Have you just about run out of ideas to increase your sales?  How about some financial strategies!  Here are some I use:

1. Work with the CEO/owner to increase the amount of time they are spending on sales.  The CEO has more punch with customers and potential customers than anyone else in the firm.  If we can help the CEO increase time spent on sales from say, 10% to 20%, what would be the resulting increase in sales, and how much would flow to the bottom line? This simple concept is often overlooked and can bring more to the bottom line than many other activities, including cost cutting.  It is not difficult - we can show you how.
2. Strategic Pricing
   • Understand your costs in-side out.
   • Understand your true overhead rates (service firms too).
   • Understand your variable and fixed costs and breakeven.
   • Have a robust quoting program to accurately estimate the cost of your product/services/jobs.
   • Understand the bottom line benefit to the company of winning the quoted business, including net contribution and cash.
   • Identify minimum margins and products/services that are not meeting these margins.  Determine how to increase those margins (reduced costs or increased prices).
   • Use this information to develop "strategic pricing strategies" to win the business you want.
3. Identify and Increase Good Customers:  
   • Calculate true custo....

     Read more...

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     Profitability And Your Finance Staff - Jun 30, 2010

     Posted by: Rick Perrin in Articles

     Are your profits where you want them to be? Has your CFO/Controller/CPA helped you to really understand what is driving your company profits or losses? 

      Does your Controller or CFO spend most of his/her time fighting fires, closing the books,  processing transactions, managing HR clerical issues and performing other non-value added services?  Is he/she overwhelmed?

      Or,

      Does your CFO/Controller add tremendous value to your company by:

     • Clearly identifying the profitability drivers of your business and leading and driving profitability improvement initiatives for each of them?
     • Providing on-going financial analysis of operations that identifies where actions are needed to improve profitability?
     • Maintaining up-to-date overhead rates so you understand the true cost of making and selling your products and services.
     • Providing quoting and pricing models so you understand the real P&L and cash affect of winning business and know how to price your products or services to win business?
     • Employing techniques like 80/20 to improve your business?
     • Leading or playing a key role in your strategic planning process to develop ideas and strategic initiatives to make your company a market leader?
     • Creating pro-forma financial projections and in-depth financial analyses of new products/services/opportunities to validate major business decisions?
     • Squeezing down working capital and improving the cash position.
     • Helping the company increase sales? (Yes, really, the CFO!)

      I help companies with and without CFO’s to improve their profitability and financial management and help their financial staff to be more effective. How much would even a small 1-2% improvement to your bottom line mean to you?

      If your financial staff is not addressing all of these areas, your firm could be more profitable. Please contact me at 608-576-3773 to set up a short meeting to learn more.

     CASH. WE HELP YOU GET IT.™        WHO IS YOUR CFO?

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     Gross Profit Optimization 972 - Feb 10, 2010

     Posted by: Rick Perrin in Articles

     IMPROVE YOUR PROFITABILITY
     

     Gross Profit (or gross margin) is a very important financial measure in almost every type of company. It is the profit from sales before administrative, sales and marketing expense, interest and other expense.

     It is important to focus on Direct Margin as a component of Gross Profit: 

     • Direct margin equals sales less direct costs. For a manufactured product direct cost normally includes direct labor, raw materials and subcontracted costs.  For distributors or retail this is the cost of purchasing the product for resale.  For service firms this is a bit trickier, but normally would include direct labor, materials, subcontractors, supplies and other variable costs that are directly attributable to the completion of the service.
     • Gross Profit is direct margin less the cost of the operational overhead required to manufacture the product, provide the service or distribute the product.  The key word is operational overhead.  It is very important to separate operational costs from administrative expenses, sales and marketing expenses and other expenses.

