Do You Know Your ROCE?

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How Measuring Your Return on Capital Employed is Critical for Financial Health

There are so many ways to measure a company’s financial success: profit margin, return on equity, and return on invested capital.

Return On Capital Employed (ROCE) is a lesser known but equally important financial indicator. ROCE is especially useful for evaluating your company’s macro level financials or other companies to invest in. It’s essential because it goes beyond simple profit margins to specifically assess how well a company runs, conducts its business, and returns value to investors.

ROCE is the total of a firm’s assets and revenues minus current liabilities. The ROCE ratio is simple:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT)/Capital Employed

The higher the result of the formula, the more efficiently a company is utilizing its capital. If a company’s ROCE has gone up since last year or in the last few years, it indicates a company is going in the right direction. At a minimum, ROCE should exceed the cost of capital (financing costs), or the company can find itself in a bad financial state.

ROCE is especially useful in comparing how different companies in the same industry leverage their capital, particularly in capital-intense industries like energy, auto, and telecommunications that habitually hold a large amount of debt.

Don’t confuse ROCE with ROE (return on equity), even though both are profitability ratios that measure a company’s profitability as related to funds invested. ROE takes profits generated from shareholders’ equity into consideration, as opposed to ROCE, which uses all capital employed including the company’s debt.

ROCE percentage is one of the tools for judging the performance of managers and how effectively they are running a business. It’s a good idea to look at the industry average and the ROCE of competing companies.  The ROCE percentage is one of the few metrics that does allow you to compare across industries and within your industry.

If employed capital is not given in financial statement notes, it can be calculated by subtracting current liabilities from total assets. Watch for poor quality profits, such as the sale of expensive equipment that can’t be repeated regularly, as these can create an artificially high ROCE. Other factors such as leasing versus purchasing equipment can also lead to a slightly higher ROCE.

Despite the value of evaluating a company’s ROCE, it should not be the only factor used for an accurate assessment of financial stability; other probability ratios certainly contribute to the whole picture.  However, knowing your ROCE percentage is important metric for a business owner to keep track.  Your ROCE percentage provides the business owner the return they are getting on their investment in the company.

If you want to learn your ROCE percentage, feel free to reach out to Mike to get a free template at Mike@trilliumfinancial.com.

Small Business Matters: “The Importance of Financial Management”

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In this episode of the “Small Business Matters” podcast, Numbers Coach Mike Iverson discusses the importance of careful financial management for the long-term survival of your business:

How this “J” Can Help You Make Strategic Decisions Easier

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by Tim Fulton, Small Business Matters

How often do you get “stuck” on a big strategic decision? If you are like many small business owners, the answer is “too often”. It may be a key employee hire, a capital decision, the purchase of a large fixed asset, or may be a decision to exit the business. None of these are easy decisions and easy to get paralysed in making the final call.

One of the best tools I have found for making tough strategic decisions is the “J Curve”. A popular blog for mid-size businesses, ShortTrack CEO, said the following about J Curves:

“The process of identifying, prioritizing, and managing J Curves is the most important determinant of entrepreneurial success.”

By definition, a J Curve investment is any strategic decision to spend money today for a benefit tomorrow. Any hiring decision is a J Curve. Any significant new customer is a J Curve. Any major allocation of capital resources is a J Curve. A marketing decision such as the offering of a new product or expansion into a new market is a J Curve. The list goes on…

Here are the 3 phases of the J Curve:

  1. The first phase of the J Curve is the “investment. How much will we need to spend in time or money on this investment? If it’s a new piece of equipment; this would include the cost of the new asset, set-up and training time, and any costs associated with ramping up the new equipment.
  2. The second phase of the J Curve is “catch up”. We have now moved based the bottom of the curve and we are trying to move towards break-even as quickly as possible. We again measure this phase in time and money. If it’s a new hire, the employee has completed his/her orientation and training and now is moving towards achieving the results we have set expectations for this new employee.
  3. The third phase of the J Curve is “blue sky”. We have moved past break-even on our investment and we are now moving towards achieving a maximum return on investment (ROI) on this big decision. The new sales rep starts making big sales. The new customer starts placing sizeable orders. The new piece of equipment has doubled our production capacity.

