Managing Business Growth

How to stay out of the red

Presented by Michelle Bomberger and Ron Kranz

Which direction are you headed?

3 10 years5today

Growth Strategies

Organic Growth: More of the same

Geographic Expansion: New areas

Market Niches/Segments:

Specialization

Innovation: New products & services

Merger & Acquisition: Buy your way in

Business Re-conceptualization:

Do the same thing in a different way

Conceptual Age Strategies:

Arbitrage processes

What changes as the business grows?

Culture

Risk

Formality

What are we growing?

Top line

COGS

Expenses

Bottom line

How to measure growth - methods

% Growth – 3 years

Rolling 12 months

Rate-of-Change (Growth)

2012$’s - 2010$’s2010$’s

X 100

Monthly Revenue: April 2013 back to May 2012

Rolling 12 months April 2013 - Rolling 12 months April 2012

Rolling 12 months April 2012 X 100

12/12 – 3/12 – 1/12 ANALYSIS

-150.0%-100.0%-50.0%

0.0%50.0%

100.0%150.0%200.0%250.0%

Current Client JAN 05 thru CURRENTSeries3 Series2

Series1

Chan

ge

Planning for the range of uncertainities

StartingBenchmark

shrink

desire

flat

Economic cycles for the rate of change

Best

Caution

Danger

AdvancingAdvancin

g

Rate of change is a predictive tool

JAN JAN MARAPRMAYJUNJULAUGSEPTOCTNOVDECJAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDECJAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDEC JAN FEBMARAPRMAYJUNJULAUGSEPTOCTNOVDEC JANArtitudes Design A A A B B D C B B B C B C C C C B B B D C D D D D D D A A A A A A A D B B B D A A A A A A A D B B BRevolution A A A B B C C D D D B A B B A A D A C C B B B C C C B D C D D D A A A A BGateway Construction C C C C B B B C C C D D D D D D D D D D A A A A A A A A A B C C C C C C C C C C B B B B B C C C B B B B BGourmet Mixes C C C C C C C B D B D A D A A B B B B B B C B B B C B B B C B B B B B C C C C C C B C C C C C B B B B B B B B B B C C C CInterface Technology NW C B C B C B A A C B B B C C C C C D D D D D D D D A A A A A A A A A B B B B C C C C C C C C B C C C B B B B B B B B C C CTime Equipment Company C B A A A B B B B C C C C C C C C C D D D D D D A A A A A A A B B B B B C C C C C D A D B A A B B B B B B B B B C C C C CDarwin Pet Products B B B B C C C C C C C C C C C C C C C C C C C C B B B B B B B B B B B B B B B C C C C B B B B B B B B B B B B B B C B BEvergreen Beauty College C C C C C C C C B B B C C CEquinox Business Law B B B B D C B B B C B B B B C C C C C C C B C C C C C D D A B B B B B B B B

Counter- Intuitive

2012

2009

2010

2011

Planning for scenarios

Plant Seeds

The Good Life

Money Grows on Trees

Weather the Storm

INV

ESTM

EN

T

P

RIO

RIT

IES

FUNDING AVAILABILITY

Long Term

Short Term

AbundantLimited

Scenarios depend on economic cycles

Weather the Storm

Danger

Money Grows on Trees

Caution

Best

The Good Life

Advancing

Plant SeedsFUNDING AVAILABILITY

INV

ESTM

EN

T

P

RIO

RIT

IES

Long Term

Short Term

AbundantLimited

THE GOOD LIFE STRATEGY

The Good Life

Best

Pay down debt and build cash reservesImplement business re-conceptualization strategies Introduce new products/services; enter new marketsImplement exit strategy and sell now to capture high valuationFund ownership buyoutImplement a self-insurance programAccelerate training in new strategic or market areasBuild inventory and secure additional outside vendorsConsider outside manufacturingSpin off undesirable operationsImplement Corporate Social Responsibility Plan and give back

