© 2006 October Research Corporation Operations and Financial Pro Forma Model Joe Piernock Corporate Development Services

© 2006 October Research Corporation 2 1.Introductions 2.AfBA Operation 3.Pro Forma Model 4.Contract Negotiation (this afternoon) Agenda

© 2006 October Research Corporation 3 Businesses rarely sink by hitting an iceberg…. They usually succumb to a hundred small leaks. An Observation

© 2006 October Research Corporation 4 Business and strategic factors: 1.Reduce a coming loss of business 2.Strategic block 3.Reduce business risk 4.Gain the market’s “high ground” 5.Strong partner to grow business 6.Enter a new geographic region Why bother?

© 2006 October Research Corporation 5 Mortgage Originators Mortgage Lenders Banks Mortgage Companies Home Builders and Developers Real Estate Agents Potential Partners

© 2006 October Research Corporation 6 Title-Related Title Search Title Policy Closings Property Reports Expanded Services Appraisals Inspections Flood Credit Potential Products

© 2006 October Research Corporation 7 Uncooperative partner Cumbersome operations Can your systems integrate operations? Can you communicate “to and through” partner? Will it increase “leaks” in your processes? Cumbersome accounting Can your systems segregate accounting? Will it add expense? Will disagreements waste resources? Compliance Risks

© 2006 October Research Corporation 8 The Financial Model

© 2006 October Research Corporation 9 1.Starts with “Applications” 2.Follows business as it flows through the company: Application Title Search & Insurance Close Appraisal 3.Input into green shaded areas. Everything else is locked. 4.The model can handle multiple locations, but one is OK. 5.The demo contains random numbers that are not meant to be used as guidelines or operational targets. Revenue Assumptions

© 2006 October Research Corporation 10 1.The model includes expense categories for large and small companies. Only use what you need. 2.Important: Use the type of measures that fit your situation: Fixed, or Variable 3.Input the correct “Units of Measure”. Expense Assumptions

© 2006 October Research Corporation 11 1.Detail Pages – Included so that you can ensure that your results are consistent with your situation. 2.Results – Calculates the following: Cash and capital needed to start the AfBA Cash and capital needed to keep it running Required manpower Standard financial statements 3.Partner Overview – a one-page summary Output

© 2006 October Research Corporation 12 1.Play with the model. Margins are thin. What does it take to succeed? What change has the strongest impact on the bottom line? Should you offer extended services? Can growth starve you for short-term cash? 2.Use the model as a foundation for contract negotiation. 3.If you do not have these business metrics, get them. Advice