50,000) (50,000) Write-downs 300,000 300,000 300,000 300,000 300,000 Monthly Revenue 2,000 2,000 2,000 2,000 2,000 Monthly Billable Hours 150.00 150.00 150.00 150.00 150.00 Average Billable Rate 60.8% 65.2% 69.5% 73.9% 78.2% Target Utilization Rate 91.20 97.80 104.25 110.85 117.30 Effective Billable Rate 22 What is Standard Rate, Average Billable Rate and Effective Rate?
  23. 23. 28 30 32 34 36 Billable Hours per Week 2,000 2,000 2,000 2,000 2,000 Monthly Billable Hours 175.00 175.00 175.00 175.00 175.00 Standard Billable Rate 350,000 350,000 350,000 350,000 350,000 Gross Revenue (50,000) (50,000) (50,000) (50,000) (50,000) Write-downs 300,000 300,000 300,000 300,000 300,000 Monthly Revenue 2,000 2,000 2,000 2,000 2,000 Monthly Billable Hours 150.00 150.00 150.00 150.00 150.00 Average Billable Rate 60.8% 65.2% 69.5% 73.9% 78.2% Target Utilization Rate 91.20 97.80 104.25 110.85 117.30 Effective Billable Rate 23 What is Standard Rate, Average Billable Rate and Effective Rate?
  24. 24. 28 30 32 34 36 Biillable Hours per Week 300,000 300,000 300,000 300,000 300,000 Monthly Revenue 3,289 3,067 2,878 2,710 2,558 Monthly Total Hours 91.20 97.80 104.25 110.70 117.30 Effective Billable Rate 173.20 173.20 173.20 173.20 173.20 Monthly Hours per FTE 18.99 17.71 16.61 15.65 14.77 FTE 7,500 7,500 7,500 7,500 7,500 Monthly FTE Cost ($90K/yr) 142,443 132,830 124,612 117,351 110,748 Monthly Cost 157,557 167,170 175,388 182,649 189,252 Gross Profit 52.52% 55.72% 58.46% 60.88% 63.08% Gross Profit % 24 What is Standard Rate, Average Billable Rate and Effective Rate? Monthly Total Hours 2,000 ÷ 65.2% 3,067 Monthly Total Hours
  25. 25. 25 What is Standard Rate, Average Billable Rate and Effective Rate? 28 30 32 34 36 Billable Hours per Week 300,000 300,000 300,000 300,000 300,000 Monthly Revenue 3,289 3,067 2,878 2,710 2,558 Monthly Total Hours 91.20 97.80 104.25 110.70 117.30 Effective Billable Rate 173.20 173.20 173.20 173.20 173.20 Monthly Hours per FTE 18.99 17.71 16.61 15.65 14.77 FTE 7,500 7,500 7,500 7,500 7,500 Monthly FTE Cost ($90K/yr) 142,443 132,830 124,612 117,351 110,748 Monthly Cost 157,557 167,170 175,388 182,649 189,252 Gross Profit 52.52% 55.72% 58.46% 60.88% 63.08% Gross Profit % Full-Time Equivalent 3,067 ÷ 173.20 17.71 FTE
  26. 26. 26 What is Standard Rate, Average Billable Rate and Effective Rate? 28 30 32 34 36 Billable Hours per Week 300,000 300,000 300,000 300,000 300,000 Monthly Revenue 3,289 3,067 2,878 2,710 2,558 Monthly Total Hours 91.20 97.80 104.25 110.70 117.30 Effective Billable Rate 173.20 173.20 173.20 173.20 173.20 Monthly Hours per FTE 18.99 17.71 16.61 15.65 14.77 FTE 7,500 7,500 7,500 7,500 7,500 Monthly FTE Cost ($90K/yr) 142,443 132,830 124,612 117,351 110,748 Monthly Cost 157,557 167,170 175,388 182,649 189,252 Gross Profit 52.52% 55.72% 58.46% 60.88% 63.08% Gross Profit %
