identifying your leading indicators of profitability jim heilborn jim heilborn associates
TRANSCRIPT
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Identifying Your Leading Indicators
of Profitability
Jim HeilbornJim Heilborn Associates
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Identifying Your Leading Indicators of Profitability
Standard measurements Current Ratio – Current assets/current liabilities=current ratio Quick Ratio – (Current assets-inventory)/current liabilities=quick ratio Gross Profit – Revenues – cost of goods= gross profit Gross Margin – Net sales – cost of goods sold=gross margin
percentage Net Operating Expense – Gross margin – SG&A = net operating profit Net Profit – (Net operating profit+ income) – (other expenses + taxes)
=net profit
Gross profit ratio, Pretax profit ratio, Sales-to assets ratio, etc. etc. All important…but............
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Identifying Your Leading Indicators of Profitability
THE KEY COMPONENTS
SALESADMINISTRATION
OPERATIONSFINANCE
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Identifying Your Leading Indicators of Profitability
KNOW YOUR NUMBER 1 KEY
INDICATORTHE RESTAURANT
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Identifying Your Leading Indicators of Profitability
LEADING INDICATORS VS.
TRAILING INDICATORS
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Identifying Your Leading Indicators of Profitability
KEY COMPONENT
SALES
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Identifying Your Leading Indicators of Profitability
Value -
What customers and investors are willing to pay for, that employees are willing and able to provide. In a public, for-profit enterprise, sustainable value requires all three groups. Value must be worthy to those paying and those providing or it will not endure.
Mickey Connolly and Richard Rianoshek, Ph.D.
The Communications Catalyst
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Identifying Your Leading Indicators of Profitability
Every product or service you can provide is one less reason for your customers to talk to your competitors.
Every product or service you provide is one more reason for your competitor’s customers to talk to you.
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Identifying Your Leading Indicators of Profitability
Customer Name Customer Expectation
Score
1 - 5
Comments
ABC, Inc. Sales
Product & Design
Order Administration
Associated Services
Delivery & Installation
Customer Service
1= Low 5 = High
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Identifying Your Leading Indicators of Profitability
KEY INDICATORS SALES
SALES ACTIVITY – SEE CHART BID LISTS
– NUMBER OF BIDS PLACED– PERCENTAGE OF SUCCESS ON BIDS
DOLLAR VOLUME OF QUOTES NUMBER OF ACTIVE CUSTOMERS NUMBER OF NEW ACCOUNTS NUMBER OF NEW ORDERS AVERAGE GROSS MARGIN/PROFIT GROSS PROFIT PER DAY DOLLARS PER REP BACKLOG SALES TO PLAN
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Identifying Your Leading Indicators of Profitability
GOAL TASK/OBJECTIVE TIME FRAMEAverage monthly gross Average daily sales = $ Within next
___monthssales = $
Average monthly GP $___________ Within next ___months dollars = $
Number of calls needed per day -
Number of appointments neededper day =
Number of orders needed per day to equal daily average of $________=
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Identifying Your Leading Indicators of Profitability
GOAL TASK/OBJECTIVE TIME FRAME
Number of orders neededper day to equal daily average
of $__ GP dollars = $
Ratio of appointments to orders = ____ appointments to ____orders
Average dollars per sale = $
Average GP dollars per sale = $
Average Number of calls to make per week =
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Identifying Your Leading Indicators of Profitability
GOAL TASK/OBJECTIVE TIME FRAMEAverage Number ofcalls to make in next 30 days = 30 DAYS
Average Number of calls to make in next 60 days = 60 DAYS
Average Number of calls to make in next 90 days = 90 DAYS
Number of new accounts to open in next 30 days = 30 DAYS
Number of new accounts to open in next 60 days = 60 DAYS
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Identifying Your Leading Indicators of Profitability
GOAL TASK/OBJECTIVE TIME FRAMENumber of new accounts to open in next 90 days = 90 DAYS
Sales MixNumber of orders/dollars generated from new Accounts per month = /
Number of orders/dollars generated from established ongoing accounts = /
Review of Top Ten & rolling forecast to identify and focus on opportunities and activity On a weekly and
monthly basis
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Identifying Your Leading Indicators of Profitability
GOAL TASK/OBJECTIVE TIME FRAME
Product MixCasegoods dollars $
Seating dollars $
Systems dollars $
Other products dollars $
Number of orders/dollars generated with primary vendors per month = /$
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Identifying Your Leading Indicators of Profitability
FORECASTING -
A CRITICAL METRIC
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Identifying Your Leading Indicators of ProfitabilityTARGETING PLANName Date
Top Ten Hot List/Close/Dollars Top Ten Target List1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 6. 7. 7. 8. 8. 9. 9. 10. 10.
