2. Identifying Your Leading Indicators of Profitability Jim Heilborn Jim Heilborn Associates

3. Identifying Your Leading Indicators of Profitability  Standard measurements  Current Ratio – Current assets/current liabilities=current ratio  Quick Ratio – (Current assets-inventory)/current liabilities=quick ratio  Gross Profit – Revenues – cost of goods= gross profit  Gross Margin – Net sales – cost of goods sold=gross margin percentage  Net Operating Expense – Gross margin – SG&A = net operating profit  Net Profit – (Net operating profit+ income) – (other expenses + taxes) =net profit  Gross profit ratio, Pretax profit ratio, Sales-to assets ratio, etc. etc. All important…but............

4. Identifying Your Leading Indicators of Profitability THE KEY COMPONENTS SALES ADMINISTRATION OPERATIONS FINANCE

5. Identifying Your Leading Indicators of Profitability KNOW YOUR NUMBER 1 KEY INDICATOR  THE RESTAURANT

6. Identifying Your Leading Indicators of Profitability LEADING INDICATORS VS. TRAILING INDICATORS

7. Identifying Your Leading Indicators of Profitability KEY COMPONENT SALES

8. Identifying Your Leading Indicators of Profitability  Value - What customers and investors are willing to pay for, that employees are willing and able to provide. In a public, for-profit enterprise, sustainable value requires all three groups. Value must be worthy to those paying and those providing or it will not endure. Mickey Connolly and Richard Rianoshek, Ph.D. The Communications Catalyst

9. Identifying Your Leading Indicators of Profitability  Every product or service you can provide is one less reason for your customers to talk to your competitors.  Every product or service you provide is one more reason for your competitor’s customers to talk to you.

10. Identifying Your Leading Indicators of Profitability Customer NameCustomer Expectation Score 1 - 5 Comments ABC, Inc. Sales Product & Design Order Administration Associated Services Delivery & Installation Customer Service 1= Low 5 = High

11. Identifying Your Leading Indicators of Profitability  KEY INDICATORS SALES  SALES ACTIVITY – SEE CHART  BID LISTS –NUMBER OF BIDS PLACED –PERCENTAGE OF SUCCESS ON BIDS  DOLLAR VOLUME OF QUOTES  NUMBER OF ACTIVE CUSTOMERS  NUMBER OF NEW ACCOUNTS  NUMBER OF NEW ORDERS  AVERAGE GROSS MARGIN/PROFIT  GROSS PROFIT PER DAY  DOLLARS PER REP  BACKLOG  SALES TO PLAN

12. Identifying Your Leading Indicators of Profitability GOALTASK/OBJECTIVETIME FRAME Average monthly gross Average daily sales = $ Within next ___months sales = $ Average monthly GP $___________ Within next ___months dollars = $ Number of calls needed per day - Number of appointments needed per day = Number of orders needed per day to equal daily average of $________=

13. Identifying Your Leading Indicators of Profitability GOAL TASK/OBJECTIVE TIME FRAME Number of orders needed per day to equal daily average of $__ GP dollars = $ Ratio of appointments to orders = ____ appointments to ____orders Average dollars per sale = $ Average GP dollars per sale = $ Average Number of calls to make per week =

14. Identifying Your Leading Indicators of Profitability GOAL TASK/OBJECTIVE TIME FRAME Average Number of calls to make in next 30 days = 30 DAYS Average Number of calls to make in next 60 days = 60 DAYS Average Number of calls to make in next 90 days = 90 DAYS Number of new accounts to open in next 30 days = 30 DAYS Number of new accounts to open in next 60 days = 60 DAYS

15. Identifying Your Leading Indicators of Profitability GOAL TASK/OBJECTIVE TIME FRAME Number of new accounts to open in next 90 days = 90 DAYS Sales Mix Number of orders/dollars generated from new Accounts per month = / Number of orders/dollars generated from established ongoing accounts = / Review of Top Ten & rolling forecast to identify and focus on opportunities and activityOn a weekly and monthly basis

16. Identifying Your Leading Indicators of Profitability GOAL TASK/OBJECTIVE TIME FRAME Product Mix Casegoods dollars$ Seating dollars$ Systems dollars$ Other products dollars$ Number of orders/dollars generated with primary vendors per month = /$

17. Identifying Your Leading Indicators of Profitability FORECASTING - A CRITICAL METRIC

18. Identifying Your Leading Indicators of Profitability TARGETING PLAN Name Date Top Ten Hot List/Close/DollarsTop Ten Target List 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Lead Sources Prospecting Plan 30 Day Booking Forecast - 30 Day Billing Forecast -

