Profit Management Workshop - 1400+ Franchise Opportunities · 2019. 12. 16. · Profit Management...
Transcript of Profit Management Workshop - 1400+ Franchise Opportunities · 2019. 12. 16. · Profit Management...
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Profit Management Workshop
How do Franchisees maximize profitability in the
face of regulatory changes, a reduced, more expensive labor force and rising cost of goods sold?
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Profit Management Workshop
Developed by the Franchisee Forum
Presenters:
Rod Bristol, EVP, Profit Mastery
Jeffery Tews, Multi-Unit Franchisee, BrightStar Care
Chuck Stempler, Pres. & CEO, AlphaGraphics Seattle
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• Who is here today? Are you a:
Zee?
Zor?
Vendor?
Profit Management Workshop
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Profit Management Workshop
• Three nuggets:1. Learn useable information that highlights missed opportunities for
Profit
2. Discover data analytical tools and financial processes that will uncover potential savings
3. Take away universal best practices for developing a profit driven mentality throughout your company
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Who Eats Where?(and What’s More Important?)
________ eats off of ________line
You EAT off the ________line
In order to improve THAT,
You have to Improve YOU.
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What Two Things are Critical?
Profits and Cash Flow
How are they achieved?
Understanding how a business makes $.
1. Gaining Control of Your Business
2. Charting a Course for the Future
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Manage Better!
Measuring…
FINANCIAL PERFORMANCE
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WHAT GETS MEASURED, GETS MANAGED
andWhat Gets Managed
Gets Done!
Profit Mastery Basics
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Profit Management WorkshopEducation
- Individual Franchisee- Network-wide programs- Profit Mastery University
Web Based Hi-Def Streaming Video (Self-Study)
Information- Industry Benchmarking Studies
RMA, Fintel, Qvinci, FRANData, Profit Gap, Profit Keeper- Bookkeeping Services
Accountability- Performance Group Facilitation
Provides the FOUNDATION
Creates the YARDSTICK
Establishes the DISCIPLINE
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Profit Management Workshop1. Plan Properly 2. Monitor Financial position
The Scorecard The Roadmap
3. Price, Volume, Cost 4. Managing Cash Flow 5. Managing Growth 6. Borrow Properly/Dealing With Banks 7. Planning for Transition
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Assets = Liabilities + Net Worth
Efficiency
Sales
Balance SheetIncome Statement
To pay for new assets
To pay off debt
To pay out to the owners
Net Profit
Uses of Profits:
Net Profits Cash Flow
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Sales = $2,160,000
Buy
Pay
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.99 :1
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A Quick Quiz!!
The item you are selling costs $4.00 and you want a 26% Gross Margin. What is the sales price? What do you sell it for?
What is the range of answers? Hi to Low…
Profit Management Workshop
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=“causes”
= “is caused by”
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No Cash Discounts on Payables
Low Productivity
Poor Inventory
Control
ShrinkageBookkeeping
ErrorsPoor
BuyingPoor
Pricing
Low GrossMargin
Low Gross Margin (Ratio #4)
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the wrong hotel…
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the wrong hotel…
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the wrong hotel…
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What is their Low Gross Margin costing?
Their Margin in Year 3: 18.5%
Their Peers’ Margin: 22.2%
Difference +/- 4%
Sales in Year 3: ~ $2,000,000
X margin difference: ~ X .04
Margin $ Left on the Table: $80,000
Primary Impact: Profit
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=“causes”
= “is caused by”
$80K (P)
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Low Gross Margin (Ratio #4)
X .05 Low Productivity
$38,000 Inefficiency
No Cash Discounts on Payables
COGS $1,760,000 - 760,000 Labor
$1,000,000 Purchases$500,000 Extend discounts
$10,000 in missed discounts
X .02 Discounts
COGS $1,760,000 - 1,000,000 Purchases
$760,000 Labor
Low GrossMargin
Low Productivity
Low GrossMargin
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• If he can manage just a 1% improvement in each of these areas:
• Buying: 1% x $1,000,000 = $10,000
• Pricing: 1% x $2,160,000 ~ $22,000
Profit Management Workshop
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$80K (P)
$60K (C)
$10K (P) $22K (P)$38K (P)
$10K (P)
$16K (C)
$19K (P)
$7.6K
$126K (C)
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Who is resp. for what? Can he do it? Cash NPBT
1. Inventory
2. Accounts Receivable
3. Hidden Costs
4. Interest
5. Gross Margin
Labor Productivity
Buying
Pricing
Cash Discounts
6. Refinance Building
Totals
$60,000
$19,000
$16,000
$ 7,600
$38,000
$10,000
$22,000
$126,000
$202,000 $106,600
$10,000
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Profit Management Workshop
VC = 70%
FC = $144,000
TP = $60,000
1) Needed Sales:
2) If FC $1.00, what sales required ______
Sometimes the Tests Come First!
Answer these two questions:
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Profit Management Workshop
Monthly Break-Even____________
Annual Break-Even________________
Your employee breaks something that costs $50, how much in sales do you need to do to cover those lost $$$?
You are hiring a new sales person for $45K. How much in increased sales do you need before they actually contribute anything?
You’re going to open a new location for $250,000. What sales will you need to recover and make a return on your investment?
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Sales-COGS=Gross Profit-OE (-VOEs)Net Profit
Sales
With Net Profit at 0, you are at Break-Even
Accountant’s P&LManaged or
Break-Even P&L
-Var. Costs
What’s Left-Fixed CostsNet Profit
Contribution
Margin
=
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Sales
Contribution Margin
Variable
Cost
Cup Fixed
Cost
Cup Net
Profit
Cup
The Cup Theory
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What happens if you never fill
the Fixed Cost Cup?