     Gross Profit Optimization therefore is the process of optimizing, or maximizing the profits from producing the product or service. Here are the steps:

     • Identify the direct costs. Set up separate ledger codes so you can track them.  For example, most firms do not properly track labor...they put it all in one bucket.  Direct labor should only include time spent producing the product or service; all other labor should be coded to indirect labor, including breaks, vacations, holidays, PTO, seminars, training, meetings, etc.  Indirect labor is overhead and should be coded as such.
     • Calculate the direct cost of each major input as a % of sales.
     • Develop detailed strategies as to how to lower each of the direct costs.  Assign teams, responsibilities and timelines for achieving specific cost reduction goals.  Often the goals will be a percentage of that direct cost to sales.  If direct labor has been running 20% and materials 30% of sales, develop specific action plans to bring labor down to 18% and materials to 28%.  This will bring 4% directly to the bottom line.  Detailed labor analysis and carefully planned purchasing strategies are required to achieve these results.
     • Identify direct margins down to the product line and item level.  Fix or rid the items that do not add value to the company.
     • Continue to track the cost/sales % over time to monitor your results and make sure you hit your direct margin targets.
     • Please take a few minutes to think about these two questions:
       
       1) What are our company's three most important opportunities?
       2) What are our company's three biggest issues or threats?

        

       If your company is successful in taking advantage of its most important opportunities and eradicates its biggest threats in 2010, it will move your company to an entirely new level of profitability, growth and financial strength.  If instead you work on lots of other less important goals and spend your staff time fighting fires, your company may be little better off than it is today and will have wasted a year of its history.

        

       To achieve these goals, you must:

       1) Properly identify the most important (3-5) opportunities and risks.

       2) Develop detailed action plans to successfully tackle them.

       3) Execute these plans effectively.

        

       Don't waste time.  Begin planning for 2010.  If you don't have a strong planning team in-house, I recommend bringing in a good outside facilitator to help you.  There are some great ones in Madison, including www.3GoodQuestions.com where I am on the planning team.

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       Financial Strategies For 2010 Profitability - Oct 7, 2009

       Posted by: Rick Perrin in Articles

       A CALL TO ACTION The Time to Act is Now!

       Many good solid firms are struggling with the economy and are waiting things out. They have cut back costs as far as possible but are at a loss on how to increase sales and profits.  Here are steps you should be taking now to REV up Sales and Profitability:   1.      First, understand your real profitability drivers.  Do you really understand why you made (or lost) $X.xx last month?  It is a combination of revenue levels, fixed and variable expenses, and some low and high margin customers and jobs.  If all you have to explain your profitability is a long P&L listing of revenue and expense items, you don't really understand your profitability and can't take necessary actions to drive improvement.  You must know your margins by individual product (or service), product line and customer, and understand your other profit drivers. 2.      Re-calculate all of your overhead rates. In the past year, you have undoubtedly trimmed many costs and your other input costs have changed.  Your overhead base (machine hours, consulting hours, service hours, etc.) have also probably dropped.  Lower costs mean lower overhead rates.  Lower base hours mean higher overhead rates.  If you haven't developed overhead rates to really understand the true cost of individual products or services, now is the time.  You might be surprised that you can actually sell at lower prices now and pick up sales volume.  Or, you could find that you are losing money with each sale because your costs have not come down in proportion to your "production hours". Note this applies to service firms as well as manufacturers.  (Service firms:  do you know your hourly cost rates for direct, administrative, and overhead costs?).  3.      Negotiate hard with vendors and show them how it can actually be good for them.  If you can lower your costs and drive more sales, both you and your vendors will benefit.  If your vendor won't play ball, others certainly may. 4.      Review your quoting model.  Does it include your new, lower overhead rates and purchase costs?  Does it show you your true cost of delivering your product or service?  Does it show you the true effect on your company of winning the business?  Your quoting model should break out incremental costs and show you the cash affect and overhead coverage and profit affect of producing or servicing the quoted business. 5.      Use your new lower cost structure and quoting model to develop pricing strategies to drive new sales, and to evaluate your current business. 6.      Analyze your customers using the above tools and an 80/20 analysis.  You may find you can reduce more costs by ridding customers that use many resources but don't contribute much. 7.      Develop detailed action plans to improve each of your main profitability drivers.  Assign an action oriented leader to head a team to analyze and improve each profitability driver and write down the specific goals, tasks, due dates and follow-up dates required to ensure each profitability driver is improved.  Set up a KPI (Key Performance Indicator) for each of your profitability drivers and chart its historical values vs. its new target values.  It's time for a CALL TO ACTION!  Instead of waiting it out, let's get going now.  If you don't have these tools in place, let me show you how to quickly develop them.

