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How a Simple Garden Hose can make a difference in Your Business

How a Simple Garden Hose can make a difference in Your Business. Bob Dawson CITE The Business Group. Today’s Objectives. Introduce you to ROI Incentive Management Identify key areas in your business model where ROI incentive management can dramatically change your financial outcome

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How a Simple Garden Hose can make a difference in Your Business

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  1. How a Simple Garden Hose can make a difference in Your Business Bob Dawson CITE The Business Group

  2. Today’s Objectives • Introduce you to ROI Incentive Management • Identify key areas in your business model where ROI incentive management can dramatically change your financial outcome • Answer the key question: “What does this have to do with a Garden Hose??”

  3. What is ROI Incentive Marketing? ROI Incentive Marketing is a unique management tool that tracks the impact and measures the ROI of incentive program results

  4. Profit Gross Margin Operating Profit Profit Before Taxes Net Profit Return on Assets Return on Equity EBITDA Process Quality Ratio Time to Market Sales Per Employee Inventory Turns A/R Collection Days Output Ratio Shipment Linearity Key Indicators • People • Turnover • Productivity • Loyalty • ROI • Capabilities

  5. The Financials Cash Flow Statement Income Statement Cash In - Cash Out Change in Cash Revenue - Expenses Profit/Loss Balance Sheet Assets = Liabilities + Equity

  6. Creating Net Profit Sales Baseline Sales: $25,000,000 Revised Sales: $26,250,000 Sales Increase = $1,250,000

  7. Creating Net Profit Cost of Goods Sold Baseline COGS: $17,250 / $25,000 = 69% COGS Revised COGS: $17,588 / $26,250 = 67% COGS Baseline Gross Profit = 31% Revised Gross Profit = 33% Incremental Gross Profit Increase = $525,000

  8. Creating Net Profit Operating Expenses Baseline OPS Exp: $6,775 / $25,000 = 27.1% OPS Exp. Revised OPS Exp: $7,514 / $26,250 = 28.6% OPS Exp. Baseline OPS Exp. = 27.1% Revised OPS Exp. = 28.6% Incremental Increase in OPS Expense = $400,000

  9. Incremental Net Profit • Incremental Sales Increase $1,250,000 • Incremental Gross Profit Increase $ 525,000 • Incremental OPS Exp. Increase ($ 400,000) • Incremental Net Profit $ 125,000

  10. Creating Cash Flow Accounts Receivable Average Annual Outstanding = $68,500 Baseline Collection Days = 58 Days Revised Collection Days = 51 Days Increase in Cash Flow of $479,500

  11. Creating Cash Flow Inventory $17,250,000 in Materials / 4.01 Turns per Year = $4,302,000 Baseline Inventory Turns per Year = 4.01 Revised Inventory Turns per Year = 4.99 Increase in Cash Flow of $777,000

  12. Incremental Cash Flow • Accounts Receivable Cash $ 479,500 • Inventory Turn Cash $ 777,000 • Incremental Cash Flow $1,256,500

  13. Net Result • Increased Net Profit $ 125,000 • Increased Cash Flow $1,256,500

  14. Calculating the Value of Improved Key Indicators What resources are available in your business? • Sales/Marketshare Growth • Multiple Product/Service Offerings • Accounts Receivable Collection Period • Inventory Carrying Costs • Cost of Goods Sold • Operating Expenses • Time to Market • Quality Control • Employee Retention • Customer Retention

  15. Identifying Your Untapped Key Indicators • Create a flow chart of your business cycle • Identify areas that require change/improvement • Determine long- and short-term objectives • Determine hard or soft objectives • Rate each objective as it relates to your business strategy, operating environment, and measurement capability

  16. Forecasting the Impact of Change • Identify the environment of your business • Identify the potential impact of achievement of your objectives on your Internal and External environments • Identify the target audience that will be responsible for completing the objectives

  17. Determining Your Investment Posture • Establish a baseline • Calculate incremental revenues and expenses • Measure your investment ROI against other historical investments

  18. Making It Happen • Create the right environment for change • Track your investment on a monthly basis • Remain flexible – Respond to changes in your environment • Focus on the returns, not the awards

  19. It’s not a question of “if” it will work…. This process will work in any business! The real question is …. How well will it work in your business? Will it Work for My Business?

  20. If you would like a no cost, no obligation review of your potential for Incentive Management ROI: (E Mail) rsdawson@businessgroupinc.com (Phone) (916) 865-4256 Bob Dawson Contact Information

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