business health checkups
TRANSCRIPT
Index of slides:
Business Health CheckupsOr how to tune up your business
and beat your competitors!
Hosted by Washington BBI
Presented by Peter Busacca
"Tune up your business using Business Health Check-up"
Washington BBI The brokers with an end-to-end solution! 1
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Agenda
• Noon – 12:15 grab vittles and eat
• 12:15 – 13:15 listen attentively to Peter droning on
• 13:15 – 13:30 survey and feedback
No bathroom or other breaks. Just go when you need to.
Get up and refill your plates until we run out.
Ask questions at any time.
Hard stop at 1:30.
Washington BBI The brokers with an end-to-end solution!
Page 2
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Administration
• Turn off your phones, pagers, and other
noise makers.
• Clean up after yourself!
• For a copy of this presentation, just send a check to my office for either: • $1 bizillion or
• Send an email request to [email protected] or
• Download from slideshare.com at
Washington BBI The brokers with an end-to-end solution!
Page 3
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Why Are We Here?
To learn how improve the performance of our firms, and our competitiveness, by using Key Performance Indicators.
To learn the value of performing an annual Business Health Checkup
How will we learn this?
• Exercises
• Lecture
Washington BBI The brokers with an end-to-end solution!
Page 4
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Goals For Today
“This is the one instance when looking in the rear view mirror can help you to drive toward a better future.”
1. Learn to use KPIs to improve business decisions
2. Learn about industry ratios and the use of key performance indicators (KPIs) for your niche.
3. Learn how to interpret your firm’s performance in light of your industry’s KPI ratios
4. Learn why this stuff matters to you.
Washington BBI The brokers with an end-to-end solution!
Page 5
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Assumptions
1. You already know what an income statement is.
2. Likewise, you can read a balance sheet.
• Does anyone here need a refresher on what an I/S or B/S is composed of?
• Too bad, we’re doin’ it
anyway.
Washington BBI The brokers with an end-to-end solution!
Page 6
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Two Basic Financial Statements
There are two basic types of financial statements: • Income Statement (aka Profit & Loss)
• Balance Sheet
• Which one tells you how much money you earned?
• Which is a snapshot and which a movie?
• Which one tells you what you owe?
• Which one tells you what you spent?
• Which one tells you what your firm is worth?
Washington BBI The brokers with an end-to-end solution!
Page 7
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
What’s an Income Statement?
Revenues
- COGS
_________________
= Operating Income
- operating expenses
_________________
= Net Income
Revenues (sales, etc.) minus- Cost of Goods Sold (L + M + OH) equals
Operating Income which is used to cover expenses
COGS is directly attributable to projects or mfrd items.Operating expenses are those other expenses that are needed to do business, like phones, rent, utilities, vehicles, maintenance, taxes, licenses & permits, new patio on your home… oops, scratch that last one.
Operating Income – operating expenses = Net Income
What matters most: revenues or net income?
Washington BBI The brokers with an end-to-end solution!
Page 8
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
What is a Balance Sheet?
Washington BBI The brokers with an end-to-end solution!
Page 9
Assets:
Current Assets +
Fixed Assets =
= Total Assets
_________________
Liabilities:
Current Liabilities +
Long Term Liabilities =
= Total Liabilities
Owners’ Equity +
Retained Earnings =
Total Liabilities & Equity
Assets are what you own.Liabilities are what you owe.
If you bought a $100K car with 10% down, at the moment before you drive off the dealer’s lot, what is:
- The asset worth? - The liability? - Owner’s equity?
What matters most: assets, liabilities or owner’s equity?
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
First KPI Exercise: I/S and B/S Basics
Income statement & Balance Sheet basic example
Hand out: Peter’s Beautiful unBent Bodies (BuBB)
financial statements
Washington BBI The brokers with an end-to-end solution!
Page 10
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Income Statement Exercise
• What is this firm’s operating income?
• What is the net income?
• What is their EBIT and EBITDA?
Washington BBI The brokers with an end-to-end solution!
Page 11
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Balance Sheet Exercise
• What is a Current Ratio?
• What does the Current Ratio indicate?
• What is this firm’s Current Ratio? • CA/CL = CR
• (181K/386K) = .47
• Would you lend money to this firm?
• What could explain this poor performance?
Washington BBI The brokers with an end-to-end solution!
Page 12
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Key Performance Indicators
KPIs evaluate the success of an organization or of a particular activity in which it engages. KPIs are financial ratios.
KPIs are usually of four types:
- Profitability ratios
- Leverage ratios: operating and financial leverage
- Liquidity ratios
- Activity ratios (aka Turnover ratios)
Which one matters the most?
Washington BBI The brokers with an end-to-end solution!