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       Every Company Regardless Of Its Size Needs A Chief Financial Officer - May 26, 2009

       Posted by: Rick Perrin in Articles

       Large companies employ top executives in sales, operations and finance.  They provide the strategies and management expertise required to bring in customers, competitively produce the firm's products or services and provide the financial management and planning required to maximize the firm's profitability and growth.

       Small and mid-market companies also employ top sales and operations executives, but not financial executives.  The majority have bookkeepers or controllers who process financial transactions and generate financial reports, but they cannot provide the financial strategies or offer the level of financial sophistication, problem solving and strategic financial management the companies need to maximize profitability and growth.

       Companies without a CFO are at a disadvantage.  Many small and mid-market firms have sophisticated operations and complex cost and financial challenges like large companies.  They need the expertise of a senior financial executive, but not full time, nor can they afford the cost of a full time CFO.  These firms often seek financial advice from their CPA firms who provide tax, reporting and general financial guidance, but do not have the corporate experience and specialized skills that CFO's excel in.

       B2B CFO^® provides CFO services on an affordable, part time or as needed basis and is the largest CFO firm in the U.S. focusing on small and mid-market companies.  With over 115 partners in 43 states, B2B CFO^® provides small and mid-market companies with the financial management they need to prosper.

       What are the benefits B2B CFO's bring to small and mid-market companies?  Cash, profitability and growth:

       CASH AND PROFITABILITY
       Timely & Accurate Financial Statements Banking and Lending Relationships Working Capital Improvement Analysis of factors affecting profitability Cash Flow Projections Exit Strategies	Expense Reduction Operational Analysis and Improvement Benchmarking and Executive Dashboards Gross Profit Optimization and Margin Improvement Product Line & Customer Analysis Financial Analysis and Modeling
       GROWTH
       Financing Financial and Strategic Planning Proven Process for Helping CEO's Sell More	Sales Analysis Tools Pricing Strategies and Quoting Tools Sales and Marketing Strategies

        

       In Summary, B2B CFO's

       • Allow Start-ups, small and mid-market companies the advantage of a CFO.
       • Help drive revenue and profitability that far exceeds the cost of their services.
       • Help reduce "administrivia" so Owners/CEO's can focus on leading their companies.
       • Help Companies without CFO's gain significant competitive advantage and improve profitability.

       CASH. WE HELP YOU GET IT.^TM

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       Planning The Exit Maximizing Value And Your Company's Future - Jan 1, 2009

       Posted by: Rick Perrin in Articles

        

       Successful Business Owner:

       You have worked for years and made incredible sacrifices building your company.  It is your largest financial asset.  However, in the next one to three years you may want to sell or transition out of your company, maximize the value you receive from it and ensure its future success so you can enjoy your retirement and other endeavors.  Planning is the key to a successful exit.

       B2B CFO's^® have extensive experience helping owners increase the value of their companies and plan successful exits. While you may have a controller or a CFO, most likely they do not have the experience of a B2B CFO^®. Our skills in business improvement and exit planning make us uniquely qualified to help you reach your goals.

       Planning the Exit - Steps to Maximize Value

       I. Improve Profitability and Cash Flow

       Most companies are valued on a multiple of EBITDA (Earnings before interest, taxes, depreciation and amortization).  Increasing earnings drives EBITDA.  A company with a history of increasing profits and cash flow with margins above its industry averages will sell at a higher price. Tools used to increase profitability and cash flow include the following:

       • Accurate, timely, well-structured and meaningful financial statements and reports
       • Benchmarking tools for tracking and improving operations and financial performance
       • Gross profit optimization - margin analysis and improvement
       • In-depth labor analysis and reporting to improve labor efficiencies and reduce overhead
       • Working capital improvement strategies to reduce A/R and inventory and increase cash
       • Purchasing and negotiation strategies to lower purchase costs
       • Job and cost accounting systems for understanding and improving margins
       • Line of business, product line and customer profitability analyses and improvement
       • Formalized cost and overhead reduction programs
       • Tax minimization strategies for increasing cash

       II. Increase Sales

       Increasing sales, if done properly, is often the quickest way of increasing company value.  When above the break even point, gross margin on additional sales can dramatically increase profits.  In addition, companies with higher revenues normally attract higher EBITDA multiples. Financial tools can be very powerful for creating strategies to increase sales.  Some of these tools include:

