Transforming Privately Held Firms: Proven Strategies from a CFO's perspective | Blake Barnett | Lunch & Learn

Barnett & Associates, LLC
Transforming Privately Held Firms:
Proven Strategies from a CFO’s Perspective
June 23rd, 2017
1

Today’s Agenda
• A brief background on myself
• Key Reasons why Private and Family owned firms succeed
• Tool and Strategies that consistently deliver improved business
performance
• Characteristics of Firms at an Inflection Point
2

Learned Best Practices from Some Good Retailers

Background Summary
● Strategic Planning
Learned Best-Practices from Top-Tier
Multi unit, retail firms
● Investing in your team:
→ Reward & Recognition
→ Clarify Roles & Respon.
→ Coaching and Mentoring
● It’s all about Relationships: Cross-
functional partnering for results
● Develop and Implement IT systems that
both Support Ops. and Enable Strategy
Application of the Learnings
in Private & PE firms
● There is no substitute for a Road Map to success
● More powerful than the other three
combined
● Organizations can absorb X change, not more:
→ PE owned firms are HIGHLY situational
→ PE (and CEO) Support is everything
● The Culture of the firm defines the firm
4

Best Practices Learned from Corporate America
Company # of Units Rev $B Accomplishments
Unocal 1,500 $5B ● Partner w/ D&T to design and Impl. Custom
IT solution for over 000’s of Fuel deliveries/yr.
→ Error rate from 18% to < 1%
● Partner w/ McKinsey to design micro pricing
zones & algorithms:
→ Manage daily pricing activity. 1¢/day = $20M/yr.
Taco Bell 5,000 $5B ● Lead first ever regional pricing approach
→ $MMM of incremental profit (we all bonused!)
● Partner with Mktg. on Product Pipeline
→ Analyze test market results of new items: Chulpa, GSB
● Develop the first Balanced-Scorecard: still in use today
Albertson’s CA 500 $9B ● CFO for California:
→ Identified & focused the Org. on Four key strategic initiatives
→ Rebuilt the Finance & Accounting Teams
→ Implement daily scorecard to track Labor
5

Today’s Agenda
performance
8

Experience with many Ownership models over the last 10 years
Combined
# Sales
A. Founders sold to PE 3 $900M
C. Entrepreneurial/Angel Investor 2 $175M
>$1.4B
B. Family Owned/Private 2 $325M
9

Founders Sold to PE: Translating Best-Practices
Translate Best-Practices into specific solution:
How many tools do you have in your tool-box?
Annual Sls. Business Ownership Solutions Implemented
$600M Multi-Unit PE ● Design & Impl. Daily scorecard
Retailer ● Implement period P&L reviews with each Category Mgr.
● Implement new debt and Treasury structure
$150M Importer of PE ● Rebuild Finance and Accounting teams
after-market Auto ● Created an FP&A function
parts ● Implement ERP – Redefine core processes
$150M Multi-Unit, PE ● Design & Implement weekly scorecard
Multi-State ● Improve monthly analytics; involve Ops. in P&L reviews
Operator ● Renegotiate insurance lines
10

Family/Private Owned: Translating Best-Practices
$225M National Private ● Implemented two new IT systems – Reengineer core processes
Retailer ● Introduced forward planning tool/approach
$100M Restaurants & Family ● Implemented and ERP system – Reengineer core processes
other ● Implemented weekly scorecards
● Helped create the FP&A Function
11

Entrepreneur/Angel: Translating Best-Practices
$100M Multi-Unit, Angel ● Partner with CEO to ID 3 – 4 key Strategies
specialty retailer ● Rebuild Finance and IT teams
● Outsource Accounting (low value added task)
$ 75M Multi unit Entrepreneurial ● Work with CEO on restructuring Options
retailer ● Partner with Controller to improve Treasury and Close
● Improve basic IT security
12

Developing a Framework to understand successful firms:
- What drives their success?
Business Proposition
- Maniacal focus on Sales
- Bold/Risk Taker
- Exploited a Niche
- Passion for the Business
Culture/Process
- Autocratic Mgt. style
- Family members involved
- Structured HR processes:
annual reviews, etc.
- Closely guarded financial
info. ‘Need-to-Know’
PE Purchased Firms
$600M $150M $150M *
* ‘Mission’ Driven Company, which possesses a very unique culture
Family Owned/Private
$100M $225M
Angel/Entrepreneur
$75M $100M
13
Highly Applies Moderate Application Low Application

Today’s Agenda
performance
14

Characteristics of Firms at an Inflection Point
• Founder/Owner sold; much less involved in day-to-day Ops.
• Long Tenured Team
• IT Systems dated or past end-of-life
• A great deal of data; little actionable information
• Director of IT spends 2 to 3 days/month reviewing phone bills
15
• Some ‘shock’ to the system forces change: Macro-Econ, founder death, etc.
• Sales & EBITDA growth slow/negative
• Low Accountability

