1. Chart Your Course to Business Success On Target Business Intensive: Session 4 April 17, 2012 Advisors On Target 1

2. Session 1 Create a working draft of your Mission Statement Create a working draft of your 1 and 5 year Vision Answer the 10 questions on the handout Session 2 Review your own financial statements and chart of accounts with what you learned in Session 2 Session 3 Create a budget for 2012 If you already have a budget, review and revise as needed Use the cashflow projection model (at the bottom of the budget tool) 2 Implementation Steps so far

3. Session 4 Determine your breakeven point for your 2012 budget Annual For the month of May 2012 Additional activities Values Exercise Business Diagnostic Assessment Homework continued 3

4. Questions about Budget Process? 4

5. Recap:How to Use your Budget Incorporate Budget into QuickBooks Monitor Monthly & YTD Progress Know what key numbers you need to hit Income Profit Margins Hours/Personnel Leads Make management decisions to achieve plan Identify Action Steps for upcoming month

6. Break Even Why Every Business Owner Needs to Know It 6

7. BEST PRACTICE GUIDE : Breakeven Sales Overhead Expenses* Breakeven Sales = __________________________ Gross Profit Margin Calculate by week, month, or year to manage your business effectively and keep a positive bottom line *Include Variable Costs, Overhead Costs and “Other Costs” if critical to business survival

8. Annual Budget Example Revenue$500,000 Direct Costs($275,000)55% Gross Profit$225,00045% Variable Expenses($25,000)5% Overhead Expenses($150,000)30% Net Operating Profit$50,00010%

9. Annual Break-Even Revenue Variable Expenses$25,000 Overhead Expenses+ $150,000 Total Overhead Expenses$175,000 Divided by GP%45% Break-Even Revenue$388,889

10. Monthly Budget Example Revenue$48,000 Direct Costs($26,400)55% Gross Profit$21,60045% Variable Expenses($2,400)5% Overhead Expenses($14,400)30% Net Operating Profit$4,80010%

11. Monthly Budget Break-Even Variable Expenses$2,400 Overhead Expenses$14,400 Total$16,800 Divided by GP%45% Break-Even Revenue$37,333

12. Calculating Break-Even Hours Monthly Budget $48,000 Based on 6 painters @ 160 hours each Total Budget Hours 960 Projected Sales Price per hour $50 (including materials) If Break-Even Revenue is $37,333 Break-Even Hours are 747 for month (approx 174 hours per week)

13. What about other expenses? Take into account other expenses that don’t hit the Profit and Loss Owner Draws/Loans to Shareholders Loan Payments Credit Card Payments not included in monthly operating expenses

14. Changed Break-Even Variable Expenses$2,400 Overhead Expenses$14,400 Vehicle Loan$750 Total$17,550 Divided by GP%45% Break-Even Revenue$39,000 Break-Even Hours are now 780 for the month

15. What if your GP% decreases? Variable Expenses$2,400 Overhead Expenses$14,400 Vehicle Loan$750 Total$17,550 Divided by GP%40% Break-Even Revenue$43,875 Break-Even just increased by almost $5,000!

16. Using Break-Even Analysis to Add Infrastructure How much more revenue do you need for new overhead to at least pay for itself?

17. Adding a new overhead position Sales Salary$40,000 Payroll Tax/WC$5,200 Benefits$3,900 Vehicle Expense$6,000 Cell Phone$600 Total$55,700 Divided by GP%45% Break-Even$123,778

18. Knowledge is power Knowing your numbers and learning how even small but timely changes affect your profitability increase your opportunities for success in any economy.

19. Marketing Your Business

20. Marketing Marketing is a key component of your business plan and achieving the results you are aiming for A Market Analysis shows your understanding of the market, your customers and your competitors. A Marketing Plan to present the strategies to develop the leads for achieving the sales forecasts you are projecting.

21. Steps to a marketing plan Define your market Analyze your market and industry Identify your marketing and sales strategies Describe your advertising and promotional activities Your marketing plan is a key component of your business plan

22. Market Research – Why do it? Obtain data about your geographic market Obtain data about your customers and potential customers Obtain data about your competitors Ensure you are on the right track with your marketing efforts

23. How to do Market Research Primary – Do your own research Identify competitors via Yellow Pages or online Conduct surveys Do focus group interviews Secondary – Use other people’s research Published Information: Industry profiles, trade journals, newspapers, magazines, census data etc. Sources: Trade Associations, Vendors, Chamber of Commerce

24. Document your research Show statistics, numbers, and sources. Your marketing plan will become the basis, for your sales projection.

25. Market Analysis - Economics Facts about your industry Total size of your market and Percentage share you have Current demand in target market Growth history Trends in target market — growth trends, trends in consumer preferences, and trends in product development Growth potential and opportunity for a business of your size Barriers to entry for new competitors Other factors that can affect your business Change in technology Government regulations Changing economy Change in your industry

26. Products and Services Features - Tangible What does your product/service do? What is special about it? Benefits - Emotional What does it do for your customer After sale services Warranty, service contract, support, follow-up What is your Unique Core Differentiator??? What is really different about you and what does that mean for your customer Try to think of things that your competitors can’t or don’t say

27. Who are your Customers? Identify your customers Characteristics Geographic Location More than one customer group? Are there intermediaries? Identify most important groups Construct demographic profiles for each

28. Demographic Profile - Consumers Age Gender Location Income level Social class/occupation Education Other Home Value, etc.

29. Demographic Profile – Business Customers Industry (or niche) Location Size of firm Quality/technology/price preferences Other

30. Competitors Who are your competitors? Products/services Companies List your major competitors Do they compete in all areas of your business or just for specific customers or services? What are key competitive factors? Analyze your strengths and weaknesses

31. What is your niche? Your unique corner of the market

32. Marketing Strategy Promotion How do you get the word out? Advertising Media Frequency Effectiveness Other Marketing Methods Networking Home Shows Website/Online/Social Media Customer Communication Plan Marketing and Advertising Budget Pricing Strategy

33. Distribution Channels How do you sell your products or services? Retail Direct (mail order, internet) Wholesale Your own sales force Agents Independent reps Has your marketing strategy proven effective? Do you need to make any changes or additions to current strategies?

34. Location Here in the Marketing Plan section, analyze your location as it affects your customers. If customers come to your place of business: Is it convenient? Parking? Interior spaces? Not out of the way? Is it consistent with your image? Is it what customers want and expect? Where is the competition located? Is it better for you to be near them (like car dealers or fast-food restaurants) or distant (like convenience food stores)?

35. Sales Forecast Provide a month by month sales forecast for the next year based on Historical Sales Market Research Seasonal Flow Growth Assumptions Consider providing two forecasts Best case Worst case

36. Implementation Steps Session 4 Determine your breakeven point for your 2012 budget Annual For the month of May 2012 Define Target Market Do a Competition Analysis