19. Identifying Your Leading Indicators of Profitability ACCOUNTVENDORBOOKING MONTH $’S BOOKED GP% / $’SBILLING MONTH $’S BILLEDGP% / $’S ABC, Inc.Teknion1. Nov.40,00034/136001. Nov.*20,00034/6800 OFS2. Dec.15,00028/42002. Dec.40,00034/13600 Seatability3. Jan.6,00035/21003. Jan.15,00028/4200 Cowabung a Teknion1. Nov.32,00031/99201. Nov.*9,00035/3150 Global2. Dec.27,00033/89102. Dec.32,00031/9920 Mayline3. Jan.19,00025/47503. Jan.27,00033/8910 1=CURRENT MONTH 2=NEXT MONTH 3=MONTHAFTER NEXT $TOTALS: 1. 72000 2. 42000 3. 25000 $TOTALS: 1. 23520 2. 13110 3. 6850 $ TOTALS: 1. 29000 2. 32000 3. 42000 $ TOTALS: 1. 9950 2. 23520 3. 13110 * Represents booking from previous forecast.

20. Identifying Your Leading Indicators of Profitability

21. STRATEGIC PARTNER OR ABUSIVE MATE? SELECTING YOUR PRIMARY VENDORS

22. Identifying Your Leading Indicators of Profitability PRIMARY SECONDARY TERTIARY

23. Identifying Your Leading Indicators of Profitability

27. KEY COMPONENT ADMINISTRATION

28. Identifying Your Leading Indicators of Profitability  KEY INDICATORS ORDER PROCESSING –TIMELINESS –ACCURACY –INTERNAL PROCESSING COSTS –ERROR RATE –COMMUNICATION INTERNAL EXTERNAL

29. Identifying Your Leading Indicators of Profitability  KEY INDICATORS HUMAN RESOURCES –Productivity –Contribution –Participation –Dependability

30. Identifying Your Leading Indicators of Profitability KEY COMPONENT OPERATIONS

31. Identifying Your Leading Indicators of Profitability KEY INDICATORS OPERATIONS  SELLING SERVICE AS A PERCENTAGE OF YOUR BUSINESS  PROFITABILITY OF SERVICE OFFERINGS  DELIVERY TIME AND COMPLETION  INSTALLATION COMPLETION  PUNCHLIST  SERVICE CALLS – COMPLETING ON THE FIRST CALL  FINAL SIGN OFF

32. Identifying Your Leading Indicators of Profitability

37. PROCEDURE QUANTITY PER HOUR VDTCRANK 1 - 2 VDT PNEUMATIC 1 CHAIR PNEUMATIC 1 - 3 BROKEN CHAIR ARM 1 - 3 BROKEN CHAIR BACK 1 - 3 BROKEN CABINET DOOR 1 - 4 STUCK/JAMMED DRAWER 1 - 4 LOWER A WORK SURFACE 1 - 3 ATT ACH A KEYBOARD 1 - 4 REPAIR A KEYBOARD 1 - 2 TASKLIGHT REPAIR 1 - 4 INSTALL NEW TASKLIGHT 1 - 5 INSTALL LOCK IN BKC WITH STEEL DOORS 1

38. Identifying Your Leading Indicators of Profitability Meeting the test  Determine the need for the product or service Is it a long-term sustainable need?  The cost of providing the product or service  Level of service you and your company can provide  “Implementability”  Impact on your current business  R.O.I – Return on Investment  Measuring for results

39. Identifying Your Leading Indicators of Profitability The Cost of Service Labor - Wages, Taxes, Benefits Space – Taxes, Utilities, Rent/Mortgage, Insurance, Office Equipment & Supplies, Maintenance Equipment – Tools, Machines, Maintenance, Supplies, Vehicles, Insurance, Phones

40. Identifying Your Leading Indicators of Profitability KEY COMPONENT FINANCE

41. Identifying Your Leading Indicators of Profitability KEY INDICATORS FINANCE/ACCOUNTING  ACCOUNTS RECEIVABLE –75/10/10/5 RULE –DSO  ACCOUNTS PAYABLE –DISCOUNTS TAKEN/OFFERED –LINES OF CREDIT AND LINE DRAWN –VENDOR RELATIONSHIP  CASH FLOW –WORKING CAPITAL - DOLLARS AND RATIOS  BANKING RELATIONSHIPS  BOOKED TO BILL RATIO

42. Identifying Your Leading Indicators of Profitability  BENCHMARKING –OFDA –BIFMA –MANUFACTURERS –INDUSTRY ORGANIZATIONS

43. Identifying Your Leading Indicators of Profitability  www.jheilbornassociates.com  jim@jheilbornassociates.com jim@jheilbornassociates.com  916.434.8711