What the CEO Wants You to Know

Session TU202

Presented by:
Kevin Cope
CEO of
Acumen Learning, LLC




Learning Objectives:

1) Apply the five elements of all successful businesses to achieve greater results in your
business and role.

2) Align your actions, priorities, and initiatives with those most critical to your business and
function.

3) Create action plans in your function to impact Cash, Margin, Velocity, Growth, and
Customer.

Building Business

Acumen
tm
Phone: (877) 224-5444 Email: mail@acumenlearning.com Website: www.acumenlearning.com



When it comes to running a business successfully, the street vendor and the CEOs of some
of the worlds largest and most successful companies talk and think very much alike.
-Ram Charan-










Definition of: Acumen:

-Quickness of perception
-Keen insight
-Mental acuteness

So you can make, Better, Smatter, Faster, Decisions!

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Business Can be Tough!

Only 5-10% of business start-ups survive past 5 years.

Only 28% of CEOs hold their jobs for 5 years or longer.

70% of merger and acquisition activity do not live up to expectations.






Business Acumen Elements




























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4






CASH

Definition of Cash:

An item on the balance sheet that reports the value of a company's assets that are cash or
can be converted into cash immediately; the most liquid of assets.


Definition of Cash Flow:

The cash that is generated in a period of time, usually a year, from a companys
operations or core business.




Cash is a companys oxygen supply!



How Do You Impact CASH or CASH FLOW?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________




Write down a specific action you will take to positively impact CASH or
CASH FLOW.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________





MARGIN

Definition of Margin:

Margin is what is left over after you have paid your expenses. It can be expressed in
dollars or as a percent. The types of expenses you deduct determine which margin you
are calculating.

The most common margin calculations are gross and net profit margin.




Every business must earn a return that is greater than the cost of using other peoples
money.
-Ram Charan

No Margin, No Mission.
-Stephen Covey




Sales (Revenues) $100 100%
- Costs of Goods Sold $ 55 55%
= Gross Margin $ 45 45%
- Expenses and Taxes $ 31 31%
= Net Profit Margin $ 14 14%



















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MARGIN (cont.)

How Do You Impact MARGIN?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________


Write down a specific action you will take to positively impact Margin.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________


VELOCITY

Definition of Velocity:

Velocity means speed. How fast and how hard can you make your assets work to make
more money? Assets include property, plant, equipment and cash, etc. Although people
are not found as an asset on your balance sheet, they are often the key in how well your
companys assets are utilized.

The more you increase an assets ability to make money, the higher the velocity


How Do You Impact VELOCITY?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________


Write down a specific action you will take to positively impact
VELOCITY.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________

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GROWTH



Definition of Growth:

Business Growth can be measured in many ways, but the three most common are Sales,
Net Earnings and Earnings per Share.

Many CEOs focus on this element more than the others as shareholders tend to value this
most.



Why is Growth so important to business?

In todays business world, no growth means lagging behind in a world that grows every
day

Investors expect it, employees are more energized by it, customers are generally attracted
to it and executives are measured by it.




How Do You Impact GROWTH?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________



Write down a specific action you will take to positively impact
GROWTH.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________



CUSTOMER

Definition of Customer:

The end user of your products and services is the most common way to identify your
customer although it may also be defined as an internal function you serve.

In the long run, anticipating customers future needs is as important as exceeding their
expectations today.


How Do You Impact your CUSTOMERS?
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________


Write down a specific action you will take to positively impact your
CUSTOMERS.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________






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How Will I Remember These?
Nucleus
Of
Business
Cash
Margin
Velocity
Growth
Customers











Cash Example
2002 2003 2004 2005 2006
Revenues $28,365 $32,187 $36,835 $39,788 $44,282
Cash & Equivalents $38,652 $49,048 $60,592 $37,751 $34,161
Microsoft

Margin Example
Tot al Sal es $9,086 100% $17,171 100.0%
Wages 3,052 34% 4,128 24%
Fuel 2,138 24% 4,319 25%
D&A 515 6% 1,276 7%
Landing fees 495 5% 865 5%
Commissions - - 888 5%
Maintenance 468 5% 735 4%
Food Service - - 328 2%
Aircraft Rentals 158 2% 316 2%
Contr. Ser. & other 1,326 15% 4,258 25%
$8,152 89.7% $17,113 99.7%
Opeart i ng Inc. $934 10.3% $58 0.3%
Interest net - 870 5%
Misc 151 2% 19 -
Taxes 291 3% - -
Net Income $499 5.5%
Tot al Op Exp.
Company A Company B
2006 2006
*-$762 -4.4%
*-$6,203 Incl udi ng reorgani zat i on cost s


