How many hours of work to master Foundation?
Corporate Sponsors for Class
ConocoPhillips and ExtraCo Banks and Salient
Who said "The purpose of business is to create a customer"
1.Business Literacy- WSJ
2.Business as an Integrated System- Foundation
3.Personal and Professional Ethics- BU Honor Code
Who said..."Whenever I hear someone curse, it's a sign to invent something."
Higher automation means...
More machines doing the work- lower labor costs
The higher the MTBF...
The more reliable your products are- higher material costs, but customers like you more
The lower the MTBF...
The less reliable your products are- lower material costs.
Lower automation means...
Higher labor costs, but you can make changes faster
The four P's of marketing
1. Product- Size, Performance, Reliability, & Age
3. Place - Sales Budget determines Accessibility
4. Promotion - Promotion Budget determines Awareness
What is the #1 buying criteria for
customers in the low tech segment?
Price. Then age, reliability, position
What is the #1 buying criteria for
customers in the high tech segment?
Position. Then age, price, reliability
Which column tells you how well you hit the 4 P's of marketing on each product?
December Customer Survey Score
To Reach 100% Accessibility...
1)You must have at least two products
2)Spend upwards of $2-3M per year in your Sales budget
To Reach 100% Awareness...
1)Promo Budget is spent by product, not segment
2)Once 100% awareness is achieved, maintain at $1.4M per year.
Last Year's Sales X Growth Rate = Next Year's Sales
The balanced scorecard
<30 points= Poor Performance
Between 30-70= Normal Performance
>70 points= Superior Performance
Who said "Expected versus actual. Expected versus actual. It's what we do all day long."
Brian Pokluda, Financial Analyst American Eagle Airline
The Basics of Business
1.The purpose of a business is to create a customer.
2.The short-term goal of a business is to make a profit.
3.Great businesses have great margins.
4.Bad forecast. Bad pro forma.
5.Profit is a matter of opinion. Cash is a matter of fact.
6.Without debt, your firm will only be half as big as it can be.
"It's not who makes the most...
...It's who keeps the most."
Earnings before interest and tax
Shows what you own
Assets = Liabilities + Owner's Equity
captures the relationship between what you own and how you financed it
Leverage = Total Assets/Total Equity
Below 1.81 means "increase debt"
Above 2.80 means "reduce debt"
Plant Improvements should match
Long Term Debt
Possible cash shortfalls should match
Financial advisors recommend
keeping how many months of salary in
an "Emergency Fund"?
3 months worth
Days of Working Capital Formula
DoWC = (Current Assets - Current Liabilities) / (Sales/365)
Current Liabilities= current debt+accounts payable
Veggie Tales voice, said to "never lose sight of the numbers", thought they would be the next Disney
The Business Cycle
Cash- Make Inventory-Sales- Collect accounts receivable and the process starts over again, maybe with new products in inventory
How much interest do you pay on an emergency loan?
your current debt rate plus an additional 7.5% interest
WHich expenditure drives customer awareness?
Your R&D decisions control which product attributes
Size, performance, age, reliability
The difference between price and what it cost to produce
If your contribution margin is below 30%...
1)Your pricing is too low, or
2)Your material costs are too high, or
3)Your labor costs are too high
HOW DO YOU LOWER YOUR COSTS?
1)Lower your material costs (i.e., MTBF)
2)Lower your labor costs via automation
Market Cap Formula
Market cap= stock price X shares outstanding
"Profit is a matter of opinion...
cash is a matter of fact."
What kind of market is Foundation
Business to business
R&D page consists of
Size, reliability (MTBF), performance
MTBF range for low tech segment
MTBF range for high tech segment
Marketing page consists of
Price, sales and promo budget, sales forecasts
Production page consists of
production schedule, buy/sell capacity, automation, compliment/recruiting hours, margins
Raise contribution margin by
raising price, lowering cost of production
Finance page consists of
earnings per share, where you can issue or retire stock, issuing retiring long term debt, dividends, ending cash balance
One year bank note
ten year bank note
Long term debt
1.8 to 2.8
Baylor Business: Leadership with...