Lead Sources
Prospecting Plan30 Day Booking Forecast - 30 Day Billing Forecast -
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Identifying Your Leading Indicators of Profitability
ACCOUNT VENDOR BOOKING MONTH
$’S BOOKED
GP% / $’S BILLING MONTH
$’S BILLED GP% / $’S
ABC, Inc. Teknion 1. Nov. 40,000 34/13600 1. Nov. *20,000 34/6800
OFS 2. Dec. 15,000 28/4200 2. Dec. 40,000 34/13600
Seatability 3. Jan. 6,000 35/2100 3. Jan. 15,000 28/4200
Cowabunga Teknion 1. Nov. 32,000 31/9920 1. Nov. *9,000 35/3150
Global 2. Dec. 27,000 33/8910 2. Dec. 32,000 31/9920
Mayline 3. Jan. 19,000 25/4750 3. Jan. 27,000 33/8910
1=CURRENT MONTH
2=NEXT MONTH
3=MONTHAFTER
NEXT
$TOTALS:
1. 72000
2. 42000
3. 25000
$TOTALS:
1. 23520
2. 13110
3. 6850
$ TOTALS:
1. 29000
2. 32000
3. 42000
$ TOTALS:
1. 9950
2. 23520
3. 13110
* Represents booking from previous forecast .
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Identifying Your Leading Indicators of Profitability
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Identifying Your Leading Indicators of Profitability
STRATEGIC PARTNER OR ABUSIVE MATE?
SELECTING YOUR PRIMARY
VENDORS
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Identifying Your Leading Indicators of Profitability
PRIMARY SECONDARY
TERTIARY
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Identifying Your Leading Indicators of Profitability
KEY COMPONENT
ADMINISTRATION
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Identifying Your Leading Indicators of Profitability
KEY INDICATORS ORDER PROCESSING– TIMELINESS– ACCURACY– INTERNAL PROCESSING COSTS– ERROR RATE– COMMUNICATION
INTERNAL EXTERNAL
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Identifying Your Leading Indicators of Profitability
KEY INDICATORS HUMAN RESOURCES
– Productivity
– Contribution
– Participation
– Dependability
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Identifying Your Leading Indicators of Profitability
KEY COMPONENT
OPERATIONS
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Identifying Your Leading Indicators of Profitability
KEY INDICATORS OPERATIONS
SELLING SERVICE AS A PERCENTAGE OF YOUR BUSINESS
PROFITABILITY OF SERVICE OFFERINGS DELIVERY TIME AND COMPLETION INSTALLATION COMPLETION PUNCHLIST SERVICE CALLS – COMPLETING ON THE FIRST CALL FINAL SIGN OFF
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Identifying Your Leading Indicators of Profitability
PROCEDURE QUANTITY PER HOUR VDTCRANK 1 - 2
VDT PNEUMATIC 1
CHAIR PNEUMATIC 1 - 3
BROKEN CHAIR ARM 1 - 3
BROKEN CHAIR BACK 1 - 3
BROKEN CABINET DOOR 1 - 4
STUCK/JAMMED DRAWER 1 - 4
LOWER A WORK SURFACE 1 - 3
ATT ACH A KEYBOARD 1 - 4
REPAIR A KEYBOARD 1 - 2
TASKLIGHT REPAIR 1 - 4
INSTALL NEW TASKLIGHT 1 - 5
INSTALL LOCK IN BKC WITH STEEL DOORS 1
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Identifying Your Leading Indicators of Profitability
Meeting the testDetermine the need for the product or service
Is it a long-term sustainable need?The cost of providing the product or serviceLevel of service you and your company can provide “Implementability” Impact on your current businessR.O.I – Return on InvestmentMeasuring for results
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Identifying Your Leading Indicators of Profitability
The Cost of Service
Labor - Wages, Taxes, Benefits
Space – Taxes, Utilities, Rent/Mortgage,
Insurance, Office Equipment & Supplies,
Maintenance
Equipment – Tools, Machines, Maintenance,
Supplies, Vehicles, Insurance, Phones
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Identifying Your Leading Indicators of Profitability
KEY COMPONENT
FINANCE
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Identifying Your Leading Indicators of ProfitabilityKEY INDICATORS FINANCE/ACCOUNTING
ACCOUNTS RECEIVABLE
– 75/10/10/5 RULE– DSO
ACCOUNTS PAYABLE
– DISCOUNTS TAKEN/OFFERED– LINES OF CREDIT AND LINE DRAWN– VENDOR RELATIONSHIP
CASH FLOW
– WORKING CAPITAL - DOLLARS AND RATIOS BANKING RELATIONSHIPS BOOKED TO BILL RATIO
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Identifying Your Leading Indicators of Profitability
BENCHMARKING
–OFDA
–BIFMA
–MANUFACTURERS
– INDUSTRY ORGANIZATIONS
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Identifying Your Leading Indicators of Profitability
www.jheilbornassociates.com [email protected]
916.434.8711