1. The Business Modelfor the 21st Century

2. Presented By:David SaxeNext Level Business Planning 3. Cash Flow RiskOwners Revenue GrowththinkMarket shareabout Competition Employee Retention Cost Control 4. Paycheck Benefits Doing my WorkEmployees SecuritythinkFridayaboutWorkEnvironment Opportunity 5. Ownership Thinking:Moving From Me to Us Owner EmployeeCash Flow PaycheckRiskBenefitsRevenue GrowthDoing my WorkMarket shareSecurityCompetition FridayEmployee RetentionWork EnvironmentCost ControlOpportunityCopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 6. Creating an Organization of WinnersENTITLEMENTEARNINGFEARHigh LETS GO FOR EXCELLENCE!HAVE YOUSHOOT THOUGHT ITFOR THE THROUGH?BIG ONE!I LIKE THINGSYOU CANJUST THE NEVERWAY THEY LET UP ARE I DID THE BEST I COULDWATCH OUT! I HAVE ITCOMING MAKEME SAFELow High 7. TheOwnership ThinkingProcess The Right Incentives The Right MeasuresThe Right The RightEducationPeople Copyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 8. VALUESThe Right People PUPPIES STARS DOGSTERRORISTSPERFORMANCECopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 9. How to Effectively Teach Finance to EmployeesPaycheck Bills Savings John Employee 2,083.00Two Thousand Eighty Three & .00 Revenue ExpensesProfit/LossCopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 10. The Three Financial StatementsIncome Statement Cash Flow Statement Sales Cash In - Expenses- Cash Out Profit Before Tax= Change in CashBalance SheetOwn =Owe +Really Own INVENTORYDEBT EQUIPMENT RECEIVABLES Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 11. What your employees dont knowcan hurt you Copyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 12. The IncomeStatement DESCRIPTION $ (000s)HOW DO I CALCULATE IT?1 Sales$14,0002 Direct Expenses Direct Expenses3 Gross Profit$14,000 Subtract Direct Expenses (2) from Sales (1)4 Overhead ExpensesSubtract Total Overhead Expenses (4) from5 Profit Before Taxes (PBT) $14,000 Gross Profit (3)Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 13. The IncomeStatement DESCRIPTION $(000s) HOW DO I CALCULATE IT?1 Sales$14,0002 Direct Expenses $6,830Direct Expenses3 Gross Profit$7,170 Subtract Direct Expenses (2) from Sales (1)4 Overhead Expenses $6,430 Subtract Total Overhead Expenses (4) from5 Profit Before Taxes (PBT) $740 Gross Profit (3)Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 14. Grow Sales or Reduce ExpensesSALES - EXPENSES= PROFIT Copyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 15. Finding the MoneyCracks in the TableINEFFICIENCIES Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 16. Case Study: OpportunitiesLIST THE GREATEST OPPORTUNITIES FOR IMPROVEMENT OR INNOVATION Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 17. Case Study:Collection DaysAverage collection days at the Company are running around 65 (meaningcustomers pay after an average of 65 days after invoicing).Questions for Consideration:How do average collection days impact our Income Statement? How do they impact our Cash Flow? What departments have an impact on average collection days?1.2. 3.4. If average collection days could be reduced from 65 to 45, approximately how much cash would this bring into the business? Monthly Sales$ 1,167,000Divided by Days in Month 30 DaysEquals Daily Potential Collections$ 38,900X20 (65-45)$ 778,000 What could this cash be used for? Could this impact the Income Statement? What actions can be taken to improve this situation? Ownership Thinking 2012 18. Key Performance Indicators (KPIs) Operational (leading) measures Financial (lagging) measures Factors which will have the greatest impact on thesuccess or failure of your organizationCopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 19. Identifying Your Key Indicators FINANCIAL DATA INTELLECTUAL DATACopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 20. ForecastingForecasting: Scoreboards &with Scoreboards: ExerciseProTech Inc. Scoreboard Exercise Forecast Actual PlanSusan Existing Client Sales $ 700,000Calculation Existing % 93.33% #DIV/0!