• Founder/Owner less
involved in day-to-day
• ‘Shock to the System’
forces change
• Sales & EBITDA
growth slowed/negative
• Long tenured Team
• IT systems past
end-of-life
• Data, but not Actionable
• Dir. of IT reviews Phone
Bills
PE Purchased Firms
$600M $150M $150M *
$100M $225M
Angel/Entrepreneur
$75M $100M
Highly Applies Moderate Application Low Application

forces change
• Sales & EBITDA
• IT systems past
end-of-life
Bills
PE Purchased Firms
$600M $150M $150M *
$100M $225M
Angel/Entrepreneur
$75M $100M
Highly Applies Moderate Application Low Application 18

WAL-MART (USA)
Income Statement
Fiscal Year 2012 Actuals + Latest Estimate
2012 Actuals + Latest Estimate (v.1) Jan Feb Mar Apr May Jun Jul
Gross Sales 1,543,502 1,540,506 1,939,474 1,027,158 960,576 1,460,551 1,145,086
Price Increase 0 0 0 0 0 0 0
New Business 0 0 0 0 0 0 0
Supplier Finance Discount 6,174 6,164 7,758 4,109 3,842 5,842 4,580
Returns 0 0 0 0 0 0 0
Penalties 0 0 0 0 0 15,570 0
Allowances 30,825 32,043 42,072 22,731 20,269 37,570 27,435
Net Sales 1,506,503 1,502,298 1,889,644 1,000,318 936,464 1,401,569 1,113,072
Cost of Gross Sales 1,036,521 1,020,649 1,293,019 683,841 659,868 1,025,320 844,822
Memo: COGS % of Gross Sls. 67.15% 66.25% 66.67% 66.58% 68.70% 70.20% 73.78%
Cost Increase 0 0 0 0 0 0 0
Cost Increase - QSHK 0 0 0 0 0 0 0
New Business-COS 0 0 0 0 0 0 0
New Business-Dist/Frt 0 0 0 0 0 0 0
Operations 14,644 28,996 31,941 25,648 21,784 17,194 21,501
Distribution (3PL) 48,224 51,067 58,337 49,646 41,728 48,876 46,138
Security 833 3,652 3,258 2,415 2,120 2,925 2,410
Royalties (confirm EH Guarnty) 0 2,760 0 2,059 1,990 1,804 943
Obsolete Expense 0 0 0 2,065 1,807 1,931 0
Other Cost of Sales 4,322 0 0 10,353 0 0 (154,874)
Freight Out 133,014 351,052 (51,488) 264,246 88,887 156,507 225,699
Gross Profit 268,945 44,121 554,578 (39,956) 118,280 147,012 126,432
Gross Profit Margin 17.9% 2.9% 29.3% -4.0% 12.6% 10.5% 11.4%
Prime Profit Margin 32.8% 33.7% 33.3% 33.4% 31.3% 29.8% 26.2%
Gross Profit Less Commission Margin 17.9% 0.9% 29.3% -5.9% 10.5% 9.5% 10.4%
Commission 0 30,805 0 18,814 20,207 14,528 11,206
Selling & Marketing 42,511 92,536 103,069 67,932 51,144 67,260 32,045
General & Admin 40,484 61,752 81,583 53,964 54,910 64,318 52,065
Operating Income 185,950 (140,971) 369,925 (180,666) (7,980) 906 31,116
Operating Income Margin 12.3% -9.4% 19.6% -18.1% -0.9% 0.1% 2.8%
19
Created P&L’s by Customer and Product to Drive Accountability

forces change
• Sales & EBITDA
• IT systems past
end-of-life
Bills
PE Purchased Firms
$600M $150M $150M *
$100M $225M
Angel/Entrepreneur
$75M $100M