There are several important rules for managing J Curves:

  • Measure the depth and width of the valley. It’s typically measured in either time or money or both. My experience is that we very commonly underestimate both of these as they relate to the decision. We expect the new sales rep to deliver new customers in three months and it takes six months. We anticipate the new customer to place an initial order of $100K and instead we get $50K.
  • Do not become emotionally attached to your J Curve. You may need to abandon it at some point in time. Your newly hired CFO has grossly overstated his qualifications for the job. Are you prepared to wait a year to see him grow into the position or cut him loose and start over?
  • Watch the number of J Curves you have at any given time. The average for small business executives is 5-7 at any given moment. My guess is that if I sat down at the desk of any of my clients I would find at least that many strategic decisions in the making. Any more than that is problematic. Any less than that is a cause for concern as well. I suggest you keep a J Curve register on your desk, which can be a legal pad with a list of your current J Curves just to keep score. What is the current status of each one?
  • Is there a plan for moving from Phase 1 to Phase 3 for each J Curve? There needs to be a unique course of action for moving efficiently thru each phase.
  • Watch out for “W” curves. You have reached Phase 3 and all of a sudden you find yourself back at Phase 1. What happened?

It’s time to get “unstuck” on your big strategic decisions. Thinking of each one as a J Curve is a great first step. You now also have a new vocabulary in which to think of these decisions and discuss with your key executives. Good luck!

Get a Feel for Your Business by Writing Down the Numbers

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In the era of smart phones, smart cars and smart homes, you might feel advice about tracking your business results with an old-school number 2 pencil is a little out of step.  You shouldn’t.

There is an old saying: “From lips to pencil tips,” which suggests that by physically writing your key figures you become more familiar with them.  Like a golfer who leaves the course saying, “I need to do better than a double bogey on number 7,” entrepreneurs who track their key figures by hand are extremely aware of what they need to improve.

Writing the key figures down month after month, you commit them to memory and become more focused on their importance to your success.  It’s a practice that is highly recommended for new business owners, and I know several veteran business owners who swear by it.

What you should track

Take a piece of paper and write your key performance figures (check out our Metrics for Success guide for more info on these numbers as well).  For most business owners, the common ones are:

  • Sales by month
  • Gross profit by month
  • Net profit by month
  • Cash flow by month
  • Accounts receivable
  • Accounts payable

Sales by month measures top-line revenue growth.  In business, either your company is growing or it has begun dying.  Watch this number closely.  Consider what is going on within your industry, both nationally and in the local market.  Set a sales goal each month that represents true, attainable growth.  If you fall short, take time to understand why and take corrective action as necessary.

Gross profit by month measures a company’s markup on its cost of goods (or services) sold.  This figure gives an indication of how well ownership has controlled its costs and, possibly, whether goods and services are priced in line with what the market will bear.  In times of inflation, it’s easy for cost increases to outpace increases in your selling prices. Committing this number to paper will help keep you abreast of the situation.

Net profit by month builds on the gross profit by month analysis.  While gross profit focuses on cost of goods or services sold, net profit also encompasses administrative expenses, interest and taxes.  If gross profit is optimal but net income is lagging, take a hard look at trimming administrative costs. Perhaps there is a way to manage interest costs. Consider hiring a tax expert who is knowledgeable of your industry.

Cash flow by month measures the company’s liquidity.  It’s how much cash is getting added to or subtracted from the bank in your bank account.  By recording this figure each month, you will naturally begin thinking about short-term, upcoming events that will impact your liquidity. Many service industry clients prepare for weak cash flow in the month of December, when people have holiday-related expenditures in mind. Conversely a retail business expects its best cash flow to occur in December.  Seasonal aspects to a business is a fact of life that should be considered in the business plan.

Tracking Accounts Receivable helps to see how much you expect to collect in the next 30 to 60 days.  Seeing this account grow can be either the result of sales growing or another issue like a customer slowing down their payments.  Understanding the reason for the growth will help you better understand your future cash flow.

