Monte Zwang - cloudfront.net

7/3/2009
FINANCIAL PLANNING IN 2009
1/3 PLANNING, 1/3 REACTION, 1/3 PLANNING TO
REACT.
Monte Zwang
WHAT HAPPENED?
 Our current economic situation is like
tidal wave that has rocked us to our
core.
 We have been given a challenging test,
an opportunity to grow and navigate
through uncharted territory.
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7/3/2009
A LITTLE ECONOMIC HISTORY…
1797–1800; Recession, 1800–1807; No Recession, 1807–1814; Recession, 1814–1819; No Recession, 1819–1824;
Recession, 1824-1937; No Recession, 1837–1843; Recession, 1843–1857; No Recession,,1857–1860; Recession, 1860–
1873; No Recession, 1873–1879; Recession, 1860–1873; No Recession, 1873–1896; Recession, 1896– 1929; No
Recession, 1929-1939; Recession, 1939–1957; No Recession, 1957–1958; Recession,1958–1973; No Recession, 1973–
1975; Recession, 1975–1980; No Recession, 1980–1982; Recession, 1982–1990; No Recession 1990–1991; Recession,
1991–2001; No Recession.
2001–2003; Recession,
2003 – 2007; No Recession,
2007–present; Recession!
REMEMBER THE BUSINESS PLAN ?
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7/3/2009
Increased 337%
Increased 159.5%
Increased 100%
GROWTH IN THE NUMBER OF SPAS
AFFECTED REVENUE PER LOCATION
Dropped from $1.04M to $847K (15.6%)
Increased 82.3% from $60.69 to $110.66
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7/3/2009
ISN’T THIS HOW IT FEELS?
WHAT IS HAPPENING TODAY
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7/3/2009
HOW ARE WE REACTING?
REMEMBER THE BUSINESS PLAN !
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7/3/2009
MAINTAINING THE SANCTUARY WITHIN –
KEEPING THE OUTSIDE WORLD OUT.
It’s crazy outside.
Our Guest’s financial lives are in turmoil
The come to us for sanctuary
Our spas are the line in the sand.
Regardless of what is happening business-wise,
Our doors are where the outside world stops.
FINANCIAL
9-1-1
This market is unforgiving.
You are operating without a safety net.
Going forward without a budget is not going to provide
the targets you need to operate.
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7/3/2009
THE 6 NUMBERS YOU NEED TO KNOW
1.
2.
3.
4.
5.
6.
Breakeven Sales
Labor Cost
Gross Profit Margin
Overhead Expenses
Net Profit
Debt Service
THE PIECES OF THE PUZZLE
Net Profit
2,700
5%
Indirect Cost
15,000
30%
Other Direct
Cost
10,500
21%
Direct Labor
16,800
34%
Retail
Purchases
5,000
10%
Direct Labor
Retail Purchases
Other Direct Cost
Indirect Cost
Net Profit
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7/3/2009
BUDGET…..
 Identify Operational Issues
 Forecast Future Cash Needs
 Monitor and Adjust Your Plan In Real Time
 Evaluate Financial Options.
 Keeps You On Track
 Understand Where You Are Financially
 Look At All Options Honestly.
 Bring The Pieces Of The Puzzle Into Balance
 Adjust The Budget To The Reality Of Your Situation
USE YOUR TOOLS
YOUR POINT OF SALE SYSTEM…..





Sales Planning
Cash Control
Daily Labor Cost
Inventory Control
How you did yesterday.
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7/3/2009
BREAKEVEN IS VITAL
If you don’t know what it is,
you can’t hit it
GLOSSARY
breakeven sales
1. minimum sales volume required (cash collected) every month to cover all direct costs,
indirect costs and debt without experiencing a financial loss.
2. discussed in terms of number of treatments (services) required
3. no one is in business to breakeven, we are in business to exceed breakeven.
4. the lower your breakeven the longer you can weather this climate .
5. overhead expenses + debt service ÷ gross margin = breakeven
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7/3/2009
DIRECT COSTS – LABOR COST
 What is your labor cost?
 Evaluate your compensation plan – It absolutely cannot
exceed 42% of Service plus Product sales.
 Front Desk labor needs to be less than 10% of Service plus
Product Sales.
 Are tools in place to monitor them?
 Daily labor reports from your POS System
GLOSSARY
direct costs - cost of sales
1.
2.
3.
4.
costs that directly relate and fluctuate with sales
largest category of expenses on your Income Statement.
should be no more than 30 – 35% of Service plus Product Sales
examples
a. direct labor
b. subcontractor (1099) labor
c. front desk labor
d. payroll taxes
e. employee benefits
f. back bar, professional product
g. operating supplies
h. inventory purchases
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7/3/2009
GROSS MARGIN – PROFIT MARGIN
Is there at least a
30% to 40% margin in your business?
GLOSSARY
gross margin on sales, gross profit margin
1. Service plus Product sales (or collections) (minus/ - ) direct costs
2. first indication of whether you are making money or not.
3. expressed as a percentage of Service plus Product Sales.
4. should be 30% to 40% of Service plus Product sales
5. must be adequate to pay overhead and debt service
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7/3/2009
YOUR LEASE & LANDLORD
 The bubble has burst on
commercial real estate.
 Market rate when you signed
you lease is not market rate
today.
GLOSSARY
indirect costs – overhead
1. costs that do not fluctuate with sales
2. occur every month
3. should not be more than 35% of Service plus Product Sales
4. examples
a. rent
b. utilities, telephone
c. insurance
d. office supplies
e. repairs & maintenance
f. advertising & promotion
g. administrative salaries & payroll taxes
h. professional fees
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7/3/2009
PRE-EMPTIVE RE-NEGOTIATION
Dealing With Debt
Debt is…
Accounts Payable, Notes, Loans, Credit Cards, Leases,
Lines of Credit
Evaluate Debt Separately from Business Operations.
If you can’t afford it, don’t buy it.
Any contract, lease, bank note, equipment lease and credit card payment
can be re-negotiated
Debt service should not exceed ½ of Net Profit
(Working Capital Before Debt Service)
W ORKING CAPITAL - AM I PROFITABLE?
M ONEY IN: SALES (COLLECTIONS)
(Minus)
M ONEY OUT: DIRECT COSTS
Equals
GROSS M ARGIN
(Minus)
M ONEY OUT: INDIRECT COST
Equals
WORKING CAPITAL (BEFORE DEBT SERVICE)
(NET PROFIT , FEASIBILITY)
WORKING CAPITAL (B EFORE DEBT SERVICE)
Plus
B EGINNING CASH POSITION - (TOTAL OF ALL A CCOUNTS)
(Minus)
MONEY OUT: DEBT S ERVICE
Equals
WORKING CAPITAL AFTER DEBT SERVICE
(THIS IS WHAT YOU GET TO KEEP.)
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7/3/2009
 Blue sheet
“The rumors of my death have
been greatly exaggerated “
– Mark Twain
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7/3/2009
RECALIBRATION
It's all about balance.
TOUGH LOVE: THE DOLLAR HEART
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7/3/2009
INVOLVE YOUR TEAM
TIMELY REVIEWS
DAILY MEETINGS
AFFORDABLE, LUXURY
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7/3/2009
YOUR EXIT IS PART OF PLANNING
YOU BOUGHT THE TICKET . . .
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7/3/2009
Throughout the conference,
I am available to meet with you,
to work on your business
and answer any questions.
MONTE ZWANG
206.963.1017
Wellness Capital.com
[email protected]
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