Month Month Month Month Week Week Week Week Week Variance Variance %
Driver Metrics Business Segment Jan-17 Feb-17 Mar-17 Apr-17 5-May-17 12-May-17 19-May-17 26-May-17 2-Jun-17 (Wk over Wk) (Wk over Wk)
Cost House-Level Labor $ Texas Waiver GH 112.9% 105.1% 107.8% 104.2% 105.8% 103.4% 105.7% 107.3% 1.6%
Metrics % of Optimal Texas ICF 111.4% 106.7% 101.1% 95.8% 94.7% 100.5% 97.2% 100.7% 3.5%
Tennessee Waiver GH 107.7% 105.7% 106.2% 105.5% 106.5% 106.8% 108.2% 105.9% -2.3%
Tennessee ICF 87.8% 100.9% 100.3% 103.3% 105.2% 101.4% 104.6% 106.9% 2.2%
Kentucky GH 94.8% 97.2% 100.6% 101.5% 91.8% 97.3% 96.7% 89.8% -6.9%
House-Level Hours Texas Waiver GH 106.6% 98.8% 102.1% 98.9% 100.1% 98.4% 100.2% 102.0% 1.8%
% of Optimal Texas ICF 106.4% 100.7% 95.6% 89.8% 88.4% 94.2% 91.2% 93.4% 2.2%
Tennessee Waiver GH 100.8% 98.2% 98.5% 98.1% 98.9% 99.3% 100.3% 97.9% -2.4%
Tennessee ICF 84.1% 95.1% 95.0% 98.3% 99.9% 97.7% 100.6% 101.8% 1.2%
Kentucky GH 91.4% 92.8% 95.7% 97.0% 88.7% 92.9% 92.6% 84.9% -7.7%
House-Level Labor Texas Waiver GH 12.0% 12.7% 11.1% 10.7% 11.4% 10.2% 11.0% 10.4% -0.6%
% OT Texas ICF 9.6% 12.0% 11.6% 13.2% 14.3% 13.5% 13.1% 15.7% 2.5%
Tennessee Waiver GH 13.7% 15.4% 15.6% 15.0% 15.4% 15.1% 15.8% 16.4% 0.6%
Tennessee ICF 8.9% 12.3% 11.0% 10.2% 10.6% 7.6% 8.0% 10.0% 1.9%
Kentucky GH 7.4% 9.4% 10.2% 9.2% 7.1% 9.5% 8.9% 11.6% 2.7%
House-Level Labor Texas Waiver GH $10.19 $9.99 $9.84 $9.81 $9.85 $9.79 $9.80 $9.76 -0.4%
Avg Compensation Texas ICF $9.94 $9.86 $10.31 $10.29 $10.25 $10.23 $10.22 $10.41 1.8%
Tennessee Waiver GH $11.78 $11.91 $11.22 $11.13 $11.16 $11.10 $11.07 $11.09 0.2%
Tennessee ICF $14.09 $14.49 $14.07 $14.03 $14.13 $14.08 $14.10 $14.24 1.0%
Kentucky GH $9.02 $9.44 $9.58 $9.40 $9.28 $9.28 $9.28 $9.28 0.0%
Open Positions Texas Waiver GH 66 68 66 52 60 54 59 56 -4.6%
(Calculated from OT) Texas ICF 11 13 14 13 15 14 14 17 22.1%
Tennessee Waiver GH 99 113 129 101 112 110 115 118 2.4%
Tennessee ICF 5 8 8 6 7 5 5 7 25.3%
Kentucky GH 4 5 6 4 4 5 4 6 31.8%
Total 184 207 222 177 199 187 198 204 2.9%
21

forces change
• Sales & EBITDA
• IT systems past
end-of-life
Bills
PE Purchased Firms
$600M $150M $150M *
$100M $225M
Angel/Entrepreneur
$75M $100M

23
POS
BOH
Above-Store
Micros
Micros
- Lbr Schd
- Menu Items
- Sales
- Sales
- Labor
- Financials
- PO
- Invoices
- Inventories
- Paid outs
EPICOR
(G/L, A/P, A/R, Budgets)
Key Differences in proposed Architecture
Micros
Compeat
- COS
- Invoices
- Inventory
Micros
- Lbr Schd
- Menu Items
- Sales
Compeat
- GL
- A/P
- A/R
- Sales
- Labor
- Financials
- PO
- Invoices
- Inventories
- Paid outs
EPICOR
(Consolidating GL)
23

forces change
• Sales & EBITDA
• IT systems past
end-of-life
Bills
PE Purchased Firms
$600M $150M $150M *
$100M $225M
Angel/Entrepreneur
$75M $100M

Finance Boot Camp: The Balance Sheet ‘Made Simple’
ASSETS:
Cash 243,013$
Undeposited Funds 6,145
Cash Restricted for Gift Cards/AD Fund 266,582
Petty Cash 9,820
Accounts Receivable 453,925
Allowance for Doubtful Accounts (94,032)
Accounts Receivable Net 359,894$
Intercompany Receivable -
Inventory 192,455
Prepaids Expenses & Deposits 6,735
Current Portion of Notes Receivable 12,964 1,457,501$
Total Current Assets 1,097,607$
Property and Equipment 234,014$
Less: Depreciation (47,978)
Property and Equipment Net 186,036$
Goodwill 1,163,009
Intangible Assets Net 1,630,997
TOTAL ASSETS 4,080,630$
LIABILITIES AND EQUITY:
Lines of Credit -$
Accounts Payable and Accrued Expenses 531,323
Intercompany Payables 1,634,727
Sales Tax Liability 50,108
Payroll Liability 123,915-
Current Portion of Notes Payable -
Total Current Liabilities 2,861,855$
Credit Line 0
Convertible debt -
Notes Payable Net of Current -
Lease Security Deposits from Franchise -
Provision for Store Closures 188,817
TOTAL LIABILITIES 3,050,672$
Members Equity 3,100,000$
Retained Earnings Beginning 68,229
Current Earnings (2,138,311)
Retained Earnings Ending 1,029,918$
TOTAL LIABILITIES AND EQUITY 4,080,630$
- Summarized Assets and Liabilities.
- The difference is ‘net equity’, or what we’re worth
at this point in time.
What we own or are owed (assets)
What we owe or have used but not paid for (liabilities)
What we are worth (the bottom line) 27June 23rd, 2017