#DIV/0!Tom New Client Sales$ 50,000Calculation New % 6.67% #DIV/0!#DIV/0!Calculation Total Sales $ 750,000 $- $-AlexDirect Labor$ 400,000Calculation Gross Margin$ 350,000 $- $-Maury Overhead$ 250,000Calculation Profit Before Tax $ 100,000 $- $-Maureen % Non-Owner Sales 80%Linda # of Qualified Leads 60Cydny Close Rate35%Frank # of Active Clients16Felix Billable Hour % 80%TonyAverage Markup57%GregAverage Collection Days40Tonya Number of Open Positions 2ChadCustomer Service Score303-984-1434,Copyright Ownership Thinking 2012. TM 95% www.ownershipthinking.com 21. CascadingMissionVision Plan Forecast ActualBob Sales$1,650,000 $1,720,000 $ 1,728,000Bill Direct Labor$650,000 $670,000 $ 668,000StrategiesAnnCalc.Todd MaterialsGross MarginOverhead $ $ $450,000550,000400,000$$$ 445,000 605,000 400,000 $ $ $ 440,000 620,000 396,000Calc. Profit Before Tax$150,000 $205,000 $ 224,000 Strategy BillDougAverage Cost/PackageDiscounts/Returns $$1.50 1,500 $$1.58 2,200 $$1.54 2,260SallyAdamOn-Time Delivery %Sales Per Staff Hour$ 95%10,500 $ 96% 9,550 $ 97% 9,362NAME KPI BUDGET FORECAST ACTUALToddAverage Collection Days403837Ann Inventory Turns 7 7 6 TomOvertime $600 $450 $438Rapid Leadership AllanPackaging Waste 250 lbs 290 lbs 310 lbs ImprovementPhyllis Product Waste500 lbs 820 lbs 730 lbs Scoreboard PlansTomAvg. Set Up Time 50 mins. 40 mins. 40 mins. NO MORE TEARSAllanPackages/Hour1700 1550 1620ObjectivesActions & People Financial BenefitsPrize xxxxxxxxx xxxxxxxxx Department / BU xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx Scoreboardxxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxx xxxx xxxxxxxxx xxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxxx Copyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 22. RIP Example: ReducingAverage Collection DaysBig Green Cash Cow Objective Actions/PeopleBenefitsCelebrationClear, accurate, IncreaseReduce Average and timely invoicesavailable cash byBar BQ withCollection Days byAsk for progress$778,000 Band20 (from 65 to 45) paymentsIncrease GM7-day customer (annually) by service call$20,000 due totaking discountsCredit approvalsfrom suppliersTime FrameMonthly Reduce interest Cost statements and call listsexpense by$24,000$1,50090 DaysBeginning April 1st Sales team report on agingImprove quality and fill rateCopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 23. Medical Supply DistributorImpact of RIPsQTR Name Objective SavingsQ1The Vendor Love Boat Reduce junk fees, take all discounts, $30,000.00Q1Sizzlin SamplesReduce Samples expense and Sample Freight $12,000.00Q1Mercedes Drives 100Add 100 new accounts per month$11,954.00Q1Returns of the JediReducing customer returns $15,000.00Q1It Aint Easy Being Green Reducing carbon footprint $ 5,000.00Q2CPR Flatliners Reduce customer attrition $15,325.00Q2The Terminator Paperless Picking and Packing in warehouse$ 5,400.00Q2Deal or No DealReduce Variouse Operating Expense $17,500.00Q2UP (a catalog adventure) Obtain vendor sponsorships for ads in catalog $41,000.00Q2Credit Casino Royale Reduce Customer Credits due to order error$12,500.00Q3The Matrix Increase Web Sales$54,000.00Q3No Going PostalInvoices via Fax or Email - Reduce Postage$ 441.76Q3The Three Amigas Upselling customers during order taking $ 3,583.00 $ 223,703.76 24. A Well Designed Incentive Plan should Be Self Funding Be perceived as Valuable Have Shared Targets Be Understandable Include a Stretch Goal Clearly Align Employees Behavior to BusinessObjectivesCopyright Ownership ThinkingTM 2012. 