Accounts Payable is the amount you owe vendors that must be paid within the next 30 to 60 days.  This balance can tell you how much cash will flow out of your business and thus plan the disbursements based on your inflows from Accounts Receivable.

Focus on important customers

In addition to tracking the numbers, it’s wise to use a second sheet of paper to track results on a customer-by-customer basis. This makes it very clear which customers are most important to your success. And, if an important customer starts slipping away, you will quickly become aware and might be able to salvage the relationship. Your second sheet will track:

  • Sales by month by customer; and
  • Gross profit by month by customer

If sales to a significant customer slip unexpectedly, learn what you can from the employee servicing the account. Then, follow up personally with the customer. It could be that the customer has fallen on difficult times. Maybe there is a competitor trying to make inroads.  Whatever the cause, do what you can to nip it in the bud.

When gross profit by customer increases or decreases from one month to the next, you want to know why. This is a very real measurement of where you are making money and where you are losing it. You need to understand what has happened to that one customer relationship. If gross profit for that customer is up, can you move other customer relationships in the same direction? If it’s down, can you prevent the cause from impacting other customers?

If you would like to get more detailed information on these metrics, download our Metrics for Success guide. If you have questions about how to get started or what your numbers are telling you, give us a call at (404) 353-2148 or email info@trilliumfinancial.com.

How ABC can Help with Your 123s

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by Anne Moore Odell

Sometimes, it can feel like your hands are tied when it comes to costs—everything from rent and salaries to materials. As you closely examine every line of your company’s income statements looking for ways to cut costs and grow profits, pay particular attention to direct and indirect costs as two levers you can adjust to maximize revenues.

Smart companies are figuring out which indirect and direct costs are fundamental to their operations, which activities can be outsourced, and which can be done away with altogether. Activity-based costing (ABC) is a powerful method for computing indirect and direct costs, to help you determine precisely where money is being spent and made.

Defining Direct and Indirect Costs

Simply defined, direct costs vary with your sales while indirect costs do not vary directly with changes in sales. Explains Mike Iverson, Numbers Coach, “If you don’t sell a widget, your direct cost isn’t there, but if you don’t sell a widget, you still have indirect costs.”  Direct and indirect costs are sometimes also referred to as variable vs. fixed cost.

Direct costs can be logically connected to the creation of a product or the completion of a service. These costs can include materials and labor. It is even possible to calculate the exact cost of the materials used to create one unit of a product and the amount of labor necessary.

Indirect costs are the bucket into which the other costs of doing business are dropped, including rent, marketing, sales, accounting and executive costs. Indirect costs are more difficult to connect to the cost of your product and service. For example, if you make three product lines, it is very difficult to directly correlate the salary of the receptionist to a unit of product.

“Indirect costs, sometimes referred to as overhead, are controlled using a combination of vendor contracts, vigilant operators and timely financial reports,” says Bob Wagner, President of NetFinancials, Inc. headquartered in Atlanta. “We have one operator that paid a substantial amount for on-going repairs and maintenance expense. Most of the repair expense has been consolidated in a single vendor, which the operator monitors very closely using the budgeting feature in the financial reports that we provide.”


ABC Tracks and Applies Actions to Accounting

Activity-based costing (“ABC”) can help you understand and manage costs by looking at every activity in a business, and then assigning the cost of the activity to the product created. This makes it possible to designate more costs as direct versus lumping costs into indirect.

Iverson says that with ABC companies need to ask, “What activities do I engage in to make this product and how can I allocate my burden to that product?” In this model, companies examine which activities are driving both direct and indirect costs. Instead of lumping all indirect costs an indirect cost pool, activity-based accounting allocates and tracks expenses as they occur by activity.

“Activities-based accounting can get to the nitty-gritty of WHY you are incurring the cost in the first place,” says Iverson.