What happens if you never fill
the Variable Cost Cup? You’re _______
Profit Management Workshop
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If Fixed Costs Go Up $1.00?
What do we need in increased sales to cover
that cost?
Fixed Costs increase = $1.00 = $2.50C.M. % .4
Operating Leverage…
Profit Management Workshop
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1. _________________
2. _________________
3. _________________
4. _________________
Sales ($)
Variable
Cost
CupFixed
Cost
Cup Net
Profit
Cup
Contribution Margin
Profit Management Workshop
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Why Don’t More Owners Do This ?
“Don’t have the time”
“Don’t know how”
“If it was important, my CPA would do it”
“It’s not fun”
“I’m more of a crisis manager”
Profit Management Workshop
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Jeffrey Tews, Franchisee, Madison, WI
•4 Territories of BrightStar Care
•1 Medical Staffing Division
•1 BrightStar Senior Living
•1 BrightStar Senior Living under development
•35 Managers, 450 Direct Care Staff
•$12M per year revenue.
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Branch Profit Bonus Plan
• The Branch team earns 1/3 of the EBITDA over 6% to their bonus pool.
• Revenue on Quarterly basis 100% $985,272
Minus Cost of Goods Sold 58% $572,443
Gross Profit 42% $412,829
Administrative Expenses 31% $303,464
EBITDA 9% $109,365
Base line in the bonus plan is 6% EBITDA -6% = 3% * .33 $9,853
• 3% over the base the team earned 1% of sales bonus for this quarter.
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Branch Profit Bonus Plan Outcomes• Revenue Only bonus plan left us vulnerable to paying bonus
when we did not make expected EBITDA
• Team focused upon revenue and costs has resulted in higher earnings.• Overtime use reduced.• Cost of goods sold saving ideas have been generated –
background checks and drug screens.• Advertising effectiveness research intensified.• Management effectiveness improvements to reduce adds.• Increased attention to Direct Care Staff retention.
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AlphaGraphics Seattle
• AlphaGraphics is a full service commercial print company with locations in Seattle, Fife, Renton, Bellevue and Lynnwood WA. Our full time employee count is 102. AlphaGraphics provides customer facing service from 8AM until 6PM Monday thru Friday. AlphaGraphics production facilities run from 6AM until 12AM Monday thru Friday and extend to 24x7 based upon client demand.
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AlphaGraphics Seattle• Areas of specialization:
1. Pre-press, pre-flight, value engineering, design.
2. Sheet fed digital color and monochrome printing (up to 14.33”x26”), paper and synthetic substrates from 16# to 24pt.
3. Offset printing up to 24”x29”, 5 colors plus in line and off line coating.
4. Specialty digital printing – envelopes, spot and textured UV.
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5. Signage and grand format ink jet printing up to 128” x 150’ for rolls and 128” x length of material, up to 2” thick. 8 colors plus white, UV ink. Latex and eco solvent printing is also available. Complete automated finishing – hemming, grommet setting, CAD cutting, custom assembly, custom on-site installation.
6. Fulfillment – pick, pack and ship; print on demand, pack and ship.
7. Ecommerce – customized web-to-print ordering systems.
AlphaGraphics Seattle
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Client Base:
1800+ clients, primarily located in the Pacific Northwest.
AlphaGraphics Seattle
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A. Cash flow is the prime metric to measure and manage.
I. Operationally P&L is likely structured on an accrual basis
II. Balance sheet is cash oriented
AlphaGraphics Seattle
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B. It is vital that owners make an honest assessment of their financial knowledge base and skill set.
I. If you have gaps, do you have personnel or outside resources who will fill them?
II. Set your pride aside – acknowledge your gaps, seek help – fellow franchisees, peers, network leaders, your franchisor
AlphaGraphics Seattle
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C. You Manage What You Measure
I. Annual plan / budget versus actualII. Waste – labor and materialsIII. Price – selling prices versus cost
AlphaGraphics Seattle
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D. Labor supplyI. Train and develop your team from the
foundation up.II. Promote from within
AlphaGraphics Seattle
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“In my honest opinion, this program is BY FAR (Zors) most valuable initiative. As confident as I was about my ability to manage and control my office’s financial and operational metrics, I was veryhumbled as soon as I saw my financial and KPI results compared to the other owners in our group, as well as once I learned more about how I could improve the various metrics of the Profit Mastery model.
The improvements in our business have been dramatic across the board – financial improvements, operational improvements, process improvements, quality improvements and employee satisfaction improvements. The breadth and extent of the improvements are both humbling and inspiring!
The following data will give you a sense of the benefits of the program in only one of these areas –owner profits (arguably the most important metric to most owners):
Do These Tools Work?
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Our 2011 ODP (owner’s discretionary profit) was 11.6%In the 4 quarters since we started the Profit Mastery program (2012 Q2,Q3,Q4 and
2013 Q1) our ODP averaged 15.4%This increased ODP % equals an actual increase in $170K in ODP dollars for the prior 4 quarters (compared to what my ODP dollars would have been if I was still at my 2011 ODP % level).And, in the past 2 quarters (2012 Q4 and 2013 Q1) my OPD % increased to 16.7%, which equals an annualized increase in ODP dollars of $238K (compared to 2011 ODP % levels).
Thank you, thank you for introducing this program to franchisees!”
Do These Tools Work?
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Profit Management Workshop
• Three nuggets:1. Learn useable information that highlights missed opportunities for
Profit
2. Discover data analytical tools and financial processes that will uncover potential savings
3. Take away universal best practices for developing a profit driven mentality throughout your company
Questions??
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Thank you for coming!
Profit Management Workshop
Rod Bristol, EVP, Profit MasteryJeffery Tews, Multi-Unit Franchisee, BrightStar CareChuck Stempler, Pres. & CEO, AlphaGraphics Seattle