OPEN SOURCE MANAGEMENT Financial Management www.opensourcemanagement.it 1

Questions? On money On break even Regarding profits and profitability What would you like to know regarding money and company management? Did you read article we sent you?

THE MONEY YOU HAVE TODAY DEPENDS ON THE VALUE YOU HAVE GIVEN TO THE MARKET IN THE PAST

On what it does not depend to become wealthy

To think big/try  Be a great salesperson  To train in a unique, extraordinary technology  Overzealous financial control  Tax Planning  To associate oneself with strong (and ethical) partners  Persist  Having the right idea  To be a good person  To promote one’s company Be ethical  Give a good service  Be positive  Attend training 

2. Innovate the Business Model and not the Product 1. Desire and not passion 2. Innovate the Business Model and not the Product 3. What do you know that others don’t? 4. Money are not important. What is your GRAND project to change the world? 5. Desire to be the number 1 in one’s industry 6. OVERZEALOUS financial control on the numbers and on the financial aspects 7. Success begins at home

8. Surround yourself with great minds and get away IMMEDIATELY from people who criticize or who do not believe in you. 9. Take decision FAST: ready, fire, aim. Dont be afraid 10. Integrity and personal value. Faith. 11. Be willing to acquire at any cost extremely valuable knowledge 12. Build a network of allies 13. Predict the future of your industry

1) They bring you the quarterly numbers and the P&L is not so good… What do you do? a) Nothing, we dont keep track of numbers in our center… b) We like to see the bright side of things. We will fix the numbers in the future… c) Wow, numbers are REALLY bad…

2) You need 70. 000 Leva but you realize that you have 70 2) You need 70.000 Leva but you realize that you have 70.000 Leva to collect from clients in the next three months. What do you do? a) Fantastic. This takes care of it. Now I just have to find some bank to give me a cash advance. b) I get immediately my secretary to collect them all. c) I realize I have a problem because money will not be enough.

3) The montly financial numbers show a small loss … A) You dont have to worry. If you work well money will arrive… B) We have to keep our cool. We will find a way to fix the scene and make money… C) We need to get mad and as needed change everything.

GOOD AND BAD BUSINESS OWNERS A) They convince themselves of the fact the numbers are still not good, even though they maybe are ok B) They plan for the unexpected C) They overdramatize the numbers when they are so-so. They say «they are terrible» A) They convince themselves that all in all numbers are good, even when they are bad B) They dont consider «the unexpected» when planning, but they hope lucky strikes will happen C) They try to see the positive sides in numbers that are, truly, terrible

Creative and Positive Attitude + Overzealous Control

OPEN SOURCE MANAGEMENT THE GOAL www.osmconsultgroup.com 13

Passive (Automatic) Income Royalties (books, franchises, licenses) Bond coupons Pensions Rental income (apartments or companies) Interests Company Profits (Dividends)

Passive Income > Life Style

Exercise

a) Pay profit sharing (dividend) Make company flourish! a) Pay profit sharing (dividend) a1) Invest part of the capital outside the center b) Build a system that can be duplicated b1) Build passive income for the company

A company generates only the money it thinks it may need

BUSINESS OWNER MONEY MANAGEMENT OPEN SOURCE MANAGEMENT BUSINESS OWNER MONEY MANAGEMENT www.opensourcemanagement.it 19

People Service Money

What didn’t work?

0) When cash decreases two months in a row there is ALWAYS a problem…

RULE 1 MEASURE MEASURE MEASURE

Delegate everything except Command

It is not your external accountant or a Financial Director that will help you make great profits. You need to have a strong internal person in accounting. In our company a part time person manages three companies

Measure sales every month

Every month measure Profit

Every month measure cash flow (liquidity on hand)

RULE 2 Look at the brutal facts about costs Know the ratio fixed costs/total income

COSTS = BRUTAL FACTS 1) Make a full list of the monthly fixed costs of your company. 2) Establish the incidence they have on the average monthly income of the last four months (VAT excluded). 3) Every good financial strategy begins there.

Definition of “Fixed Cost” Fixed Costs are all those costs your company has whether it works or not.

Study the attacched list of fixed costs for a company and ask any question you may have

Exercise: lets make together the full list of fixed costs for our companies or for a beauty center

Pay back Debts You have to add to your fixed costs a monthly amount to pay back debts you have with vendors, financial institutions, back taxes, etc. In how long time would you like to pay back your debts?