303-984-1434, www.ownershipthinking.com 25. Broad Based Incentive Design: ExamplePBT After Incentive30% of incremental PBT dollars afterthreshold of $900,000 go to incentive Payout PBT Pool$900,000 $900,000 $00 planAll employees eligible 90 days afterhire date$970,000 $1,000,000 $30,000Quarterly payout. 50% of incentive$1,040,000 $1,100,000 $60,000 for quarters 1-3 will be banked, and anadjustment will be made at year end$1,110,000 $1,200,000 $90,000 Incentive will be prorated if an$1,180,000 $1,300,000$120,000 employee has been eligible less than afull quarter$1,250,000 $1,400,000$150,000 30%Prorated for part time employees Distribution method TBD$1,320,000 $1,500,000$180,000 Incentive payouts are taxable wages$1,390,000 $1,600,000$210,000Must be employed on last date of$1,460,000 $1,700,000$240,000 incentive period, or no longer eligible No cap on plan$1,530,000 $1,800,000$270,000 At stretch goal PBT of $1,500,000$1,600,000 $1,900,000$300,000 payout is 6% of total wages. Copyright Ownership ThinkingTM 2011. 303-984-1434, www.ownershipthinking.com 26. 1st Year Results:Office Furniture Distributor Year Prior toOwnership 1st Year ResultsOwnership Thinking Thinking FOCUSwith OT Sales: $8.5 Million Gross MarginSales: $12 Million Gross Profit: 24.1% Profit Before Tax Gross Profit: 26% Sales Expense Profit/Loss: $650k Profit/Loss: ($395k) Install Expense Profit/Loss %: 6% Profit/Loss %: (4.6%) Debt ReductionInd. Standard: 3.5% Cash Flow: ($514k)Error Reduction Cash Flow: $359k Estimating Accuracy LT Debt: $216k LT Debt: $587k Collections DSO: 29 days DSO: 50 daysLabor Efficiency Inventory Turns: 65 Inventory Turns: 15 Inventory Control Bonus Payout: Profitable Revenue$3,300 per Employee Bonus Payout: NoneCopyright Ownership ThinkingTM 2010. 303-984-1434, www.ownershipthinking.com 27. Sample Agenda Day One8:00am to 8:15am Introductions (leadership team and up to 30 employees through 12:00pm)8:15am to 9:15am Ownership Thinking Overview- SI Video- Assessment Review9:15am to 12:00pmOwnership Thinking & Money Matters Training- Break at 10:45am12:00pm to 12:30pm Break, Lunch (leadership team only remainder of day)12:30pm to 1:30pmKey Issue Discussion1:30pm to 1:45pm Break1:45pm to 3:15pm Identify Key Indicators and Build Scoreboard- Individual and/or departmental dashboards3:15pm to 3:30pm Rapid Improvement Plan Identification (for following day)3:30pm to 4:00pm Incentive Plan Discussion and Metric Identification 28. Sample AgendaDay Two8:00am to 9:30amScoreboard Review and Huddle Training (leadership teamonly through 12:00pm) - Forecasting / Huddle Video9:30am to 10:15am Incentive Plan Review and Discussion10:15am to 10:30amBreak10:30am to 11:00amAction Items and Timetables11:00am to 12:00pmRapid Improvement Plan Exercise12:00pm to 12:30pmLunch for all employees (review results of leadership teamwork)(If >30 employees, Money MattersTM training for remaining employees in additional half-daysessions of 30-40 employees per session) 29. Information As a participant in one of our talks, you are eligible for aFREE 60-DAY MEMBERSHIP TO THE OT CLUBAccess to Dialogue PageBi-Monthly, Free Webinars and Tips Messages Additional Discounts on Conferences and OT ProductsGive us your card or email us to get your free membership linkDont miss our 6th Annual Conference:Creating Cultures of Accountability and Purpose Inverness Hotel and Conference Center, Denver, COOctober 11th 12th, 2012 See our website for details NEW FOR 2012Regional Ownership Thinking Getting Started Workshops (1 Day)Visit www.ownershipthinking.com for more information David Saxe Next Level Business Planning Phone: 613-563-1085 Fax: 613-231-2914Email: david@nextlevelbusinessplanning.comWebsite: www.nextlevelbusinessplanning.com