BUSINESS MECHANIC & ADVISOR
CFO SERVICES FOR PRIVATE COMPANIES
Architects, lawyers, accountants, consultants, engineers, designers and advertising agencies ”sell” the time of the people on the team. Time cannot be put on a shelf and sold next month. Use it or you lose it. Think of this as fresh produce in a restaurant. It must be used today.
The best run PSFs know these metrics and keep them up to date on a weekly/monthly as applicable.
Cash on Hand
Cash is the fuel that fires the business engine in good times even more so when the economy slows down. Cash should be tallied daily and Cash forecasts should be updated every month for the 90 day and 12 month future periods.
Utilization Rate The amount of time the team works on direct client work.
Realization Rate The amount of the Direct time that Clients pay in Cash.
Overhead Rate Indirect Costs vs. Labor Costs.
Net Multiplier Net Fees vs. Labor Costs.
Break-even Rate Fees needed to cover all cost and be at zero profit.
Target Net Rate Break-even + the target profit goal
Target Multiplier Minimum multiplier needed to hit Target Net Rate
Net Fee per staff Helps forecast capacity and future revenue projections.
Backlog Fees Value of contracted work to be delivered in future periods.