  27. 27. 27 4321 Net Income
  28. 28. What should YOUR Net Income be? 28 10-15% of Revenue Answer:
  29. 29. 29 What is Standard Rate, Average Billable Rate and Effective Rate? Team Metrics 1 10 20 50 % of Inc # of Hours Worked 2,080 20,800 41,600 104,000 Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400 100.0% Effective Rate 92.85 92.85 92.85 92.85 Employee Cost 75,000 750,000 1,500,000 3,750,000 Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 48.2% Gross Profit 100,128 1,001,280 2,002,560 5,006,400 51.8% Overhead Cost 57,938 579,384 1,158,768 2,896,920 30.0% Admin 40,557 405,569 811,138 2,027,844 21.0% Sales & Marketing 17,382 173,815 347,630 869,076 9.0% Facility Cost 8,691 86,908 173,815 434,538 4.5% Total Cost 159,629 1,596,292 3,192,583 7,981,458 34.5% Net Income 33,499 334,988 669,977 1,674,942 17.3%
  30. 30. 30 What is Standard Rate, Average Billable Rate and Effective Rate? Team Metrics 1 10 20 50 % of Inc # of Hours Worked 2,080 20,800 41,600 104,000 Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400 100.0% Effective Rate 92.85 92.85 92.85 92.85 Employee Cost 75,000 750,000 1,500,000 3,750,000 Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 48.2% Gross Profit 100,128 1,001,280 2,002,560 5,006,400 51.8% Overhead Cost 57,938 579,384 1,158,768 2,896,920 30.0% Admin 40,557 405,569 811,138 2,027,844 21.0% Sales & Marketing 17,382 173,815 347,630 869,076 9.0% Facility Cost 8,691 86,908 173,815 434,538 4.5% Total Cost 159,629 1,596,292 3,192,583 7,981,458 34.5% Net Income 33,499 334,988 669,977 1,674,942 17.3%
  31. 31. How Do We Determine Burden Rate? 31 Burden Rate Avg. Employee Burden Avg. Salary
  32. 32. Average Salary 60,000 65,000 70,000 75,000 80,000 Health Insurance 6,000 6,000 6,000 6,000 6,000 Disability Insurance 2,400 2,400 2,400 2,400 2,400 Life Insurance 120 120 120 120 120 Technology Stipend 2,000 2,000 2,000 2,000 2,000 Education 2,000 2,000 2,000 2,000 2,000 Social Securtiy Tax (6.2%) 3,720 4,030 4,340 4,650 4,960 Medicate Tax (1.45%) 870 943 1,015 1,088 1,160 Average Employee Burden 17,110 17,493 17,875 18,258 18,640 Employee Burden Rate 29% 27% 26% 24% 23% 32 How Do We Determine Burden Rate?
  33. 33. Average Salary 60,000 65,000 70,000 75,000 80,000 Health Insurance 6,000 6,000 6,000 6,000 6,000 Disability Insurance 2,400 2,400 2,400 2,400 2,400 Life Insurance 120 120 120 120 120 Technology Stipend 2,000 2,000 2,000 2,000 2,000 Education 2,000 2,000 2,000 2,000 2,000 Social Securtiy Tax (6.2%) 3,720 4,030 4,340 4,650 4,960 Medicate Tax (1.45%) 870 943 1,015 1,088 1,160 Average Employee Burden 17,110 17,493 17,875 18,258 18,640 Employee Burden Rate 29% 27% 26% 24% 23% 33 How Do We Determine Burden Rate?