Why is implementing change so hard?
- Without the founders driving force, the Org. is ill equipped to sustain itself
From the ‘Known”
• Safe
• Routine
• Accepted
deficiencies
• Backward Looking
To the ‘Unknown’
• Uncertainty
• Disruption
• Improved State
• Forward Planning
Fear is a
Powerful
Impediment to
change
A crisis (of some sort) is often the impetus to take a risk:
• Liquidity Crisis
• Rapid decline in sales
• Major IT implementation
28

Today’s Agenda
performance
29

Tools and a Framework that Deliver Consistent Results
- Developed at Taco Bell/Pepsi
• Strategy
• Structure
• Culture
• Rigorous analysis of desired mkt. positioning
• Honest assessment of current capabilities
• Identify 3 – 4 Key Initiatives to pursue
30
• The right people = Intellectual curious
• IT Systems / KPI’s
• Clarify Roles & Responsibilities
• Driving Accountability
• Communication, Coaching & Support
• Reward and Recognition

A clear vision for the Firm over the next, say, 36 months
 3 – 5 Key Initiatives that drive alignment across the Organization
 Forces identification of the specific tactics and measures (KPI’s) that support each
initiative
 Provides a context for management to regularly engage and provide feedback to the
team; course correct as needed
Tools and a Framework: Strategy
31

Tools and a Framework: Structure
- People and Systems
32
People:
 (Re)build the team with outside talent: a fresh perspective
 Emphasis on intellectual Curiosity
 Clarify Roles & Responsibilities
 Engage all functions and levels of the business *
Systems:
 (Re)implementing IT systems allows you to:
 Streamline the business, and
 Question everything
 Processes reengineering allows fundamental roadblocks to be addressed:
 Overly complex Legal Structures
 Multiple General Ledgers / Chart of Accounts
 Clarify Roles and Responsibilities

Tools and a Framework: Culture
- How we Work Together
33
Drive Accountability through:
 KPI’s & daily/weekly scorecards with specific owners – takes the emotion out
 Institute regular P&L reviews – forward looking
Focus on Communication, Coaching and Support:
 Weekly one-on-ones with ALL direct reports
 Support Center team works 2 -3 days/week in the Field
 Regular (monthly or quarterly) Town Halls *
* Tends to work better in Larger Organization or Geographically disbursed firms.
Reward and Recognition:
 Create an Award
 Hand written Thank You notes
 Gift Cards

Putting it together in Practice: A simple Framework
1. Strategy
Development /
Goal Setting
2. Budgeting:
Identify tactics
& timeline by
function
3. Daily /
Weekly
Scorecard
4. Monthly
Business
Reviews /
Update Forecast
& Tactics
34
• Sr. Team Driven
• Layout BIG Goals
• Outline general approach
• ID tactics to achieve each goal
• ID resources & timelines
• Bottoms-up build to drive
commitment
• Implement daily / weekly
Scorecard
• Drive accountability
• Mgr’s present to Sr. Team
• Coaching / Growth
opportunity

• Owner-lead firms are Passionate about their business, beyond $
35
Key Take Away’s
• Success in the past ≠ Success in the future; in fact the opposite
• Things that get measured get done!
• Strategy, Structure and Culture is an extremely powerful
framework to effectively manage any organization

Q&A
36
Thank you for your time this afternoon

Transforming Privately Held Firms: Proven Strategies from a CFO's perspective | Blake Barnett | Lunch & Learn

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (12)

Ähnlich wie Transforming Privately Held Firms: Proven Strategies from a CFO's perspective | Blake Barnett | Lunch & Learn

Ähnlich wie Transforming Privately Held Firms: Proven Strategies from a CFO's perspective | Blake Barnett | Lunch & Learn (20)

Mehr von UCICove

Mehr von UCICove (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Transforming Privately Held Firms: Proven Strategies from a CFO's perspective | Blake Barnett | Lunch & Learn