1. Best Practices Session Currie Summit

2. 1300 Companies, 10 Year Average Annual Performance
Shareholder Value
Revenue
Earnings
Return
90% Percentile 21% % 24%
80% Percentile % % 19%
50% Percentile 9% % 13%
1300 Companies, 10 Year Average Annual Performance
10X VALUE: THE ENGINE POWERING LONG-TERM SHAREHOLDER RETURNS.
Lucier, C.E.; Moeller, L.H.; Held, R.
Strategy & Business, 8, Q3 97, pp

3. Critical Elements Revenue Growth Through Account Management
Financial Performance and Discipline Through a Financial Model 3

4. Evolution of the Market
Transactional
Relationship
Costly Change
Easy Change

5. Fundamental Business Strategy
Target
Equity
Financial
Model
Contract
Relationship
Quality
Factors
Entry
Strategy
Market
Analysis
Account
Identification
Investment
Revenue
Stream
Alliance
Penetration
Acquisition
share
ROA

6. Financial Model %
* G&A Expenses Are a Percentage of P,S & R Sales

7. Financial Model $
* G&A Expenses Are a Percentage of P,S & R Sales

8. Calculating Absorption with the Financial Model in Currency
* G&A Expenses Are a Percentage of P,S & R Sales

9. Absorption 108% Absorption at Model
Total Rental, Parts, & Service Gross Profit
495.00
Total Company Expenses
457.50
108% Absorption at Model
495.00
457.50

10. Absorption & Profitability
Sales Mix Impact
Units
Aftermarket
Absorption
NPBT
65%
35%
89%
7.0%
60%
40%
101%
7.7%
50%
108%
9.4%
120%
10.4%

11. Sales Department Financial Model
Sales Personnel Expense (50%)
30% is going to be compensation of the Sales Reps
12% is going to be wages of Overhead Staff
Sales Management
Sales Admin (Coordinators, Order Entry, Etc.)
8% is going to be Benefits
Statutory Benefits (Payroll Taxes, Workers Comp., etc.)
Non-Statutory Benefits (Health Insurance, 401(K), etc.)
Page 11
Rev. 4-99

12. Sales Department Financial Model
Sales Occupancy Expense (10%)
This includes all costs associated with the sales departments share of the building.
Rent / Lease Payments
Utilities
Property Tax / Insurance
Building Improvements
Grounds Maintenance
Sales Operating Expense (25%)
Anything not associated with people or the building.
Demo
Marketing / Advertising
Supplies
Page 12
Rev. 4-99

13. Sales Department Critical Variables
$240,000 in Annual Gross Profit Per Sales Rep
New Unit Inventory Turns of 12X
Used Unit Inventory Turns of 6X
Allied Inventory Turns of 12X
Aged Inventory of 0% for New & Used
Sales Rep to Sales Admin Ratio of 3:1
Page 13
Rev. 4-99

14. Service Department Financial Model
Sales Category (100%)
Customer Breakdown Labor Revenue
Customer Contract Labor Revenue
Warranty Labor Revenue
Internal Customer Labor Revenue
New Prep
Used Reconditioning
Rental
Cost of Goods Sold (35%)
Technician W2 or T4 Wages Only
Gross Profit (65%)
Difference between Labor Revenue and Tech Wages
Page 14
Rev. 4-99

15. Service Department Financial Model
Service Personnel Expense (20%)
10% is going to be wages of Overhead Staff
Service Management
Service Sales Commissions
Service Admin (Dispatcher, Warranty Clerk, Service Writer)
8% is going to be Technician Benefits
Statutory Benefits (Payroll Taxes, Workers Comp., etc.)
Non-Statutory Benefits (Health Insurance, 401(K), etc.)
2% is going to be Overhead Staff Benefits
Statutory & Non-Statutory
Page 15
Rev. 4-99

16. Service Department Financial Model
Service Occupancy Expense (5%)
This includes all costs associated with the service departments share of the building.
Rent / Lease Payments
Utilities
Property Tax / Insurance
Building Improvements
Grounds Maintenance
Service Operating Expense (10%)
This figure includes the net recovery of:
Service Vehicles
Service Accessories
Special Tools
Etc.
Page 16
Rev. 4-99

17. Service Critical Variables
Productivity
85% Application Rate
100% Efficiency Rate
85% Productivity
Key Measurements
$12,000 revenue per month per tech
100% Service Vehicle Recovery
200% Service Accessories Recovery
5:1 Service Tech to Service Admin Ratio
Page 17
Rev. 4-99

