Profit Management Workshop

Transcription

1

2 Profit Management Workshop How do Franchisees maximize profitability in the face of regulatory changes, a reduced, more expensive labor force and rising cost of goods sold?

3 Profit Management Workshop Developed by the Franchisee Forum Presenters: Rod Bristol, EVP, Profit Mastery Jeffery Tews, Multi-Unit Franchisee, BrightStar Care Chuck Stempler, Pres. & CEO, AlphaGraphics Seattle

4 Profit Management Workshop Who is here today? Are you a: Zee? Zor? Vendor?

5 Profit Management Workshop Three nuggets: 1. Learn useable information that highlights missed opportunities for Profit 2. Discover data analytical tools and financial processes that will uncover potential savings 3. Take away universal best practices for developing a profit driven mentality throughout your company

6 Who Eats Where? (and What s More Important?) eats off of line You EAT off the line In order to improve THAT, You have to Improve YOU.

7 What Two Things are Critical? Profits and Cash Flow How are they achieved? Understanding how a business makes $. 1. Gaining Control of Your Business 2. Charting a Course for the Future

8 Manage Better! Measuring FINANCIAL PERFORMANCE

9 Profit Mastery Basics WHAT GETS MEASURED, GETS MANAGED and What Gets Managed Gets Done!

10 Profit Management Workshop Education - Individual Franchisee - Network-wide programs - Profit Mastery University Web Based Hi-Def Streaming Video (Self-Study) Provides the FOUNDATION Information Creates the YARDSTICK - Industry Benchmarking Studies RMA, Fintel, Qvinci, FRANData, Profit Gap, Profit Keeper - Bookkeeping Services Accountability - Performance Group Facilitation Establishes the DISCIPLINE

11 Profit Management Workshop 1. Plan Properly 2. Monitor Financial position The Scorecard The Roadmap 3. Price, Volume, Cost 4. Managing Cash Flow 5. Managing Growth 6. Borrow Properly/Dealing With Banks 7. Planning for Transition

12 Net Profits Income Statement Cash Flow Balance Sheet Sales Net Profit Assets = Liabilities + Net Worth Efficiency Uses of Profits: To pay for new assets To pay off debt To pay out to the owners

13

14 Sales = $2,160,000 Buy Pay

15 .99 :1

16 Profit Management Workshop A Quick Quiz!! The item you are selling costs $4.00 and you want a 26% Gross Margin. What is the sales price? What do you sell it for? What is the range of answers? Hi to Low

17 = causes = is caused by

18 Low Gross Margin (Ratio #4) No Cash Discounts on Payables Poor Inventory Control Low Productivity Shrinkage Bookkeeping Errors Poor Buying Poor Pricing Low Gross Margin

19 the wrong hotel

20 the wrong hotel

21 the wrong hotel

22

23 What is their Low Gross Margin costing? Their Peers Margin: 22.2% Their Margin in Year 3: 18.5% Difference +/- 4% Sales in Year 3: ~ $2,000,000 X margin difference: ~ X.04 Margin $ Left on the Table: $80,000 Primary Impact: Profit

24 $80K (P) = causes = is caused by

25 No Cash Discounts on Payables Low Gross Margin Low Productivity Low Gross Margin Low Gross Margin (Ratio #4) COGS $1,760, ,000 Labor $1,000,000 Purchases $500,000 Extend discounts X.02 Discounts $10,000 in missed discounts COGS $1,760,000-1,000,000 Purchases $760,000 Labor X.05 Low Productivity $38,000 Inefficiency

26 Profit Management Workshop If he can manage just a 1% improvement in each of these areas: Buying: 1% x $1,000,000 = $10,000 Pricing: 1% x $2,160,000 ~ $22,000

27 $126K (C) $60K (C) $16K (C) $10K (P) $38K (P) $10K (P) $22K (P) $7.6K $80K (P) $19K (P)

28 Who is resp. for what? Can he do it? Cash NPBT 1. Inventory 2. Accounts Receivable $60,000 $16, Hidden Costs 4. Interest 5. Gross Margin Labor Productivity Buying Pricing Cash Discounts $19,000 $ 7,600 $38,000 $10,000 $22,000 $10, Refinance Building Totals $126,000 $202,000 $106,600

29 Profit Management Workshop Sometimes the Tests Come First! Answer these two questions: VC = 70% FC = $144,000 TP = $60,000 1) Needed Sales: 2) If FC $1.00, what sales required

30 Profit Management Workshop Monthly Break-Even Annual Break-Even Your employee breaks something that costs $50, how much in sales do you need to do to cover those lost $$$? You are hiring a new sales person for $45K. How much in increased sales do you need before they actually contribute anything? You re going to open a new location for $250,000. What sales will you need to recover and make a return on your investment?

