Business Planning in Uncertain Times For Vermont Specialty Food - PowerPoint PPT Presentation

Business Planning in Uncertain Times For Vermont Specialty Food Association & Vermont Retail & Grocers Association April 3, 2020 Bryan Ducharme www.venture7advisors.com (802) 489-7700 1

This is different Strong economy deliberately shut down to save lives. Unprecedented government support. Long-term economic and psychological impact. www.venture7advisors.com (802) 489-7700 2

Unprecedented Business Uncertainty Decisions are inherently emotional. Analytical planning tools can help. www.venture7advisors.com (802) 489-7700 3

Step 1 – survival How long can you last under various revenue, spending and investment scenarios? Manage cash flow aggressively. Take advantage of any credit available to you. Reduce expenses aggressively. www.venture7advisors.com (802) 489-7700 4

13 Week cash flow forecast Source: Marty Mooney of Equity38, published on CFO.University www.venture7advisors.com (802) 489-7700 5

Data-driven decision making Predict Adjust Measure A detailed understanding of the business. What-if analysis. Bring hard data into an inherently emotional process. Questions? www.venture7advisors.com (802) 489-7700 6

Adapting your business model post-covid-19 Economic headwinds. Geopolitical instability? • Unemployment and reduced discretionary spending. • Budget deficits, higher taxes, slower growth. • Changes in business and consumer behavior. Acceleration of digital vs. in-person business. • Remote work policies. • Distance learning. • Telemedicine. • Ecommerce. • Changes in medical systems and availability? • There will be opportunities too. Migration away from dense cities? • Hiring flexibility. • Low interest rates. • Government stimulus spending. • Distressed equipment sales. • Business acquisition opportunities. • www.venture7advisors.com (802) 489-7700 7

Financial Sensitivity “What If” analysis Testing business assumptions. Assumption Selling price per unit $12 Variable cost per unit $5 Fixed Cost per year $200,000 Forecast sales (units) 50,000 www.venture7advisors.com (802) 489-7700 8

Financial Sensitivity “What If” analysis Assumption Forecast Selling price per unit $12 Revenue: $600,000 Variable cost per unit $5 Variable Costs: $250,000 Fixed Cost per year $200,000 Fixed Cost: $200,000 Forecast sales (units) 50,000 Profit: $150,000 What if your assumptions are off? www.venture7advisors.com (802) 489-7700 9

Financial Sensitivity “What If” analysis Assumption Assumption (Prediction) (10% worse) Selling price per unit $12 $10.80 Variable cost per unit $5 $5.50 Fixed Cost per year $200,000 $220,000 Forecast sales (units) 50,000 45,000 What’s the impact of each change in assumption? www.venture7advisors.com (802) 489-7700 10

Financial Sensitivity “What If” analysis Impact of changing one variable by 10%. Assumption Forecast Profit Difference (10% worse) Profit (vs. $150,000) Selling price per unit $10.80 $90,000 -40% Variable cost per unit $5.50 $125,000 -17% Fixed Cost per year $220,000 $130,000 -13% Forecast sales (units) 45,000 $115,000 -23% www.venture7advisors.com (802) 489-7700 11

Financial Sensitivity “What If” analysis Advantages • An easy way to test business model assumptions. • Identify the assumptions with the greatest impact on profit. Limitations • Aggregate level data may not reveal all issues. • This approach can only test one assumption at a time. Questions? www.venture7advisors.com (802) 489-7700 12

financial Modeling Multi-variable “what if” testing & financial projections. Revenue Projections • Product/Category Volume • • Price Income Statement Cost of Goods Sold Balance Sheet Volume • Raw materials • Cash Flow • Equipment • Labor Cash timing AR • AP • Investment • www.venture7advisors.com (802) 489-7700 13

financial Modeling – Example spreadsheet Management Buyout of a Consulting Company (simplified) Projected various scenarios • Business improvement ideas • Deal value / negotiation • Deal structure • Operating performance • Focus on “Rev Worksheet” • Staff • Billing rate • Utilization • Direct vs. indirect labor www.venture7advisors.com (802) 489-7700 14

financial Modeling EXAMPLE: Strategic Pivot Fast growing manufacturer of specialty tools. • Bad experience with vendors. • Decision to make parts in-house. • Growing factory with CNC machine tools & staff. • Just began $3 million capital raise for new factory. Then COVID-19 happened. Revisited all assumptions • Vendors are hungry (including big ones). • Make key parts and source the rest. • Postpone factory by 1 year or more (look for deals). • Increase revenue 2.5x in current footprint/fixed costs. • Owners equity forecast to be almost twice as high in 3 years. Complete strategic pivot planned in about 3 weeks with business modeling! www.venture7advisors.com (802) 489-7700 15

Business Planning in uncertain times Predict Adjust Measure Survive by preserving cash and securing additional capital. Test your business assumptions with sensitivity analysis. Complex plan changes call for more complex financial modeling. www.venture7advisors.com (802) 489-7700 16

Larry Scott Bryan Chernicoff Hardy Ducharme Partner Partner, Managing Partner Creative Director Master Entrepreneur • Co-founder, Kodiak Group • Co-founder, Kodiak Group • Founder, New England • Founder, GreenHeart Global • Founder, TrueNorth Overshoe (NEOS) • Founder Windhorse • Founder, Ulu Boots Construction • CEO, Senix Corporation • Founder, Linckia Communicatons • Award-winning designer & • Founder, Venture 7 Development musician Advisors. www.venture7advisors.com (802) 489-7700 17