For example, assume Widget Company audits their client’s freight bills as their service.  The freight bills are received electronically directly from the client’s freight carrier vendor.  Widget Company has an Information Technology Department (“IT”) that maintains the computers and equipment which perform the audit of the client freight bills.  Can IT costs get allocated?  If so, how?  Widget Company using ABC determined that the maintenance and repair of the computers and equipment occurred based on the use of the equipment, in other words the volume of transactions getting audited by the systems.  Based on how many freight transactions were audited (the “activity”) Widget Company determined the best allocation of the IT maintenance and repairs expense was based on the number of audited freight bill transactions.  The allocation using ABC enabled Widget Company to a better picture of profitability by client.

Working with Costs in Real Time

Reviewing your income statements shouldn’t be just a quarterly or annual activity it should be monthly so that you can find ways to manage and limit expenses. One proven method of cutting both indirect and direct costs is following them as they occur.  “Accurate, timely financial statements and reports are essential in giving management the information they need to manage their direct costs,” explains Wagner. “With the speed of today’s business, only real-time reports give managers the feedback they need to manage costs.”

Wagner gives as an example the weekly report his company delivers to clients. Sales, cost of sales, banking, credit card and payroll data are obtained in real time using scanners, email and high-speed Internet. Weekly reports are prepared within 48 hours of receiving the data, ensuring that managers stay informed and on top of their operations.

Let us know how we can help you with ABC in your company.

Numbers Coach Helps a Content Publisher Stay Financially Focused

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The Company

EB Medicine (“EBM”), founded by Robert Williford, and it is carried on by family members Stephanie Williford and Robin Wilkinson.  EBM provides high quality content for the physicians who want to stay on top of issues in their specialty.  This includes study guides for a physician to keep up their continuing medical education and stay abrest of new methods or technologies.  EBM products are produced by practicing physicians from leading institutions around the world with a broad range of clinical expertise.

 

Situation

In 2016 the EBM team wanted to enhance their financial management and reporting.  They were looking to create a platform to communicate the company’s key performance indicators (“KPI”) that drive its financial results.  In addition, the EBM team wanted a “road map” that could guide them as they made financial decisions impacting strategies for growth.

 

Solution: The Numbers Coach Financial Leadership Services

The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing EBM’s performance metrics.  NC developed a financial scorecard focusing financial drivers that give the team visibility into the profits and cash flow critical to sustained profitable growth.  The scorecard offers an “at a glance” view of results.  NC also developed a financial model that provided the road map for the EBM team to see where they were headed with profits and cash flow.  The model provides a rolling forecast during the year so that EBM team could make financial and operational decisions to achieve their goals.

 

 

 

Results

NC pulled together financial and non-financial data to complete a customized scorecard and financial model.  Each month NC meets with the EBM team to methodically review results and provide the input and analysis from the scorecard and financial model.  From the monthly financial mentor meetings, the EBM team can take actions on activities that improve the company’s bottom line results.

For more information on EB Medicine visit www.ebmedicine.net

To learn more about the Numbers Coach financial leadership services, click here

“Mike has been an important part of our team over the past year.  His understanding of financial processes, cash flow, and how to explain our results has provided our team with the right tools to navigate our finances successfully and stay focused on our financial goals.”  

Stephanie Williford, CEO

Numbers Coach Helps Manufacturer Improve Financial Results

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The Company

Direct Refrigeration Sales (“DRS”), founded by Tim Litsch, provides a high quality alternative to OEM replacement parts for the refrigeration industry.   One of their primary parts is a gasket that seals a refrigeration unit when closing the door and ensures the contents remain cold and intact inside the unit.  DRS products are of such quality that even several OEMs in the food service industry source with DRS for their replacement parts.

Situation

In 2016 Tim Litsch wanted to enhance his financial management and reporting.  The DRS team was looking to create a platform to communicate the company’s key performance indicators (“KPI”) that drive its financial results.  In addition, they wanted to see what needed to be done for the company to extract themselves from financing that was non-traditional but necessary to carry the business forward.  The DRS team wanted visibility through a financial model that would tell them what needed to be done to move from non-traditional financing to traditional bank financing at a lower cost.