       • Proven B2B CFO^® process "Finding the Exit"^® to help the CEO/Owner sell more
       • Strategic and Financial Planning, incorporating sales and marketing strategies
       • Quoting and pricing tools and strategies to understand costs and improve proposals
       • Financial modeling & ROI analyses for new products, investments, and facilities
       • Sales analysis tools - insight from understanding trends by customer and product line

       III. Strengthen the Infrastructure

       Acquiring companies want to buy well run companies with solid infrastructures.  Strong management teams are a critical component.  Robust and well documented systems, procedures and processes are also essential. Strong infrastructures also make good use of technology and have strong internal controls. Well documented intellectual property and customer and vendor contracts are also critical.

       Companies with strong infrastructures command a higher price.  Most acquirers will analyze the infrastructure when performing due diligence.  You do not want them deducting significant amounts from the sales price, or worse, walking away altogether because you do not have your infrastructure in order.  At B2B CFO^® we understand how to help you improve your infrastructure to maximize company value.

       IV. Strategic and Financial Plans

       The most successful companies have a strong strategic planning process which helps them create the vision and strategies to drive high long term growth and profitability.  They prepare financial models to analyze their strategic initiatives and projected financial statements to understand what future profitability and financing needs may be.  They also have a strong operational planning process to develop goals, action plans, timelines and accountabilities to reach their current year goals, which are integrated with the strategic plan. The operational plan includes a well thought out budget.  Finally, they have a results management program to ensure they continually execute their plans and keep on track to reach their goals.<....

       Read more...

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       Banking And Lending Relationships - Sep 18, 2008

       Posted by: Rick Perrin in Articles

       Strong banking and lending relationships are key to a well-financed business. Well financed businesses can operate much more efficiently than cash strapped firms and can take better advantage of market opportunities when they arise. Owners, of businesses that are well financed, are able to sleep much better at night than those who struggle with cash. Since banks are the single largest source of financing (cash) for business, having strong banking relationships is paramount to having a well- financed business.

       Some companies, especially startups and those with little equity may have difficulty borrowing from banks. There are times when other non-bank lenders can provide better financing options than banks. Therefore, having strong relationships with other lenders such as asset based lenders, lessors, private investors and investment bankers can be very important to business success.

       Strong banking and lending relationships are based on trust and good communications between the banker (lender) and the borrower. Providing lenders with accurate and timely financial statements, good cash flow and income projections, and keeping them informed about major business decisions and activities will go a long way in developing trust and cementing a strong relationship. Bankers/lenders will provide better financing for relationship-based borrowers who keep them well informed about good as well as bad news in the business. Businesses that have strong financial management and institute good financial procedures and controls will also be looked on favorably by bankers and other lenders.

       B2B CFO® advisors, on average, have worked and negotiated with lenders for over 25 years and have strong relationships with many banks and alternative financing sources. They understand which banks and other lenders will serve your company the best, based on your industry and company profile. B2B CFO's will help you put together the accurate and timely financial statements and pro-forma cash and financial projections that will help you secure a great financing package for your business. In addition, your B2B CFO® advisor will help you determine the most appropriate mix and terms of financing to best meet your companies needs, whether it be short term lines of credit, long term debt, leases, or working with you and investment bankers to secure equity capital.

       Your B2B CFO® advisor will help you make better business decisions by helping you analyze your business from a financial standpoint and by implementing a management reporting system that gives you the information you need to make better decisions. This will help you increase profitability and drive your firm's growth, strengthening your company and its banking and lending relationships.

        Working with banks and lenders can take substantial time and effort. Your B2B CFO® advisor can take care of much of the work for you, allowing you to spend your time leading and improving the business and increasing sales. Your banker/lender will also feel a sense of security knowing that you have a top financial professional helping you with your financial management and will reward your company with a stronger and more attractive financing arrangement.

       In summary, B2B CFO® can help you secure a better banking/lending relationship, which will ensure your firm is well financed, has the most competitive rates and terms, and will free you up to concentrate your time on growing the business. As an additional benefit, you will be able to sleep better at night!