18. Service Productivity Efficiency Application Productivity 85% 100% =
Page 18
Rev. 4-99

19. Productivity Calculations
Hours Billed
1,768
100% Efficiency
85% Productivity
Productive Hours
85% Application
Total Hours Paid
2,080
15% Lost Time
Non Productive Hours
312
Allowed Time
208
Expense Time
104

20. Getting to Gross Profit
Productivity
Profitability
Revenue Multiple
Revenue
Cost of Wages

21. Parts Department Financial Model
Parts Personnel Expense (10%)
8% is going to be wages of Parts Staff
Parts Management
Parts Sales Commissions
Parts Admin (Counter, Warehouse, Clerical)
2% is going to be Employee Benefits
Statutory Benefits (Payroll Taxes, Workers Comp., etc.)
Non-Statutory Benefits (Health Insurance, 401(K), etc.)
Parts Operating Expense (3%)
This figure includes the net recovery of freight, both inbound and outbound.
Page 21
Rev. 4-99

22. Parts Department Financial Model
Parts Occupancy Expense (2%)
This includes all costs associated with the parts departments share of the building.
Rent / Lease Payments
Utilities
Property Tax / Insurance
Building Improvements
Grounds Maintenance
Page 22
Rev. 4-99

23. Parts Department Best Practices
Parts Freight Recovery 100%
Inventory Turns of 5X
Inventory Aging <5%
Average Monthly Revenue Per Parts Employee $50,000
Page 23
Rev. 4-99

24. Rental Department Financial Model
Rental Cost Goods Sold (55%)
Depreciation of 30%
Interest of 10%
Maintenance & Repair of 15%
Rental Personnel Expense (10%)
8% is going to be wages of Rental Staff
Rental Management
Rental Sales Commissions
Rental Admin (Counter, Check In/Out, Clerical)
2% is going to be Employee Benefits
Statutory Benefits (Payroll Taxes, Workers Comp., etc.)
Non-Statutory Benefits (Health Insurance, 401(K), etc.)
Page 24
Rev. 4-99

25. Rental Department Financial Model
Rental Operating Expense (3%)
This figure includes the net recovery of hauling/transportation, both inbound and outbound.
Rental Occupancy Expense (2%)
This includes all costs associated with the rental departments share of the building.
Rent / Lease Payments
Utilities
Property Tax / Insurance
Building Improvements
Grounds Maintenance
Page 25
Rev. 4-99

26. Rental Department Critical Variables
100% Recovery of Hauling/Transportation
5.0% Monthly Rental Revenue Multiple
Average Monthly Rental Revenue Divided by Original Acquisition Cost of the Fleet
2.5% Wash Out GP Per Month for Rent-to-Rent Units
Step 1: (Rental Revenue + Resale Price) minus (Original Acquisition Price + Interest + Maintenance & Repair) = Wash Out GP
Step 2: Divide Wash Out GP by # of Months the unit was in the fleet to arrive at Wash Out GP per Month.
Step 3: Then take Wash Out GP per Month and divide by Original Acquisition Price
Page 26
Rev. 4-99

27. G&A Department Financial Model
All Expenses are expressed a percentage of Parts, Service and Rental Revenues.
G&A Personnel Expense (5%)
2% is going to be wages of the CEO/President/Dealer Principal
2% is going to be wages of the administrative staff
Accounting, Payables, Receivables, HR, IT, etc.
1% is going to be Employee Benefits
Statutory Benefits (Payroll Taxes, Workers Comp., etc.)
Non-Statutory Benefits (Health Insurance, 401(K), etc.)
Page 27
Rev. 4-99

28. G&A Department Financial Model
G&A Operating Expense (3%)
All Operating Expenses that are not easily allocated to an operating department are by definition G&A.
G&A Occupancy Expense (2%)
This includes all costs associated with the G&A departments share of the building.
Rent / Lease Payments
Utilities
Property Tax / Insurance
Building Improvements
Grounds Maintenance
Page 28
Rev. 4-99

29. Employee Mix Goal is 75% of Employees are Revenue Producers:
Equipment Sales Reps
Aftermarket Sales Reps
Service Technicians
Parts Counter
Rental Coordinators
And we want 50% of Employees to be Techs.
25% of Employees are Non-Revenue Producers:
Management
Administrative Assistants
Distributor Principals
Service Admin
Parts Warehouse
Accounting HR IT
Etc.