Decision Making is Easy!

Feb 06, 2024 by Roger Scherping



I met once with a small business owner in the apparel business. His business was just a couple of years old, and it had yet to turn a profit. While there had been some good organic growth, the growth hadn’t been fast enough. He had been forced to put lots of money into the business that year, and he felt it was time to make a decision.

He said his options were:

  (1) Make the additional effort to add customers to get to the point where it’s breaking even,
  (2) Add new products that would increase sales to the existing customers and turn a profit,
  (3) Bring in a partner who has both equity to invest and industry expertise to share,
  (4) Just sell the business.

The owner had already identified these options before we met, but even his gut didn’t tell him which was his best option. He turned to me for help.


Modeling the Future in Decision-Making

Only after talking with me did the first step to finding the answer become clear to him. The answer, of course, was to create a business projection that allowed us to model and quantitatively compare the expected financial results of each of his various options. Since he didn’t have the necessary finance background or spreadsheet skills to do this on his own, I showed him ProjectionSmart.

Following the ProjectionSmart 1-2-3 approach, the first thing I needed was 12 months of his financial history. Fortunately his financial reporting was very well done, and it even included enough detail for us to break down sales and gross margin by his different sales channels.

The second thing we did was prepare a detailed budget as things stood for the next 12 months. We broke it down by sales channel to calculate the profit that could be generated by each channel.

He had to develop honest answers to questions like:
                                                                                                                        

  • Can he really increase sales organically?
  • What would it take to drive additional sales?
  • What sales channel has the most potential?
  • What would it cost to generate those sales?
  • Does he need to research and add new products to the line?
  • How long would that take, and what would it cost?
  • Does he need to add additional staff?
  • What value could a partner bring besides some cash to invest?
  • What could the owner expect to get for the business if he sold it now?

We discussed these questions, made assumptions and tested them, and came up with our sales and gross margin estimates. We took his answers to these questions and incorporated the sales and cost estimates into the financial model. He also had good control of his overhead expenses and was able to accurately predict them.

Finally I asked him a series of questions about his business. What equipment purchases did he need to make? What were his loan payments per month? What did he expect his inventory levels to be each month? He understood his business well, and these questions were easy for him to answer.

That’s the beauty of ProjectionSmart. You are not expected to be an accountant! You just answer straightforward questions about your business, questions that will not be difficult for you to answer, and ProjectionSmart takes it from there.


Decision Making is Easy!

ProjectionSmart took all of his information and prepared first a baseline financial model for us. We then worked through each of the different options, modeling each one, showing us the costs and the expected profit from each. When we were through, his best option became quantitative and clear to him.

Someone once told me, “Decision making isn’t hard. Decision making is easy. It’s getting the necessary information that is hard. How hard would it be to pick the right stock if I gave you a copy of the Wall Street Journal for one year from today?”

ProjectionSmart helps you get the necessary information to make decision making easy.

I’ve had small business owners who have used ProjectionSmart tell me things like, “This is my business’s crystal ball” and “ProjectionSmart is like my digital Controller.” One experienced business owner even told me, “I did even know it was possible to do an analysis (a projection) like this.”

These comments are all from business owners who review their financial statements every month to understand where they’ve been, and they were all amazed at the insights that ProjectionSmart gave them into where they are going.

ProjectionSmart can be your clients’ digital Controller. Let it help you help them stay on top of their business and keep them in control. They will be able to anticipate problems, always know where their cash is going to be at, and quantitatively analyze their business when it’s time for a big decision that can’t be answered by gut instinct.


Do a Prediction
                   
How do you help your clients see their financial future? I believe there is not a better service a trusted financial advisor can provide to their clients.
                           
If you’ve ever created a spreadsheet financial model to do a prediction, you know what is involved in capturing history, creating a budget, and determining what other plans the company has and then creating a multi-tab spreadsheet that creates an income statement, balance sheet and cash flow statement. You worry about whether there is a formula error somewhere or a bad assumption that drives an erroneous result.
                                                         
The good news is that at ProjectionSmart we’ve eliminated the spreadsheet for you and put it in a quick and simple-to-use online tool! Instead of concentrating on cells and formulas, you just concentrate on your inputs and the results. So ditch your spreadsheet!
                                                           
When you use ProjectionSmart every month with your clients, maybe you are able to bill for an additional hour create their prediction, or maybe you bill them an additional fee for their prediction. It’s up to you.
                                                
With a monthly prediction, your clients will be more successful and more comfortable with their numbers. They will be anticipate and avoid problems, leverage resources more effectively, make more quantitative business decisions, and feel much better about their business’s future – all because of you!

On your side, you will increase your monthly revenue, have happier and longer-term clients, help your clients be more successful, and differentiate your practice.
                                         
After all, who doesn’t want happier and more successful clients and more revenue? Let us help.

Here’s a video to show you how easy ProjectionSmart is to use.                                                                               
                                                                                                                       
Try out the new ProjectionSmart here.


 

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