31 Managed or Accountant s P&L Break-Even P&L Sales -COGS =Gross Profit -OE (-VOEs) Net Profit Contribution Margin = Sales -Var. Costs What s Left -Fixed Costs Net Profit With Net Profit at 0, you are at Break-Even

32 The Cup Theory Sales Contribution Margin Variable Cost Cup Fixed Cost Cup Net Profit Cup

33 Profit Management Workshop What happens if you never fill the Fixed Cost Cup? What happens if you never fill the Variable Cost Cup? You re

34 Profit Management Workshop If Fixed Costs Go Up $1.00? What do we need in increased sales to cover that cost? Fixed Costs increase = $1.00 = $2.50 C.M. %.4 Operating Leverage

35 Profit Management Workshop Sales ($) Contribution Margin Variable Cost Cup Fixed Cost Cup Net Profit Cup

36 Why Don t More Owners Do This? Profit Management Workshop Don t have the time Don t know how If it was important, my CPA would do it It s not fun I m more of a crisis manager

37

38 Jeffrey Tews, Franchisee, Madison, WI 4 Territories of BrightStar Care 1 Medical Staffing Division 1 BrightStar Senior Living 1 BrightStar Senior Living under development 35 Managers, 450 Direct Care Staff $12M per year revenue.

39 Branch Profit Bonus Plan The Branch team earns 1/3 of the EBITDA over 6% to their bonus pool. Revenue on Quarterly basis 100% $985,272 Minus Cost of Goods Sold 58% $572,443 Gross Profit 42% $412,829 Administrative Expenses 31% $303,464 EBITDA 9% $109,365 Base line in the bonus plan is 6% EBITDA -6% = 3% *.33 $9,853 3% over the base the team earned 1% of sales bonus for this quarter.

40 Branch Profit Bonus Plan Outcomes Revenue Only bonus plan left us vulnerable to paying bonus when we did not make expected EBITDA Team focused upon revenue and costs has resulted in higher earnings. Overtime use reduced. Cost of goods sold saving ideas have been generated background checks and drug screens. Advertising effectiveness research intensified. Management effectiveness improvements to reduce adds. Increased attention to Direct Care Staff retention.

41 AlphaGraphics Seattle AlphaGraphics is a full service commercial print company with locations in Seattle, Fife, Renton, Bellevue and Lynnwood WA. Our full time employee count is 102. AlphaGraphics provides customer facing service from 8AM until 6PM Monday thru Friday. AlphaGraphics production facilities run from 6AM until 12AM Monday thru Friday and extend to 24x7 based upon client demand.

42 AlphaGraphics Seattle Areas of specialization: 1. Pre-press, pre-flight, value engineering, design. 2. Sheet fed digital color and monochrome printing (up to x26 ), paper and synthetic substrates from 16# to 24pt. 3. Offset printing up to 24 x29, 5 colors plus in line and off line coating. 4. Specialty digital printing envelopes, spot and textured UV.

43 AlphaGraphics Seattle 5. Signage and grand format ink jet printing up to 128 x 150 for rolls and 128 x length of material, up to 2 thick. 8 colors plus white, UV ink. Latex and eco solvent printing is also available. Complete automated finishing hemming, grommet setting, CAD cutting, custom assembly, custom onsite installation. 6. Fulfillment pick, pack and ship; print on demand, pack and ship. 7. Ecommerce customized web-to-print ordering systems.

44 AlphaGraphics Seattle Client Base: clients, primarily located in the Pacific Northwest.

45 AlphaGraphics Seattle A. Cash flow is the prime metric to measure and manage. I. Operationally P&L is likely structured on an accrual basis II. Balance sheet is cash oriented

46 AlphaGraphics Seattle B. It is vital that owners make an honest assessment of their financial knowledge base and skill set. I. If you have gaps, do you have personnel or outside resources who will fill them? II. Set your pride aside acknowledge your gaps, seek help fellow franchisees, peers, network leaders, your franchisor

47 AlphaGraphics Seattle C. You Manage What You Measure I. Annual plan / budget versus actual II. Waste labor and materials III. Price selling prices versus cost

48 AlphaGraphics Seattle D. Labor supply I. Train and develop your team from the foundation up. II. Promote from within

49 Do These Tools Work? In my honest opinion, this program is BY FAR (Zors) most valuable initiative. As confident as I was about my ability to manage and control my office s financial and operational metrics, I was very humbled as soon as I saw my financial and KPI results compared to the other owners in our group, as well as once I learned more about how I could improve the various metrics of the Profit Mastery model. The improvements in our business have been dramatic across the board financial improvements, operational improvements, process improvements, quality improvements and employee satisfaction improvements. The breadth and extent of the improvements are both humbling and inspiring! The following data will give you a sense of the benefits of the program in only one of these areas owner profits (arguably the most important metric to most owners):

50 Do These Tools Work? Our 2011 ODP (owner s discretionary profit) was 11.6% In the 4 quarters since we started the Profit Mastery program (2012 Q2,Q3,Q4 and 2013 Q1) our ODP averaged 15.4% This increased ODP % equals an actual increase in $170K in ODP dollars for the prior 4 quarters (compared to what my ODP dollars would have been if I was still at my 2011 ODP % level). And, in the past 2 quarters (2012 Q4 and 2013 Q1) my OPD % increased to 16.7%, which equals an annualized increase in ODP dollars of $238K (compared to 2011 ODP % levels). Thank you, thank you for introducing this program to franchisees!

51 Profit Management Workshop Three nuggets: 1. Learn useable information that highlights missed opportunities for Profit 2. Discover data analytical tools and financial processes that will uncover potential savings 3. Take away universal best practices for developing a profit driven mentality throughout your company Questions??

52 Profit Management Workshop Thank you for coming! Rod Bristol, EVP, Profit Mastery Jeffery Tews, Multi-Unit Franchisee, BrightStar Care Chuck Stempler, Pres. & CEO, AlphaGraphics Seattle