  34. 34. 34 How Do We Determine Burden Rate? Team Metrics 1 10 20 50 % of Inc # of Hours Worked 2,080 20,800 41,600 104,000 Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400 100.0% Effective Rate 92.85 92.85 92.85 92.85 Employee Cost 75,000 750,000 1,500,000 3,750,000 Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 48.2% Gross Profit 100,128 1,001,280 2,002,560 5,006,400 51.8% Overhead Cost 57,938 579,384 1,158,768 2,896,920 30.0% Admin 40,557 405,569 811,138 2,027,844 21.0% Sales & Marketing 17,382 173,815 347,630 869,076 9.0% Facility Cost 8,691 86,908 173,815 434,538 4.5% Total Cost 159,629 1,596,292 3,192,583 7,981,458 34.5% Net Income 33,499 334,988 669,977 1,674,942 17.3%
  35. 35. 35 How Do We Determine Burden Rate? Team Metrics 1 10 20 50 % of Inc # of Hours Worked 2,080 20,800 41,600 104,000 Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400 100.0% Effective Rate 92.85 92.85 92.85 92.85 Employee Cost 75,000 750,000 1,500,000 3,750,000 Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 48.2% Gross Profit 100,128 1,001,280 2,002,560 5,006,400 51.8% Overhead Cost 57,938 579,384 1,158,768 2,896,920 30.0% Admin 40,557 405,569 811,138 2,027,844 21.0% Sales & Marketing 17,382 173,815 347,630 869,076 9.0% Facility Cost 8,691 86,908 173,815 434,538 4.5% Total Cost 159,629 1,596,292 3,192,583 7,981,458 34.5% Net Income 33,499 334,988 669,977 1,674,942 17.3%
  36. 36. 36 Food for Thought How Much Does 2 Hours Effect Cash?
  37. 37. 37 Food for Thought: How Much Does 2 Hours Effect Cash? Additional 2 Hours 1 10 20 50 # of Hours Worked 2,080 20,800 41,600 104,000 Net Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400
  38. 38. 2,080 2,080 2,080 2,080 Total Hours Paid 28 30 32 34 Billable Hours per Week 52 52 52 52 Week in Year 1,456 1,560 1,664 1,768 Billable Hour per Year 70.0% 75.0% 80.0% 85.0% Weekly Expectation Company Culture (72) (72) (72) (72) Holidays 9 days (120) (120) (120) (120) Vacation 3 weeks (40) (40) (40) (40) Bureau Events 1 week (40) (40) (40) (40) Company Retreat 1 week (272) (272) (272) (272) Hours Not Worked 1,184 1,288 1,392 1,496 Net Billable Hours 56.9% 61.9% 66.9% 71.9% Utilization Rate Target 38 Food for Thought: How Much Does 2 Hours Effect Cash?
  39. 39. 39 Food for Thought: How Much Does 2 Hours Effect Cash? Additional 2 Hours 1 10 20 50 # of Hours Worked 2,080 20,800 41,600 104,000 Net Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400
  40. 40. 40 Food for Thought: How Much Does 2 Hours Effect Cash? Additional 2 Hours 1 10 20 50 # of Hours Worked 2,080 20,800 41,600 104,000 Net Utilization Rate 66.9% 66.9% 66.9% 66.9% Production Hours 1,392 13,915 27,830 69,576 Average Billing Rate 150 150 150 150 Revenue 208,728 2,087,280 4,174,560 10,436,400 Revenue Before Increase 193,128 1,931,280 3,862,560 9,656,400 Additional Net Income 15,600 156,000 312,000 780,000
  41. 41. 41 Food for Thought How Much Does an Additional $10 effect CASH?
  42. 42. 42 Additional $10 Average Bill 1 10 20 50 # of Hours Worked 2,080 20,800 41,600 104,000 Net Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 150 150 150 150 Revenue 193,128 1,931,280 3,862,560 9,656,400 Food for Thought: How Much Does an Additional $10 effect CASH?
  43. 43. 43 Additional $10 Average Bill 1 10 20 50 # of Hours Worked 2,080 20,800 41,600 104,000 Net Utilization Rate 61.9% 61.9% 61.9% 61.9% Production Hours 1,288 12,875 25,750 64,376 Average Billing Rate 160 160 160 160 Revenue 206,003 2,060,032 4,120,064 10,300,160 Revenue Before Increase 193,128 1,931,280 3,862,560 9,656,400 Additional Net Income 12,875 128,752 257,504 643,760 Food for Thought: How Much Does an Additional $10 effect CASH?
