Questions & Answers

Q: Could you please elaborate on the definition of Cost of Waiting, as Cost per Service Point is different (and a more straightforward costing exercise).

A: Customer waiting cost is an estimate of the lost customer value as waiting time increases ie unsatisfied customers that do not return due to excessive waiting time, this indicates the lost future profit. An example is provided in the instruction sheet. Cost per Service Point is the staffing cost and any asset/delivery cost per service point ie how much it costs to provide the service point. If the model was simply optimised for minimum service point cost an unacceptable waiting time would be introduced and customers lost. By considering the cost of waiting this can be allowed for.

Question and Answer Item 2058252 - Browse All Question and Answer Items

Q: Ahh I see -- But I am trying to see what the business is worth to me as an owner to buyout my partner.

A: It is still the same lets say you have $100,000 you can put it in the bank and get x% or invest in the business and get y% unless y is greater than x then you are better of putting your money in the bank ie less risk plus the value of y needs to be higher the higher the business risk. So you are attempting to determine the future business return/profit and then apply a required rate of return % that allows for the business risk. If you believe the business future returns will be greater this is reflected in the Relative indicators ie if the Market is growing then increase the Market Strength indicator and the profit goes up ... or if you think you can make operational improvements (these should be quantified) then increase the Business Market Position indicator. This provides expected outcomes to which you can then apply sensitivity analysis to determine the possible valuation range.

Question and Answer Item 2058240 - Browse All Question and Answer Items

Q: When I enter the inventory amount in Material and Supplies - the higher I go with this number the lower the equity goes - which does not make sense to me.

A: That is correct. As Material and Supplies costs increase profit decreases (assuming everything else is constant) so to achieve the required Return on Investment the Valuation (and Equity) decreases. This is basically saying the lower the profit the lower the value.

Question and Answer Item 2058238 - Browse All Question and Answer Items

Q: My question is related to ROI: I'm trying to use your model to help me develop an ROI figure based on current expenses and income plus a $200,000 investment in the business with a pessimistic retrun of 10%, expected return of %15 and optimistic return of %20. Can you tell me how to enter my data so I can obtain the ROI model?

A: I am not entirely sure what your require as if the income/expenses are set then the ROI% determines the Investment ie your $200,000? The sensitivity analysis built in to the model allows you to consider changes in your inputs to determine how sensitive the outcome is to errors. However if what I think you are trying to achieve is correct the following may help. Input the values for your business on the input sheet. On the valuation sheet set the Required Return on Investment (blue cell) at 15% the calculated Current Expected Valuation in the yellow cell below this is the valuation at 10% ROI ie if you invested this amount in the business the return would be 15%. Change the Required Return on Investment value to 10% and 20% to see your pessimistic and optimistic values. The valuation will decrease as the % is increased ie to achieve a higher return on the same profit the investment in the business must be less. Hope that helps.

Question and Answer Item 2058206 - Browse All Question and Answer Items

Q: Is it possible to have a sheet that graphs ONE LINE of the budget. There is a graph for the total (Actual and Budget Chart) - but I'd like to be able to produce the same graph for ANY line from the chart of accounts. This way we can see for a line item how we're doing.

A: This is not a possible from the standard compiler but you can open/save a new workbook and then link to the compiler data ie make the new workbook cells take data from the compiler so you end up with a formula like ='[New Budget.xlsm]Profit and Loss'!$M$16 . This allows you to set up any data links you like (ie line by line) and then plot as you like.

Question and Answer Item 2058199 - Browse All Question and Answer Items

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