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       Testimonial - Dane Manufacturing - Sep 18, 2008

       Posted by: Rick Perrin in Testimonials

       We purchased Dane Manufacturing in 2001 with the intent on improving and growing an 85 year old metal manufacturing company. After about $5MM of invested capital, grow it we did. Dane grew at 35-plus percent per year for five years in a row. In 2005 it became very clear we had outgrown our accounting firm and their business model wasn't working any longer. We searched for an alternative and found Rick Perrin from B2B CFO®.

       Rick came in and I hired him after our first meeting to start working with Dane. Since coming, he has formalized our financial reporting, job costing, improved the treatment of inventory and tightened up reporting and financial management. Now due to Rick and my management team's efforts we finish a financial period (every 4 weeks) and I have the complete financials on my desk I can trust the following Monday by noon.

       We send financials to the bank the following day. Rick has also helped refinance the company's assets and helped Dane with its first acquisition of a complimentary business. The B2B CFO® model is fantastic for a company our size that needs the talents of a CFO sometimes and can't yet afford one full-time.

       I would strongly recommend the model for any company between the size of $2 - $75MM without a full-time CFO or any owner that wants a second set of eyes on their current financial team. It is a great model and superb help to small business in America - brilliant model - fractional ownership of a CFO's talents.

       Lastly in 2007 Dane was recognized as an Inc. 5000 company (fastest growing, privately held, companies in America) with a rank of 2,015 (178% growth in 3 years) out of 5,000 and recently informed we will be an Inc. 5000 company again in 2008. This could not have happened at Dane without Rick Perrin's talents and the B2B CFO® business model.

       Thankfully, Troy F. Berg, President/Owner Dane Manufacturing
       www.danemfg.com

        

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       Wind River Financial Inc. Testimonial - Sep 18, 2008

       Posted by: Rick Perrin in Testimonials

       Rick has assisted Wind River with developing a crucial pricing model.  This new model will allow us to reach our profitability goals while not diluting our return by bringing in business we really can't afford.

       Mark Courchane, Partner
       www.windriverfinancial.com

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       Testimonial - Docusafe Of Madison Phoenix - Sep 17, 2008

       Posted by: Rick Perrin in Testimonials

       Rick has been tireless in assisting us with many advancements in our internal financial processes.  We greatly appreciate his competence and professionalism.  We are better for it.

       Richard E. Dohm

       www.docusafe.net

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       Briefing Paper Financial Analysis And Planning - Aug 15, 2008

       Posted by: Rick Perrin in Articles

        

       Definition

       Financial Analysis and Planning is the process of analyzing a company's historical financial and operational results. It is also a practice of preparing and analyzing projections for future operations and projects.  This process is done in order to understand what drives financial results by learning from the prior outcomes. This coupled with looking at alternative scenarios, helps to make better decisions on future operations.  Understanding the drivers of profitability in the past and modeling future plans will give a company the insight to greatly improve its future profitability.

       3 Questions

       1 Do we really understand why we were profitable - unprofitable last month? Last year?

       2 What steps can we take to optimize our gross profit?

       3 Do we have a good process in place to analyze the key decisions of our  strategic plan?
       
       Discussion

       Many companies, large and small, do not understand their real underlying drivers of profit and loss.  With multiple locations, departments, products, vendors and customers, without financial analysis, it is difficult to understand what caused last month's level of profit or loss.  Many companies also make large, complicated decisions about future projects, locations, products or customers without proper planning and modeling of the various assumptions, and assessing the risks and rewards of those decisions.
       
       References

       - Website: Wikipedia (http://en.wikipedia.org/wiki/Financial_analysis)

       - Book: Techniques of Financial Analysis: A Practical Guide to Measuring Business Performance by Erich A. Helfert.
       
       Situation analysis

       - Identify primary drivers of profitability and design reports to monitor them.

       - Identify key in-process decisions and develop financial tools to analyze them.

       - Research industry & competitor key metrics and compare to company results.
       
       3 More Good Questions

       4 Do we understand the true incremental costs of making each of our products?

       5 Do we understand the affect that a large new quote will have on the bottom line, before we send it out?

       6 How can we run the business better with a short term and long term cash forecast?
       
       B2B CFO^® Partners are experienced in financial analysis and helping you increase profit.

       http://www.3goodquestions.com/

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