Exercise 1: company sells paint Calculate the percentage of fixed cost on the revenue for company number 1 Make an analysis of its financial health

COMPANY 1 Company buys at 50 and sells at 100. Sales Commission 10% 500.000 euro owed to banks 400.000 euro bills overdue to vendors

How to calculate the ratio of fixed costs on the average monthly income (Average monthly Fixed Costs/Average montly Income) x 100= ratio of fixed costs on the income

Fixed Costs = (682.715/1.837.191) x 100= 37,16% Bills = 900.000 euros – pay back in 10 years = 90.000 yearly In 8 months = 60.000 euro New fixed costs = 40,42%

ANALISYS (buys at 50 resell at 100) Sales Price = 100 Fixed Costs = 40,42 Sales Commission = 10 Cost of Product = 50 ======================= Total = 100,42 Every product sold the company loses 0,42%

ANALISYS (buys at 50 resell at 120) Sales Price = 120 Fixed Costs (40,42%)= 48,50 Sales Commission = 12 Cost of Product = 50 ======================= Total = 110,50 Every product sold the company makes a 9,50% profit

HEALTH CLINIC OR BEAUTY CENTER Sales Minus Fixed Costs Minus Variable Costs Commissions Bonuses Costs of Dispensable products Cost of external specialist paid on commissions = Profits /Loss

BOOKS OF AUTHOR JONES  SALES PRICE 20 EURO FIXED COSTS (45% OF SALES) 9 EURO COST OF PRODUCT 11 EURO COMMISSIONS (10%) 2 EURO ===================== FINAL RESULT - 2 EURO (today everytime the company sells a book of this author, it loses 2 euro)

DICTIONARY BUTTERWORTH SALES PRICE 17 EURO FIXED COSTS (45% OF THE SALES) 7,65 EURO COST OF PRODUCT 7 EURO COMMISSIONS (10%) 1,7 EUR ===================== FINAL RESULT + 0,65 EURO (today everytime the company sells a book of this author, the company makes 0,65 euro)

AUDIO BOOKS JONES: SALES PRICE 15 EURO FIXED COSTS (45% OF THE SALES) 6,75 EURO COST OF PRODUCT 5 EURO COMMISSIONS (10%) 1,5 EURO ===================== FINAL RESULT + 1,75 EURO (today everytime the company sells a book of this author, company makes 1,75 euro).

BOOKS OF AUTHOR GREEN SALES PRICE 18 EURO FIXED COSTS (45% OF THE SALES) 8,1 EURO COST OF PRODUCT 6 EURO COMMISSIONS (10%) 1,8 EURO ==================== FINAL RESULT + 2,1 EURO (today everytime the company sells a book of this author, the company makes 2,1 euro)

RULE 3 TAX PLANNING (Predict how much taxes you will have to pay)

RULE 4 TREAT ALL EXPENSES LIKE AN INVESTMENT

BEANS THEORY Treat any expense like it is an investment. What are you buying with it? Dont buy people’s time, buy results

LIST OF MONTLY COSTS Receptionist 1,000 Leva per month Marketing Expert: 2,000 Leva per month Accountant 470 Leva per month What are you buying with it? Is is the right price? Is this a good deal?

No fixed salaries but fixed plus commissions Bonuses Is there a person in the company that would have the potential to make you a lot of money? No fixed salaries but fixed plus commissions

Boss we need more money for marketing …

5) Invest NOW in high return items

Coins Knowledge Human Resources Investments that generate passive income

6) RELATIONSHIP WITH MONEY

Invest in the Universe Bank Account

You need to have a great goal Proverbs 3:9-10 New International Version (NIV) 9 Honor the Lord with your wealth,     with the first fruits of all your crops; 10 then your barns will be filled to overflowing,     and your vats will brim over with new wine.

2. Innovate the Business Model and not the Product 1. Desire and not passion 2. Innovate the Business Model and not the Product 3. What do you know that others don’t? 4. Money are not important. What is your GRAND project to change the world? 5. Desire to be the number 1 in one’s industry 6. OVERZEALOUS financial control on the numbers and on the financial aspects 7. Success begins at home

8. Surround yourself with great minds and get away IMMEDIATELY from people who criticize or who do not believe in you. 9. Take decision FAST: ready, fire, aim. Dont be afraid 10. Integrity and personal value. Faith. 11. Be willing to acquire at any cost extremely valuable knowledge 12. Build a network of allies 13. Predict the future of your industry