  44. 44. 44 4321 Capacity to Contract
  45. 45. Capacity to Contract 45 Contracted Work Revenue Capacity
  46. 46. Percentage of your Revenue Capacity Committed to Contract Work 46 Capacity to Contract January February March Total Under Contract 275,000 220,000 100,000 595,000 Not Under Contract 37,000 92,000 212,000 341,000 Revenue based on Forecast 312,000 312,000 312,000 936,000 % under Contract 88% 71% 32% 64%
  47. 47. Percentage of your Revenue Capacity Committed to Contract Work 47 Capacity to Contract January February March Total Under Contract 275,000 220,000 100,000 595,000 Not Under Contract 37,000 92,000 212,000 341,000 Revenue based on Forecast 312,000 312,000 312,000 936,000 % under Contract 88% 71% 32% 64%
  48. 48. Percentage of your Revenue Capacity Committed to Contract Work 48 Capacity to Contract January February March Total Under Contract 275,000 220,000 100,000 595,000 Not Under Contract 37,000 92,000 212,000 341,000 Revenue based on Forecast 312,000 312,000 312,000 936,000 % under Contract 88% 71% 32% 64% 100% - 64% 36%
  49. 49. What’s the Story Here? – 3 Month Average 49 Capacity to Contract Aug, 68%
  50. 50. What’s the Story Here? – 3 Month Average 50 Capacity to Contract Aug, 68% 68% + 36% 104%
  51. 51. What’s the Story Here? – 3 Month Average 51 Capacity to Contract Aug, 68%
  52. 52. What’s the Story Here? – 3 Month Average 52 Capacity to Contract Dec, 85%
  53. 53. What’s the Story Here? – 3 Month Average 53 Capacity to Contract Dec, 85% 85% + 36% 121%
  54. 54. What’s the Story Here? – 3 Month Average 54 Capacity to Contract Aug, 68%
  55. 55. What’s the Story Here? – 3 Month Average 55 Capacity to Contract Dec, 52%
  56. 56. What’s the Story Here? – 3 Month Average 56 Capacity to Contract Dec, 52%52% + 36% 88%
  57. 57. 57 Bonus Metrics
  58. 58. Recurring Monthly Revenue 58 Security: Increases Recurring Monthly Revenue Capacity to Contract: Decreases Cash Reserve: Less Required Effective Rate: Less Reliant Emphasis on these KPIs decreases
  59. 59. Gross Revenue per Producer 59 Gross Revenue & Net Income Per Producer Benchmarked Against Forecast
  60. 60. Forecasted Revenue & Net Income Per Producer 60 Revenue per Producer 187,200 187,200 15.0% 15.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 180,000 182,000 184,000 186,000 188,000 190,000 192,000 194,000 January February March April May June July August September October November December Goal - Rev/Producer Act - Rev/Producer Act - NI/Producer Goal - NI/Producer
  61. 61. Forecasted Revenue & Net Income Per Producer 61 Revenue per Producer 192,000 185,070 16.7% 17.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 180,000 182,000 184,000 186,000 188,000 190,000 192,000 194,000 January February March April May June July August September October November December Goal - Rev/Producer Act - Rev/Producer Act - NI/Producer Goal - NI/Producer
  62. 62. Capacity to Contract 62 Producer Job Type Billing Type Types of Profit • Utilization Rate • Profit per Producer • Design • Engineering • Product • Flat Fee • Retainer • Hourly • Value Billing
  63. 63. 63 In Summary Cash Net Income Capacity to Contract Effective Rate
  64. 64. Questions? Need more info? Feel free to get in touch! Summit CPA Group Jody Grunden, CPA jody@summitcpa.net Jamie Nau, CPA jamie@summitcpa.net www.summitcpa.net

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