Solution: The Numbers Coach Financial Leadership Services

The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing DRS’s performance metrics.  NC developed a financial dashboard scorecard focusing financial drivers that provide visibility into the profits and cash flow critical to sustained growth of a business.  The scorecard offers an “at a glance” view of results.  NC also developed a financial model that provided a road map for the DRS team to see where they were headed with profits, cash flow, and the pay down of debt.  The model provided a rolling forecast during the year so that Tim and his team could make financial and operation decisions to achieve their goals.

Results

NC effectively pulled together the required financial and non-financial data to complete a dashboard scorecard and financial model.  Each month NC meets with the DRS team to methodically review results and provide the input and analysis from the scorecard and financial model.  From the monthly meetings, the DRS team implemented actions to take on activities that would improve the company’s bottom line results.

For more information on Direct Refrigeration Sales, visit www.directrefrigeration.com

To learn more about the Numbers Coach financial leadership services, click here

“Mike has been an integral part of our team over the past year.  His solid understanding of financial reporting processes and cash flow has provided our company with the right tools to navigate our finances successfully and help us stay focused on our financial goals.”  

Tim Litsch, Founder / CEO

Numbers Navigator Helps Pool Company Float More Cash to the Bottom Line

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About the Company

Bill White built Southern Splash Pools (“SSP”) in 2001 to provide northern Georgia with quality custom and new pool construction, pool repair and maintenance services.  SSP provides a lifetime structural guarantee with all of its installations.

The Situation

Over the years, Bill realized that his profits weren’t where he thought they should be, but couldn’t identify exactly why:  “At the end of the day, our overall sales numbers were good, but the bottom line was not.”

The Solution

Intrigued by information about the Numbers NavigatorR he found in the Numbers Coach (“NC”) monthly newsletter, White decided to “pull the trigger” and contacted NC’s, Mike Iverson, to provide a comprehensive analysis of SSP’s financial operations.  Iverson used the Numbers NavigatorR to determine the key financial drivers in SSP’s business model, then conducted a discovery session with management to gain an understanding of their key business issues.

NC provided SSP with a comprehensive financial report that identified opportunities to drive more cash flow from the business.  Together the Numbers Coach and SSP determined that margins were too thin, and that pricing per project needed to be adjusted to reach the profitability desired by SSP.  To achieve this the Numbers Coach provided:

  •  A 20+ page financial report detailing key drivers in SSP’s business model
  • Cash on hand/revenue targets for each month
  • Models for various pricing strategies and guidance on creating the pricing structure that would provide more profitability
  • Provided a short-term planning tool to ensure resources and cash were allocated appropriately
  • Established a schedule for accountability check-ins to measure progress on financial goals


“I appreciate Mike’s approach, which is educational and ‘real world;’ he boils it down to
what I really need to know to run my business. The best part is that I now understand
what the numbers are telling me and I have someone besides myself to hold me
accountable for reaching my financial goals.”


Bill White, President, Southern Splash Pools

The Numbers Coach Helps Medical Practice Improve Profits

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The Company

Choice Care Occupational Medicine and Orthopaedics (“CCI”), founded by Dr. Ish Khan, provides a 21st Century practice model which blends the two specialties of occupational medicine and orthopaedics. Dr. Khan’s unique program is the only one of its kind in Georgia that has proven enhance the quality of patients’ medical care along with dramatic cost savings for its clients.  (Now part of U.S. Healthworks, CCI has six locations in metro Atlanta.)

Situation

Dr. Khan wanted to enhance his team’s financial management and reporting.  The CCI team was looking to create a platform to communicate the company’s key performance indicators (“KPIs”) that drive its financial results.

Solution: The Numbers Coach Financial Leadership Services

According to Dr. Kahn, the Numbers Coach (“NC”) financial leadership services were an “ideal” fit for developing CCI’s performance metrics.  NC developed a financial dashboard focusing financial drivers that provide visibility into the profits and cash flow critical to sustained growth of a business.  The dashboard offered both graphs and numerical charts to give an “at a glance” view of results.  In addition, TFI reviewed the company’s financial results each month to help the team identify areas of concern or improvement.

