Budgeting, Forecasting, & P&L Talking Numbers Knowing how to - PowerPoint PPT Presentation

Budgeting, Forecasting, & P&L

Talking Numbers Knowing how to read ( or getting comfortable with reading ) budgets, P&L’s and other financial reports gives you a leg up. Managers who learn how to understand and interpret financial reports will progress further in their careers.

Talking Numbers In order to learn, take the initiative! Go through the proper channels at your organization to seek out this information. Your controller is your friend!

Budget Basics The biggest challenge of budgeting is that we have limited resources – and unlimited wants.

Budget Basics Relate the budgeting process to something you already know: ➢ Personal Budget ➢ Your paycheck is your NET Revenue (top line) ➢ Your Operating Expenses are your mortgage, electric, gas, water, clothing, entertainment, etc. These may include items that you incur every month (mortgage) - or items that are unexpected or infrequent (car repair, Louboutins). Your “ Bottom-Line Profit ” (or loss) = your paycheck – operating expenses

Budget Basics From your GM, to your Controller, to your Department Heads to your Sales People… YOU ARE A TEAM .

Budget Basics ➢ Do you get your annual budget from Corporate? Or is it self-defined? ➢ Do you get an annual percent increase? Or a Hard Dollar increase? ➢ What are the Key Focus Areas as directed by Corporate Initiatives?   Integrated Marketing/NTR Cluster Opportunities   Digital Political   Local Automotive   National Event/ On-Site Sponsorships   New Business New Sponsorships   Multi-platform Sales Other Synergies

Budget Basics See a Budget as a “ Road Map ” When you plan a road trip, you think Big Picture : ➢ “ Where do I ultimately want to go? ” ➢ “ What route will I take to get there? ”” ➢ “ What if I go the wrong way? ” ➢ “ How will I course correct? ” Budget should be an educated guess

Budget Basics Think “ Big Picture, ” but start small Create a “ 3-Liner ” ➢ NET Revenue line ➢ Operating Expenses line ➢ Profit/ (Loss)

Budgeting Basics – Start with Assumptions ➢ Market Growth • Historical Data • Xray • Miller Kaplan ➢ Competitive Landscape • Anticipating a new competitor? • Internal Format Changes • Other stations in the marketplace • Talent considerations ➢ Ratings Goals and Implications

Assumptions (continued) ➢ Pricing Strategies • What is your typical rate of sellout? • What are your inventory challenges? ➢ Staffing Concerns • Is the staffing level appropriate? • Are there performance concerns? • Review and strategize plan for individual AE enterprises ➢ Economic Environment • Retail/Auto sales as indicators ➢ Expense Considerations • Fixed costs/contractual increases

Budgeting Basics – End with Threats/Concerns/Keys to Success ➢ Threats & Concerns • If Station X Flips formats • Pricing strategy at Y Company could make competitive landscape difficult • Risk of losing John Doe ➢ Keys to Success • I really need those dollars in my digital budget to support this level of revenue growth • New sales assistant is necessity to support overloaded sales staff

So….how do we know how we’re doing?

So….how do we know how we’re doing? On a very basic level, a P&L is just a summary of the actual financial activity of your business: Revenue Less: Expenses Profit

Why Prepare a P&L? It answers the question, “Are we making money?” • It’s reviewed by the Controller/Market Manager/DOS regularly to monitor operations • It supplies Senior Management with timely and important information regarding revenues and expense • It allows them to determine if adjustments might be necessary to recoup losses or decrease expense • It provides data by which managers and investors can evaluate your company’ s profitability

What Comprises a P&L? Sample Radio Station P&L – JULY 2018 Revenues BUDGET ACTUAL VARIANCE Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311 National Revenue $ 500,684 $ 356,744 $ (143,940) NTR $ 237,540 $ 215,600 $ (21,940) Digital $ 103,450 $ 156,930 $ 53,480 1) Revenue “ Top Line ” Network $ 53,263 $ 50,000 $ (3,263) Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648 Local Agency Commission $ 187,757 $ 201,655 $ 13,898 National Agency Commission $ 75,103 $ 53,512 $ (21,591) Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341 Operating Expenses Technical $ 103,874 $ 163,980 $ (60,106) 2) Operating Expenses Programming $ 459,336 $ 452,676 $ 6,660 Promotions $ 75,689 $ 80,555 $ (4,866) Sales $ 939,255 $ 1,034,865 $ (95,610) Digital $ 43,925 $ 44,966 $ (1,041) G&A $ 387,215 $ 401,742 $ (14,527) Total Expense $ 2,009,294 $ 2,178,784 $ (169,490) 3) NET Profit (Loss) Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149) “ Bottom Line ” Profit Margin 33.14% 29.82%

The P&L is a great way to review what’s already happened… But how do we anticipate and plan for future results? FORECAST!

Forecasting Basics ➢ Revenue • Ideal – 90 days • Real – 30-60 days • Pending, Activity, Booked Business • Changes in Marketplace ➢ Expense • What has changed since our budget? • Where is our revenue performance? ‐ Revenue-related expense ‐ Spend More/Pull Back • Any items we know are going to be different?

FORECAST Revenues BUDGET FORECAST VARIANCE Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311 National Revenue $ 500,684 $ 356,744 $ (143,940) NTR $ 237,540 $ 215,600 $ (21,940) Digital $ 103,450 $ 156,930 $ 53,480 Network $ 53,263 $ 50,000 $ (3,263) Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648 Local Agency Commission $ 187,757 $ 201,655 $ 13,898 National Agency Commission $ 75,103 $ 53,512 $ (21,591) Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341 Operating Expenses Technical $ 103,874 $ 163,980 $ (60,106) Programming $ 459,336 $ 452,676 $ 6,660 Promotions $ 75,689 $ 80,555 $ (4,866) Sales $ 939,255 $ 1,034,865 $ (95,610) Digital $ 43,925 $ 44,966 $ (1,041) G&A $ 387,215 $ 401,742 $ (14,527) Total Expense $ 2,009,294 $ 2,178,784 $ (169,490) Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149) Profit Margin 33.14% 29.82%

Budgeting/Forecasting/P&L - Takeaways ➢ Budget = Educated Guess • Make your Controller your friend • Work with your team on goal and strategy • Use Assumptions (history, Miller Kaplan, other data) to create your road map • Have a plan for the unplanned ➢ Forecast & P&L • Be aware of your performance • Be educated about changes that will shift your projections • Work with your team to resolve issues quickly

Budgeting, Forecasting, & P&L If you need any additional tips, guidance, etc. Erika Sylvia Feel free to reach out to me at any time! Market Controller, Emmis Communications esylvia@indy.emmis.com