Economic forecasting tools

Understanding Economic Cycles

Rolling 12-Month Analysis

Financial Health Ratios

Key Performance Indicators

Financial Health Ratios

BALANCE SHEET RATIOS

INCOME STATEME

NT RATIOS

INVESTMENT RATIOS

ASSET MANAGEMENT

RATIOS

Stability Profitability

Overall Efficiency Working Capital

staying power earning power

roi power cashflow power

Current Ratio Gross Margin

Sales-to-Assets Ratio

Inventory Turnover Ratio

Quick Ratio Net Margin Return on Assets Ratio

Inventory Turn-Days Ratio

Debt:Equity Return on Equity Ratio

AR Turnover Ratio

AR Turn-Days Ratio

AP Turnover Ratio

AP Turn-Days Ratio

Key performance indicators

Sales/Revenue Operating Costs Profit Inbound Calls Net Cash Flow Gross Margins

Proposed

Website Visits Cash Burn Rate Per Day

Labor Efficiency

Proposals Submitted Percent Indirect Labor Billable Hours

Conversion Rates Number of Complaints Aged Receivables

Order Backlog Re-work Hours Write Downs

Work in Progress Contribution Costs Largest Expense to Sales

Machine Up Time # Overhead Employees

Items Shipped

Gross Profit per Day Purchase Orders Issued

Labor Fee Multiplier

New Accounts Opened Number Sick Days Invoices Mailed

Repeat Orders Number Working Days Machinery Down Time

Leading

Revenue/Employee

Macro economic indicators

Gross Domestic Produce US Leading Indicator

M2 Money Supply Housing Starts

After Tax Disposable Income

Retail Sales

Durable Consumer Goods Aerospace Manufacturing

Price of Oil Interest Rates

Unemployment Non-Durable Consumer Goods

Driving influences on businesses

Society Technology

Economy Energy

Politics Environment

Population Automation

Inflation Oil Majority Party

Regulations

Education Bio-Tech GNP Coal War Clean Water

Work Force

Electronics Interest Rates

Solar Terrorism Clean Air

BoomersRetiring

Wireless Dollar Value

Nuclear

IRS Endangered Species

AbundanceMentality

Hybrid Cars

BankFunds

Fusion Social Security

Global Warming

GlobalTalent

Aerospace Private Funds

Wind Regulations

Stock Market

Bio Health Care

In conclusion…

The plan rarely goes as planned

Find the predictive tools that work for you

Know the rate of change and trends

Plan for various scenarios

Measure financials

Thank you for your attention

Any questions?

WEATHER THE STORM STRATEGY

Eliminate all unnecessary expensesReduce trainingRenegotiate vendor contractsEnsure competitive banking ratesRe-finance long-term debtDevelop energy savings programsMove to a paperless environmentHire a savings consultant to review costsUse personal mileage plans for business travelVideo conference instead of travelImplement employee layoff planReduce employee benefitsOutsource and out-task

Weather the Storm

Danger

PLANTING SEEDS STRATEGYAcquire a troubled company

Upgrade key playersHire sales personBoost your marketing and advertisingRaise pricesExtend credit to loyal customersPurchase a facility or implement improvementsUpgrade or replace equipmentExpand internationallyImplement training program in core competenciesRe-conceptualize your business

Caution

MONEY GROWS ON TREES STRATEGY

Giving exuberant bonusesExcessive stock optionsPurchasing luxury automobiles, boats, and airplanesProviding unnecessary employee perks, i.e. membershipsTaking executive vacations/retreatsDraining cash reservesFunding ideas and research without sound strategySeason tickets to sporting eventsFishing or spa tripsPolitical contributions

Money Grows on Trees

Sales/Revenue February 2010 to January 2011 e.g. $1.1M

Sales/Revenue February 2009 to January 2010 e.g. $0.9M= 1.22

Sales/Revenue February 2009 to January 2010 e.g. $0.9M

Sales/Revenue February 2008 to January 2009 e.g. $1.1M= 0.82

ROLLING 12- MONTH ANALYSIS