Results

NC effectively pulled together the required financial and non-financial data to complete a dashboard.  Each month TFI assisted with the monthly financial results for the dashboard.   More importantly, NC’s methodical approach to measuring and reporting financial results provided the CCI team with timely information to take actions on profitable activities for bottom line results.

“Mike has been an integral part of our team over the years.  His solid understanding of financial reporting processes and systems provided our company with the right tools to navigate our finances successfully.”

Dr. Ish Khan, founder/CEO

The Six Elements of Balanced Wealth

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For many successful entrepreneurs, wealth is measured in the most traditional medium: money. There’s enough money to support a chosen lifestyle, provide for loved ones and save for a comfortable retirement. There are even opportunities to enjoy some of life’s real pleasures.

Yet for every entrepreneur who is content with financial success, there’s another who wonders whether there isn’t more to life. In his book, Wealth and Happiness: Using Your Wealth to Create a Better Life, wealth advisor and author David Geller explores the feelings of emptiness that sometimes accompany business success.

Drawing on his experience as CEO of a prominent Atlanta wealth management firm, Geller describes people who are financially well-to-do, but find their lives unfulfilling. Geller himself struggled with such feelings following divorce. His clients often struggled with similar feelings after the death of a spouse or the loss of a business partner.

In coping with the loss of an important relationship, money is of little comfort. Incremental increases of income are not met by increased happiness. In fact, many people in that situation experience a negative correlation between increased wealth and their levels of happiness. That got Geller thinking about his clients’ situations, as well as his own. If their lives aren’t better at the end of the day, what’s the point?

 

A Holistic Approach

He began to research the notion of happiness, including Aristotle’s theory that “happiness is the meaning and purpose of life, the whole aim of human existence.” He learned that happiness is built on the foundation of a stable, balanced lifestyle. In particular, he identified six elements of wealth that are always present in stable, balanced lives as:

  1. Time
  2. Money
  3. Talents
  4. Body & Mind
  5. Wisdom
  6. Networks and Community

The key component is not money, but relationships (Networks and Community). The quality of a person’s most important relationships is the surest measure of happiness. When people commit to nurturing those relationships, the other elements of wealth seem to fall into place.

As a wealth advisor, Geller now believes his job includes managing a client’s mindset as well as his or her money. His findings led him to redefine the wealth management firm and put in place a system that would help clients pursue overall fulfillment and happiness. The firm’s approach is based on a model called Behavioral Wealth Management, which incorporates scientific research about decision-making and life events.

Geller also identified barriers that prevent people from using wealth to maximize their happiness. One of the most common is confusing pleasure and wealth. Activities that are pleasurable ignite your senses. True wealth, on the other hand, is about igniting your passions to make a difference in someone else’s life.

Personalization of behavioral wealth management is possible through use of tools that assess a person’s attitudes toward money and relationships. It’s a science-based approach to achieving stability in a client’s lifestyle.

If you see an inverse correlation between an increase in your wealth and your level of happiness, it may be time to rearrange priorities. Give us a call at (404) 353-2148 or send us an email, and we’ll discuss ways to restore your sense of a balanced life.

What Is the Balanced Scorecard? (And Why Should You Care?)

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By Michael Iverson

If a business advisor told you that more than half of the largest U.S. corporations used a particular management tool, chances are pretty good that you would be interested in using it for your business.   The balanced scorecard is, in fact, widely used by America’s largest companies. Editors of the Harvard Business Review named it one of the most influential business ideas of the past 75 years.

The purpose of the balanced scorecard is alignment of strategy with the daily activities of a business.  It was introduced as a performance measurement framework in the 1990s by two business professors — Drs. Robert Kaplan and David Norton. The idea is to augment traditional financial business metrics with strategic, non-financial performance measurements. In combination, the two very different kinds of measurements provide a more balanced view of a company’s performance, especially its progress toward achieving long-term, strategic objectives.

