Petrick, continued from page 16 Deciding on Realistic Assumptions for Projections/Targets Before we attempt to calculate goals and targets for next year we need to get clear and realistic about our assumptions for the business. Since we just spent time analyzing our most recent performance we should be able to capture some specific assumptions upon which we will build our projections. Here are some assumptions we made for this sample business: ö Sales will continue to fall ö Margins will continue to shrink ö All the “obvious/low hanging” expense cuts have been made already ö We will not be able to borrow money due to our lack of profitability ö Vendors will not likely offer more friendly terms ö WE ARE COMMITTED TO TURN THIS BUSINESS AROUND! Strategies to Survive
Helping Your Business Bloom! "Fibre Federal welcomes me. When I walk in, I feel like I matter and they actually treat me like a person. Even if I have twenty things to do, they’re not rushing me to get onto the next member. I feel like I’m being taken care of and that really matters.“ -Jason Vorse, Owner Pollen Floral Works Bring your business to Fibre Federal for Business Plus Checking, Business Online Banking, remote deposit, low-cost loans, and incredible member service.
360.423.8750 1.800.205.7872 www.fibrecu.com
Federally insured by NCUA
Banking Made Easy
• Reduce the Debt-to-Worth Ratio • Increase Inventory Turnover to improve cash flow • Continue to reduce expenses FOCUS ON WHAT YOU CAN CONTROL! STEP G Start with the ratios – fill in reasonable targets that you determine will make the most positive impact on your business; in this case the business has decided to reduce the Debt-to-Worth ratio; and increase Inventory Turnover. So we set target ratios that we believe are attainable. STEP H Calculate COGS and inventory based on the target ratios. STEP I Select sales level based on assumption of falling sales and reducing margins – these allow the other components to be calculated to complete your targets. We plan to cut expenses 10 percent – so we can calculate the P&L based on that. This effort can seem challenging but once you’ve started to examine your business you will quickly learn much of what you assumed is not supported by the numbers. If you want help taking the next step in applying these methods to your business just contact me for a confidential appointment to discuss your situation. Our advisory services are provided at no cost to you thanks, in part, to a cooperative agreement between the US Small Business Administration and Washington State University. This article was compiled using multiple sources, including those from the Retail Owners Institute (retailowner.com) by Jerry Petrick, MBA, and Certified Business Adviser with the Washington State University Small Business Development Center (SBDC) in Longview. Jerry provides nocost, confidential business advisory services by appointment. He can be reached via email jerry.petrick@wsbdc.org
July 2018 | Kelso Longview Business Connection | 17