Preseason Planning and Cash Flow Management. Mike Barnidge Credit Manager

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2 Preseason Planning and Cash Flow Management Mike Barnidge Credit Manager

3 This seminar provides a planning and forecasting tool you can use throughout the year to fine-tune your financials, plan for anticipated growth, and make smarter decisions about preseason commitments.

4 Banking Personal History QBP AE/Outside Sales Credit Manager Passion for Small Businesses

5 OBJECTIVES FOR TODAY FORECASTING 101 INTRODUCE FORECASTING TEMPLATE LEARN THE TOOL USE THE TOOL GROUP WORK INCORPORATING PRESEASON COMMITMENTS

6 FORECASTING 101 Forecasting a planning tool that helps management in its attempts to cope with the uncertainty of the future, relying on data from the past and present, assumptions of the future, and analysis of trends. Forecasting can be as complicated and sophisticated as you want to make it Forecasting can be as simple as you want to make it Find the right spot for your business

7 Projection July 12 August 12 September 12 October 12 November 12 December 12 YTD Sales $ 110, $ 109, $ 75, $ 78, $ 51, $ 45, $ 933, Cost of Goods Sold $ 53, $ 52, $ 36, $ 37, $ 24, $ 21, $ 447, Gross Margin $ 57,580 $ 57,121 $ 39,430 $ 40,898 $ 26,926 $ 23,745 $ 485,205 Operating Expenses Payroll $ 27, $ 27, $ 18, $ 19, $ 12, $ 11, $ 233, Occupancy $ 3, $ 3, $ 2, $ 2, $ 1, $ 1, , General and Administration Expenses $ $ $ $ $ $ $ Advertising and Promotion $ 2, $ 2, $ 1, $ 1, $ 1, $ $ 20, Insurance $ $ $ $ $ $ $ 5, Other Operating Expenses $ 3, $ 3, $ 2, $ 2, $ 1, $ 1, $ 31, Licenses and Taxes $ 6, $ 6, $ 4, $ 4, $ 2, $ 2, $ 52, Telephone $ $ $ $ $ $ $ 2, Office Expenses $ $ $ $ $ $ $ 6, Travel and Entertainment $ $ $ $ $ $ $ 1, Auto Expense $ $ $ $ $ $ $ Depreciation and Amortization $ $ $ $ $ $ $ Professional Services $ 1, $ 1, $ 1, $ 1, $ $ $ 16, Total SG&A Expenses $ 16,357 $ 16,227 $ 11,201 $ 11,618 $ 7,649 $ 6,745 $ 137,836 Total Operating Expenses $ 47,162 $ 46,786 $ 32,296 $ 33,499 $ 22,054 $ 19,449 $ 397,417 Net Profit/(Loss) $ 10,418 $ 10,335 $ 7,134 $ 7,400 $ 4,872 $ 4,296 $ 87,788 Other Income (Expense) $ (688.11) $ (682.62) $ (471.20) $ (488.75) $ (321.77) $ (283.76) $ (5,798.40) Net Income (Loss) Before Tax $ 9,730 $ 9,652 $ 6,663 $ 6,911 $ 4,550 $ 4,012 $ 81,989 Forecast Example July to December

8 Myths of Forecasting My forecast is always wrong, so I don t really need to do it in the end. Forecasting is easy when my business is growing and difficult when my business isn t growing. I only need to look at my forecast once a year when I m actually sitting down to complete it. I have to be a math wizard or have an accounting degree to forecast.

9 WHY FORECAST? Forecasting is the best way to truly understand your business goals for the coming year. It is a thought provoking, idea creating, and confidence building exercise that creates your financial foundation for the year ahead. Forecasting helps you understand how integrating new product lines can impact your bottom line. It can guide you to decide when and how much to buy Feasibility Reading I m going to grow 25% next year! Finally, Forecasting can help you understand how changes in debt, business expenses, and personnel will impact your bottom line.

10 BIG HUGE INTIMIDATING EXCEL FILE INTRO Created this for an actual dealer Includes actual NBDA benchmarks Best Practices Create a Save As file for your shop. Use the original as the Alamo. You might delete a formula that you didn t want to delete. Having the original file to fall back on is ideal. Start simple - what in this spreadsheet looks familiar to you? Start there. If nothing looks familiar call me, we should talk. The more you use it, the better it gets.

11 NBDA DATA Information provided by shops in a survey initiated in the spring of 2010 This was a voluntary survey 102 shops responded to this survey and provided their information Shop Demographics Includes both single location retailers as well as multiple location retailers Includes retailers from across the country Primarily Urban or Very Urban locations, along with some Rural locations based on population and density

12 Actuals Projection Assumption Table YTD Comparison

13 ACTUALS PAST RACE RESULTS This is the starting point of the spreadsheet. Inputting your actual results from last year along with year-to-date numbers if applicable. A green field signifies that you need to input a number there. Why this format? Format ties directly to the NBDA format. Do the best you can. Not all of these lines will flow perfectly with your financials. Be aware that some cells include a formula. Those cells will not be highlighted in green. Change the green cells and leave the rest. Check for accuracy ex. Revenue less COGS/Revenue will equal Gross Margin. The Gross Margin on your financials should equal the Gross Margin here when entered correctly. Check all numbers that you enter.

14 ASSUMPTION TABLE - PLANNING Remember Green means input something here. Verify that your PY Results in column B are accurate. These are calculations based off your actuals from the prior year. Start with what you know will stay the same or close to the same. (Operating expenses) Sales growth add 100% to what your goal is. Ex. Goal of 7% growth = 107%. This matches last year and adds on the growth. Assumption Table flows to Projections.

15 ASSUMPTION TABLE Gross Margin Calculation = Rev-COGS/Rev. Average Inventory = (Beginning Inv + Ending Inv)/2 Inventory Turnover = COGS/Average Inventory Average Days to Sell Inventory = 365/Inventory Turnover. AP Days = (Accounts Payables/COGS)*365

16 PROJECTION COMPLETED TRAINING PLAN Two parts Actuals previous year Projection the plan for this year Projection is a calculation based on your Assumption table and last year s actual numbers Converts the % into actual hard dollars. Verify the numbers look accurate AND realistic. Can I really do $1mm in October?

17 YTD COMPARISON RACE RESULTS Think of your comparison as the Race Results Two Comparisons Compares this month, this year to last year and the projection for this year Compares this YTD to last YTD and YTD projection Includes NBDA Data average of all shops and what a high profit shop looks like. Analyze the differences between this year and last as well as between your projection and reality. What contributed to the variance? Write down your reasons for the difference each month. This will help you better understand how to improve. It will also help you remember your year as you review and prepare for next year.

18 Group Work Answer Three Questions: 1. What are 3 factors that you look at to determine your growth number for the coming year? We are going to grow 15% next year sounds great, but how did you arrive at that number? 2. You and your staff have determined that purchasing a shop vehicle is a huge opportunity to grow your business. How are you going to determine what you could/should spend on that vehicle and when you should do it? 3. What is the one barrier you have to utilizing this tool throughout the year? How are you going to overcome that barrier?

19 PRESEASON COMMITMENTS How much should I buy and when should I take it? Longer terms are ALWAYS better, right? Growth and Purchasing having enough of the right product when you need it Resisting the urge to blindly take on brands without proper planning

20 QUESTIONS?

21 FORECASTING TEMPLATE LINK