A Change of Focus

The balanced scorecard attempts to address a long-time shortcoming of U.S. businesses – their focus on attainment of quarterly earnings goals, while paying too little attention to building long-term value. By focusing on near-term earnings, which are easily measurable, American businesses often neglect investment in intangibles, the returns of which are more difficult to measure.

Focusing on past events causes companies to under-invest in important areas like product and process innovation, building and retaining employee skills, and improving customer satisfaction levels.  These intangibles contribute significantly to the long-term value of a business.  Companies create future value by investing in customers, suppliers, employees, processes, technology and innovation – the intangibles that matter today.

Companies can only improve management of their intangible assets if they integrate measurement of those intangibles into their management systems. This notion led to development of a management tool for describing, communicating and implementing strategy – the balanced scorecard.

The scorecard envisions a company’s Vision and Strategy at the center of a continuous feedback loop, surrounded by four perspectives, each with its own business metrics. A company collects and analyzes data relative to each perspective.

The Learning & Growth Perspective

Employee training, individual growth and company-wide improvement are hallmarks of great companies. Employees who embrace technological advances and mentoring become more productive. Their collective knowledge significantly enhances the company’s value.

The Business Process Perspective

Managers need to know how well the business is performing based on its internal processes. Are the internal processes allowing the company to produce quality products and services, while achieving incremental improvement? The metrics for this perspective are unique to each business and should be designed by managers who are intimately aware of both internal processes and customer needs.

The Customer Perspective

Perhaps the most important management concept of recent years is the realization that meeting, if not exceeding, customer expectations is a leading indicator of business success. Customers whose expectations are met or exceeded become extremely loyal, building business value. When expectations are not met, customers begin to look for other suppliers.

The Financial Perspective

Traditional financial analysis does provide useful information. Kaplan and Norton suggest that it is most useful when it encompasses risk assessment and cost-benefit measurements, and when it is balanced by data from the other three perspectives.

If you would like help in creating a balanced scorecard for your business, just give us a call at (404) 353-2148 or send us an email, and we will be happy to help!

Numbers Coach Crafts Financial Models for Brewing Company

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COMPANY
In 1993, Red Brick Brewing (RBB) started as one of the first craft brewers in Atlanta.  The Red Brick team is dedicated to providing the consumer with world class Southern beers and ales.  The consumer gets a consistently great-tasting beer from unique blends of hops and other ingredients.  The RBB team of dedicated people are passionate about brewing the best-tasting Southern beer.  (Red Brick Brewing rebranded back to their original name of Atlanta Brewing Company in 2018.)

SITUATION
In 2012, the Red Brick team was transitioning its financial management and reporting with the goal of creating a financial model that would communicate the company’s key performance indicators (KPI) and drivers of its financial results to management and investors.  However, the team quickly found that it was challenging to accomplish this goal on their own.

SOLUTION: The Numbers Coach Financial Leadership Services
The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing RBB’s customized financial model and metrics.  NC’s,Mike Iverson, created the model and also reviewed the company’s financial results each month to help the team identify areas of concern or improvement.

RESULTS
NC effectively pulled together the required financial and non-financial data to complete a customized financial model, providing insights for the team to do product and cash flow planning.  The model was developed with “what if” scenario planning capability.   This allows the team to see how changes to key metrics drive the financial results of the business.  The model also has the option to provide a rolling forecast for the team to get visibility on how they might finish the year given actual results to date.

According to RBB investor (and founder of North Highland Global Consulting) Dave Peterson:  “Mike at the Numbers Coach jumped in and set up a customized financial model that matched Red Brick’s business and key metrics.  His solid understanding of financial reporting and analysis provided our company with the right tools for financial planning.  We would highly recommend the Numbers Coach financial leadership services.”

For more information on Red Brick Brewing Company/Atlanta Brewing Company, visit https://atlantabrewing.com.

To learn more about the Numbers Coach financial leadership services, click here.

“Mike jumped in and set up a customized financial model that matched our business and key metrics.  His solid understanding of financial reporting and analysis provided our company with the right tool for financial planning.”  

Dave Peterson, Red Brick investor & founder of North Highland Global Consulting