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Velocity Example
Company A

Company B
2006 2006
Sales $55,908 $3,981
Net Profit Margin 6.0% -0.2%
Inventory Turnover 83.7 22.5

Growth Example
Revenues
$15,000
$30,000
$45,000
$60,000
$75,000
$90,000
$105,000
$120,000
$135,000
$150,000
$165,000
$180,000
$195,000
$210,000
$225,000
$240,000
$255,000
$270,000
$285,000
$300,000
$315,000
$330,000
$345,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
i
n

m
i
l
l
i
o
n
s


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Nordstomvs. Dillards, J C P., Target, Sears Hld.

















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Pop Quiz

+ You are confidant you know the answer

? If you might know the answer

- If you dont know the answer



For your most recent fiscal year end: + - ?

1) How much cash was on hand? __________________

2) What was cash from operating activities? __________________

3) What was total net income? __________________

4) What was the net profit margin %? __________________

5) What were total sales? __________________

6) What was the inventory turnover? __________________

7) What was your return on assets (ROA)? __________________

8) How much are sales growing year over year? __________________

9) How much is net income growing year over year? __________________

10) How much is EPS growing year over year? __________________

11) How do all of the above compare to your competition? __________________

Total Score __________


+ =1 Point ? = Point - =0 Points


Finding the answers to the Pop Quiz










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Component
Income
Statement
Balance
Sheet
Statement of
Cash Flows
Calculation Enter Results Here Metric
Cash & Cash
Equivalents
None $ Cash
Cash From
Operations
None $
Cash from
Operations
Net Income

None $ Net Income
Total
Revenues
%
Net Profit
Margin %
Total
Revenues
None $
Revenues /
Sales
Cost of Goods
Sold
Inventories

Net Income

Total Assets

Total
Revenues
%
Revenue / Sales
Growth
Net Income

%
Net Income
Growth
Earnings Per
Share
%
Earnings Per
Share Growth
From Internal Data or Market Research Customers
G
r
o
w
t
h

(
%
)
%
C
a
s
h
Locati on in Financials
Return on
Assets (ROA)
M
a
r
g
i
n
V
e
l
o
c
i
t
y
Inventory
Turnover
Last Year's EPS
Net Income

Inventories

Cost of Goods Sold

Last Year's Revenues

This Year's Revenues

- 1 100 =

This Year's EPS

Total Revenues
- 1 100 =
100 =
=
Total Assets

Net Income
Last Year's Net Income

This Year's Net Income

- 1 100 =
100 =
Navigating an Annual Report






Which of the five elements does your CEO
emphasize:

Cash?
Margin?
Velocity?
Growth?
Customers?




























CEO Urgency Continuum
URGENT NEAR TERM LONG TERM
CASH
MARGIN
VELOCITY
GROWTH
CUSTOMERS


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My Challenge to You


Answer the 11 questions for your organization.

Follow through on your action items.

Listen to your earnings conference call and read your annual report.

Build your business acumen skills.







Where to Find Free Information


www.nasdaq.com
www.reuters.com
www.finance.yahoo.com
www.finance.google.com









The most successful business leaders never lose sight of the basics. Their
intense focus of the fundamentals of business is, in fact, the secret to their
success. Like the street vendor, they have a keen sense of how a business
makes money.

-Ram Charan




In Summary

Every business is the same inside and focuses on 5 basic elements. These elements
are what your CEO thinks about and has to manage on a regular basis:

Cash an item on the balance sheet that reports the value of a company's assets that are
cash or can be converted into cash immediately; the most liquid of assets. Cash in-
flows arise from three activities - financing, operations or investing. Cash out-flows result
from expenses or investments.

Margin is what is left over after you have paid your expenses. It can be expressed in
dollars or as a percent. The types of expenses you deduct determine which margin you
are calculating.

Velocity means speed. How fast and how hard can you make your assets work to
make more money?

Growth can be measured in many ways, but the three most common are Sales, Net
Earnings, and Earnings per Share.

Customer the end user of your products and services. May be an internal function
you serve as well as the end consumer.

5 Elements of Business
Nucleus
Of
Business
Cash
Margin
Velocity
Growth
Customers
























The 5 elements are interdependent in naturewhen you impact one, there is an affect on
the others. What are you doing to improve these for your company?


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Telephone: (877) 224-5444 Email: mail@acumenlearning.com Website: www.acumenlearning.com