Page 13
_________________
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Is There One Set of KPIs for Everyone?
• Every industry and niche has its own KPIs.
• Also, size matters. • Unfair to compare a $1M firm to a $10B, even if they are in the
same NAICS code.
• For example, it is unfair to compare a local general contractor to a multi-billion dollar general contractor! Different KPIs.
• Even in the general industry and revenue size, e.g., distribution, it would be unfair to use the KPIs for a durable goods distributor if your client is a perishable good distributor. So, must be apples to apples (pun intended).
Washington BBI The brokers with an end-to-end solution!
Page 14
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Where do You Find the Right Ratios?
• Moody’s financial ratios can be found at many libraries. Ask your librarian.
• Subscribe to Moody’s (if you are utterly rich)
• Pay large CPA firm to provide this information
• Ask your banker
• Have a Business Health Checkup
performed by your CPA or consultant
Washington BBI The brokers with an end-to-end solution!
Page 15
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
What is a Business Health Checkup?
• Do you go to your doctor for an annual checkup?
• Why? • Diagnosis
• Early intervention & prevention
• Cheaper than finding out too late!
• A BHC will help you:• Figure out what is working well
• Determine what needs fixing
• Highlight what needs fixing right freaking now!!!
Washington BBI The brokers with an end-to-end solution!
Page 16
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Business Health Checkup Continued
A BHC is an analysis of your financial statements using financial ratio that are specific to your firm’s industry and niche.
• BHCs should be performed at least annually
• Some firms do them quarterly
Washington BBI The brokers with an end-to-end solution!
Page 17
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Business Health Checkup Continued
BHCs:
• Provide early diagnosis, thus your risk is lowered,
• Go hand-in-hand with job/project costing to:• Help you know what kinds of projects are profitable,
• Which projects could be profitably with a few tweaks,
• Which projects you should just stay clear of
• That helps you to improve sales due to improved targeting
• Also it helps you to estimate more accurately
• And it helps your profitability, often dramatically
Washington BBI The brokers with an end-to-end solution!
Page 18
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
What if I Don’t Want to Do a BHC?
• You won’t know what is broken
• You won’t know the severity or urgency of problems
• Your time will be spent putting out fires
• You won’t know what is the underlying cause(s) of the fires
• You spend too much time fixing what already works well
• And too little time working and thinking strategically
• You competitors will kick your butt!
Washington BBI The brokers with an end-to-end solution!
Page 19
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
What Are Some Symptoms that Would Encourage You to Get a BHC Done?• Do you spend your time putting out fires?
• Does your banker laugh when you ask for a loan?
• Do your raw materials arrive COD?
• Have you had trouble making payroll?
• Are you sleeping poorly due to work-related worries?
• Are you saving enough $$$ for retirement?
• Are you earning as much as you want?
Washington BBI The brokers with an end-to-end solution!
Page 20
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
BHC
• Hand out BHC example• Industry Ratio Report for NAICS 811111
• Narrative Report for NAICS 811111 Peter’s BuBB
• Take these home with you and look at them at your leisure• How can Peter’s BuBB have such a high profitability ratio and a
dismal current ratio?
• And what about that embarrassing liquidity ratio?
• How is it that their sales and profitability figures look so good?
• If you can answer these questions, come work for me!
Washington BBI The brokers with an end-to-end solution!
Page 21
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Goals for Today – Did We Meet Them?
1. Do you see how using KPIs will improve your business decisions?
2. Did you learn a bit about industry ratios and the use of key performance indicators (KPIs) for your niche?
3. Do you know how to interpret your firm’s performance in light of your industry’s KPI ratios?
4. Do you understand more about why this stuff matters?
Washington BBI The brokers with an end-to-end solution!
Page 22
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact info
Index of slides:
Contact Info
Peter Busacca [email protected]
Washington BBI 425/391-8720 www.WashingtonBBI.com
Mailing Address 400 NW Gilman Boulevard, Unit 2208
Issaquah, WA 98027
Office Address: 38579 River Street, Suite 14
Snoqualmie, WA 98065
Washington BBI The brokers with an end-to-end solution!
Page 23
1. Title2. Agenda3. Administration4. Why Are We Here?5. Goals for Today6. Assumptions7. Two Basic Financial Statements8. Income Statements9. Balance Sheets10. First KPI Exercise11. Income Statement Exercises12. Balance Sheet Exercise13. Key Performance Indicators14. Is There One Set of KPIs for Everyone?15. The Right Ratios16. What is a Business Health Checkup?17. Business Health Checkup Continued18. Business Health Checkup Continued19. But What if I Don’t Want to Do a BHC?20. Symptoms21. BHC22. Goals for Today 23. Contact Info