|
|
Commerce Concepts, LLC |
|
September, 2009 |
Volume 9, Issue 3 |
|
In this issue: Cash Flow Planning and Budgeting
_________________________
Commerce Concepts Mesa Arizona (602) 320-1953 FAX (480) 751-1539 On the Web; _________________________
Our Services Merger & Acquisition facilitation & due diligence Post M&A integration management Development & execution of owner exit strategies Capital formation New venture start-ups and expansions Operations analysis, planning and reorganization Business and operating plan development Turnaround management and loss prevention Cash flow analysis and management Venture assessment Management Information System Analysis Internal financial controls and pre-audit counsel Critical Project Management __________________
__________________
EX-IM BANK
Take advantage of International financing through the EXIM Bank. Advances include up to 100% of cost of goods, labor and overhead to manufacture US products sold abroad.
|
000
Business Planning Newsletter
We are approaching Q4, "the judgment quarter", where revenue, sales performance, projections, P&L and cash flow figures are all examined with much greater scrutiny in your quest in achieving projections. Are you on target to hit yours? Below are some useful end of year and business planning tips that may help.
Cash - The life blood of every business. This is a very critical time of year for cash flow planning and budgeting, especially as many businesses will experience a slow down during the holiday season and/or end of year. Are your sales on target for the close of 2009? If not, how much additional cash will be required to fuel your sales and marketing campaigns to achieve them? Do you have the necessary cash reserves to take you through the end of the year if orders decline or work in process cannot be delivered by year end? Compare your actual financials to your prior cash flow forecasts. If you are right on or have exceeded your forecasts for the last several quarters, you and your team are fortunate and darn good. If you fell short or missed by a mile, identify the reasons why and take corrective action now to make Q4 2009 finish strong. Be as analytical as possible with your cash flow planning for the quarters to come. Good sales forecasting and operational budgeting are essential for accurate cash flow planning. Many of our clients perform and maintain cash flow planning for the next 12 months and update their plans every month. I highly recommend this practice and commend all those that have the foresight and resources to do so. Those that do have an advantage over those that don't; they can see adverse cash flow indicators and trends much sooner in advance and are able to take corrective action sooner, thus avoiding unnecessary erosion of valuable cash reserves, which usually results in a greater demand on debt. Most successful marketing managers are at least one quarter ahead of the calendar when it comes to launching their campaigns. Have you budgeted for your Q1 2010 marketing campaign development expenditures for Q4 of this year? Come out of the gate in the first few weeks of 2010 with a strong marketing campaign. Let your customers and prospective customers know about your new products, new services, product improvements, special offers, expanded capabilities with a timely and well engineered marketing campaign. Invest and budget in Q4 for immediate release and execution Q1 2010. Banks are loosening up a little but they still tend to tighten up credit toward the end of year. Do you have an adequate line of credit available if; sales fall short, you plan to expand, introduce or develop a new product, execute an acquisition, or are forecasting a surge of growth in the next 6 to 12 months? Don't procrastinate - get your line of credit inline with your forecasts and cash flow planning. Have you been drawing from your line of credit and not paying it down? Well, you're not alone. Some businesses have been harder hit than others in these uncertain times and have had to tap out their lines to make ends meet. However, if you are generating adequate cash flow form operations to support operations and still drawing heavily from your line, you should include a repayment plan in your master cash flow plan. Typically, this is a long-term plan but it is still cash you must allocate that will not be not available for operations. Don't forget to buy your banker a nice lunch every month - you will be glad you did. Share your monthly financials, your present and projected cash position, your growth plans, your successes, and yes, your failures too. Bankers hate surprises - surprises erode the trust you have worked so hard to gain. If you anticipate you will require an increase in credit line, an upcoming loan or refinance, let your banker know your upcoming capital requirements well in advance. If you embrace this practice, you'll be surprised of their willingness to help you.
An up to date business plan will uncover your strengths and weaknesses. It will force your managers to contribute to the corporate planning process, instill greater accountability, set unified goals and targets, more accurate sales forecasts and operational budgets, thus making for a single, more cohesive management team. This is the place to clearly define responsibilities, accountability, objectives, targets, and establish capital budgets for all departments. A solid business and operating plan will provide you with an accountability tool like no other and is one of the strongest team self-discipline and self-motivational tools you can have. With your entire management team participating in the planning process, each department will possess a much clearer understand of the relationship each department has on the other's performance and success. If you need an update or assistance to manage the planning process, we can deliver. Whether you are trying to determine your corporate valuation for your bank, your shareholders, a sale, merger or JV, succession planning, or a stock option plan for your key employees, it is never an simple task. There are many methods one can use to determine their business valuation; multiples of sales, cash flow, comparison to like business sales and many other methods. Each method has its own merit depending on the purpose of the valuation. In a business sale scenario, it is your objective to get your valuation as high as reasonably possible and the buyer's objective to discount your number and drive a lower valuation. Typically, one does not pay too much attention to the complexity and variables of valuation methodologies until there is a pending event where the valuation will drive the outcome of a deal, such as an asset or stock sale. You must have a substantial arsenal of documentation at hand to prove your case and convince the buyer of your value. Buyers go to great lengths and expense to prove you wrong. There will be always be deep negotiations over the price and terms and some give and take by both parties. Be well prepared and get your best possible price. Start with the highest reasonable substantiated valuation you can as your starting point. Substantiated means to have your research, methodologies and case well documented. Make sure you include detailed asset lists with current replacement cost for all saleable inventory and obsolete inventory at market prices, values for IP, ongoing customer contracts, customer lists, audited or reviewed historical financials, accurately restated financials (non-tax basis) with adequate notes from your CPA or CFO for all changes, and projected income statements, balance sheets and cash flow statements for 3 to 5 years. Since VC and PE investing has slowed substantially, private company valuations are more heavily weighted on present and future discounted multiples of cash flow. This is rapidly becoming the norm for all but retail and pure service sectors. Straight multiples of present or averaged past EBITDA works in some deals, especially fire sales, but does do not represent the true value of a well managed company that is as a leader in their industry with substantial growth opportunities. We strongly recommend you perform and compare many different valuation methods. We also recommend you order a professional valuation. Add in additional value if you have substantial saleable inventory (more than the industry average), if you have a top book of customers, ongoing customer contracts, intellectual property, an experienced top-quality management team, a proven business plan, are a leader in your industry, and are free from pending litigation. The aforementioned attributes, as well as potentially many more, will increase your valuation while also reducing the buyer's risk, and if properly documented, packaged and presented, will leverage your negotiating strength substantially. This quarterly business planning bulletin is brought to you by Commerce Concepts, LLC. If you received this in error and/or do not want to receive future quarterly issues, please send us an Email with Opt-Out in the subject line. Copyright 2009 Commerce Concepts LLC, all rights reserved |
|
__________________ Low Interest Leasing
New sources available for commercial leases with low interest rates. Ideal for: computer hardware, software, accounting systems, and capital equipment. Let us know if you have a leasing requirement __________________
________________
News Links __________________
_____________________
M&A Due Diligence
Commerce Concepts offers comprehensive due diligence services for mergers and acquisitions. Serving both clients on the buy or sell side. You will find our services fast, thorough and reasonably priced. _____________________
For an appointment, call Stu Keller today at: 602-320-1953 Let Commerce Concepts make a difference in your bottom line |
