Biz-Café Weekly Performance Statement With Pastry Ted Mitchell

Two Classic Accounting Statements 1) The Income Statement Written as a statement about the flows over the reporting period (week, month, etc.) 2) The Balance Sheet Written for the specific point in time, a snap shot of one day’s situation

Evolution of the Weekly statement Monthly Income Statement To a Weekly Income Statement Weekly marketing performance statement with Advertising and Radio to generate marketing profit, MROS, ROME Weekly Marketing Performance Statement including servers as a sales force. Weekly Marketing Performance Statement with Pastry Sales changing the GROS from the MP

Quantity Coffee Sold 2,000 Price coffee medium $4.00 Revenue Coffee $8,000 Variable cost per cup $0.26 Gross Profit, Coffee $7,480 (P-V)/P =93.5% Quantity of Pastry Sold 600 Price for Pastry $2.00 Revenue Pastry $1,200 Variable Cost of the Pastry $0.50 Gross Profit, Pastry $1,800 (P-V)/P = 75% Total Revenue (Coffee + Pastry) $8,680 Cost of Goods Sold (Coffee + Pastry) $640 Gross Profit (Coffee + Pastry) $8,040 GROS = 92.6% Marketing Effort, Servers, Advert, Radio, E $2,400 Marketing Profit, Z $5,640 MROS = 70.5% Return on Marketing Effort, Z/E ROME = 235%

Note How the Markup is different from the Gross Return on Sales Quantity Coffee Sold 2,000 Price coffee medium $4.00 Revenue Coffee $8,000 Variable cost per cup $0.26 Gross Profit, Coffee $7,480 (P-V)/P =93.5% Quantity of Pastry Sold 600 Price for Pastry $2.00 Revenue Pastry $1,200 Variable Cost of the Pastry $0.50 Gross Profit, Pastry $1,800 (P-V)/P = 75% Total Revenue $8,680 Cost of Goods Sold $640 Gross Profit $8,040 GROS = 92.6% Marketing Effort, Servers, Advert, Radio, E $2,400 Marketing profit, Z $5,640 MROS = 70.5% Return on Marketing Effort, Z/E ROME = 235% Note How the Markup is different from the Gross Return on Sales

Marketing Profit Returned on Sales, MROS Quantity Coffee Sold 2,000 Price coffee medium $4.00 Revenue Coffee $8,000 Variable cost per cup $0.26 Gross Profit, Coffee $7,480 (P-V)/P =93.5% Quantity of Pastry Sold 600 Price for Pastry $2.00 Revenue Pastry $1,200 Variable Cost of the Pastry $0.50 Gross Profit, Pastry $1,800 (P-V)/P = 75% Total Weekly Revenue $8,680 Cost of Goods Sold $640 Gross Profit $8,040 GROS = 92.6% Marketing Effort, Servers, Advert, Radio, E $2,400 Marketing profit, Z $5,640 MROS = 70.5% Return on Marketing Effort, Z/E ROME = 235% Marketing Profit Returned on Sales, MROS Marketing Profit Returned on Marketing “Investment” ROME

Basic Profit Equation Has Changed Profit = PQ – VQ – F Z = PQ – VQ – Ad – Radio – Server Expense Z = (P – V)Q + (Pp –Vp)Qp – F What is the relationship between Q and Qp? Qp = 30%Q Z = (P –V)Q + (Pp –Vp)(30%)Q – F Z = (coffee unit profit)Q + (pastry unit profit)(30%)Q – F Z = ($3.74 + $1.50 (0.3))Q – F Z = ($3.74 + .45)Q – F Z = $4.19Q – F

Balance Sheet Traditional Assets Cash, equipment, accounts receivable into a statement of market and competitive assets Awareness, customer satisfaction, market share

Weekly Balance Sheet for Week 8 at Sunday Midnight Cash 35,000 Loans 25,000 Assets 20,000 Depreciation (5,000) Retained Earnings 30,000 Total Assets 50,000 Total Liabilities Awareness = % of total 90% Customer Satisfaction 65 Average Customer Sat 70 Relative Customer Sat 65/70 = 92.86% Market Share, S ??? Average market share, Sa 1/N = ??? Relative market share, Sr S/Sa = ??? Awareness as a Percentage of the Total Population of Potential Customers in the Market

Weekly Balance Sheet for Week 8 at Sunday Midnight Cash 35,000 Loans 25,000 Assets 20,000 Depreciation (5,000) Retained Earnings 30,000 Total Assets 50,000 Total Liabilities Awareness = % of total 90% Customer Satisfaction 65 Average Customer Sat 70 Relative Customer Sat 65/70 = 92.86% Market Share, S ??? Average market share, Sa 1/N = ??? Relative market share, Sr S/Sa = ??? Customer satisfaction as a stand alone number is not very useful

Weekly Balance Sheet for Week 8 at Sunday Midnight Cash 35,000 Loans 25,000 Assets 20,000 Depreciation (5,000) Retained Earnings 30,000 Total Assets 50,000 Total Liabilities Awareness = % of total 90% Customer Satisfaction 65 Average Customer Sat 70 Relative Customer Sat 65/70 = 92.86% Market Share, S ??? Average market share, Sa 1/N = ??? Relative market share, Sr S/Sa = ??? Relative to Average Customer Satisfaction is Useful

Weekly Balance Sheet for Week 8 at Sunday Midnight Cash 35,000 Loans 25,000 Assets 20,000 Depreciation (5,000) Retained Earnings 30,000 Total Assets 50,000 Total Liabilities Awareness = % of total 90% Customer Satisfaction 65 Average Customer Sat 70 Relative Customer Sat 65/70 = 92.86% Market Share, S ??? Average market share, Sa 1/N = ??? Relative market share, Sr S/Sa = ??? Market Share needs to be relative to something to be useful

Weekly Balance Sheet for Week 8 at Sunday Midnight Cash 35,000 Loans 25,000 Assets 20,000 Depreciation (5,000) Retained Earnings 30,000 Total Assets 50,000 Total Liabilities Awareness = % of total 90% Customer Satisfaction 65 Average Customer Sat 70 Relative Customer Sat 65/70 = 92.86% Market Share, S ??? Average market share, Sa 1/N = ??? Relative Market Share, Sr S/Sa = ???

Compare Balance Sheets Relative to Something is the key to usefulness End of Week 8 End of Week 9 ∆ = W9-W8 Cash 35,000 43,000 8,000 Assets 20,000 Depreciation (5,000) (5,200) (200) Total Assets 50,000 57,800 7,800 Loans 25,000 Retained Earnings 32,800 Total Liabilities Awareness 90% 93% +3% Relative Satisfaction 94% +1% Relative Market Share ???

Compare Balance Sheets End of Week 8 End of Week 9 ∆ = W9-W8 Cash 35,000 43,000 8,000 Assets 20,000 Depreciation (5,000) (5,200) (200) Total Assets 50,000 57,800 7,800 Loans 25,000 Retained Earnings 32,800 Total Liabilities 7,840 Awareness 90% 93% +3% Relative Satisfaction 94% +1% Relative Market Share ???

Any Questions on the Type of Performance Statement and Balance Sheet that Marketers want?