Budgeting, Forecasting, & P&L Talking Numbers Knowing how to - - PowerPoint PPT Presentation

Budgeting, Forecasting, & P&L

Talking Numbers

Knowing how to read (or getting comfortable with reading) budgets, P&L’s and

• ther financial reports gives

you a leg up. Managers who learn how to understand and interpret financial reports will progress further in their careers.

In order to learn, take the initiative! Go through the proper channels at your

• rganization to seek out

this information. Your controller is your friend!

Talking Numbers

Budget Basics

The biggest challenge of budgeting is that we have limited resources – and unlimited wants.

Budget Basics

Relate the budgeting process to something you already know:

➢ Personal Budget ➢ Your paycheck is your NET Revenue (top line) ➢ Your Operating Expenses are your mortgage, electric, gas, water, clothing, entertainment, etc. These may include items that you incur every month (mortgage) - or items that are unexpected or infrequent (car repair, Louboutins). Your “Bottom-Line Profit” (or loss) = your paycheck – operating expenses

From your GM, to your Controller, to your Department Heads to your Sales People… YOU ARE A TEAM.

Budget Basics

➢ Do you get your annual budget from Corporate? Or is it self-defined? ➢ Do you get an annual percent increase? Or a Hard Dollar increase? ➢ What are the Key Focus Areas as directed by Corporate Initiatives?  Integrated Marketing/NTR  Digital  Local  National  New Business  Multi-platform Sales  Cluster Opportunities  Political  Automotive  Event/ On-Site Sponsorships  New Sponsorships  Other Synergies

Budget Basics

See a Budget as a “Road Map”

When you plan a road trip, you think Big Picture: ➢ “Where do I ultimately want to go?” ➢ “What route will I take to get there?”” ➢ “What if I go the wrong way?” ➢ “How will I course correct?” Budget should be an educated guess

Budget Basics

Think “Big Picture,” but start small

Create a “3-Liner”

➢ NET Revenue line ➢ Operating Expenses line ➢ Profit/ (Loss)

Budget Basics

➢ Market Growth

• Historical Data
• Xray
• Miller Kaplan

➢ Competitive Landscape

• Anticipating a new competitor?
• Internal Format Changes
• Other stations in the marketplace
• Talent considerations

➢ Ratings Goals and Implications

Budgeting Basics –

Start with Assumptions

Assumptions (continued)

➢ Pricing Strategies

• What is your typical rate of sellout?
• What are your inventory challenges?

➢ Staffing Concerns

• Is the staffing level appropriate?
• Are there performance concerns?
• Review and strategize plan for individual

AE enterprises ➢ Economic Environment

• Retail/Auto sales as indicators

➢ Expense Considerations

• Fixed costs/contractual increases

Budgeting Basics –

End with Threats/Concerns/Keys to Success

➢ Threats & Concerns

• If Station X Flips formats
• Pricing strategy at Y Company could

make competitive landscape difficult

• Risk of losing John Doe

➢ Keys to Success

• I really need those dollars in my digital

budget to support this level of revenue growth

• New sales assistant is necessity to

support overloaded sales staff

So….how do we know how we’re doing?

On a very basic level, a P&L is just a summary

• f the actual financial activity of your

business: Revenue Less: Expenses Profit

So….how do we know how we’re doing?

Why Prepare a P&L?

It answers the question, “Are we making money?”

• It’s reviewed by the Controller/Market Manager/DOS

regularly to monitor operations

• It supplies Senior Management with timely and important

information regarding revenues and expense

• It allows them to determine if adjustments might be

necessary to recoup losses or decrease expense

• It provides data by which managers and investors can

evaluate your company’s profitability

What Comprises a P&L?

1) Revenue “Top Line”

2) Operating Expenses 3) NET Profit (Loss) “Bottom Line”

Sample Radio Station P&L – JULY 2018

Revenues BUDGET ACTUAL VARIANCE Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311 National Revenue $ 500,684 $ 356,744 $ (143,940) NTR $ 237,540 $ 215,600 $ (21,940) Digital $ 103,450 $ 156,930 $ 53,480 Network $ 53,263 $ 50,000 $ (3,263) Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648 Local Agency Commission $ 187,757 $ 201,655 $ 13,898 National Agency Commission $ 75,103 $ 53,512 $ (21,591) Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341 Operating Expenses Technical $ 103,874 $ 163,980 $ (60,106) Programming $ 459,336 $ 452,676 $ 6,660 Promotions $ 75,689 $ 80,555 $ (4,866) Sales $ 939,255 $ 1,034,865 $ (95,610) Digital $ 43,925 $ 44,966 $ (1,041) G&A $ 387,215 $ 401,742 $ (14,527) Total Expense $ 2,009,294 $ 2,178,784 $ (169,490) Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149) Profit Margin 33.14% 29.82%

The P&L is a great way to review what’s already happened… But how do we anticipate and plan for future results?

FORECAST!

➢ Revenue

• Ideal – 90 days
• Real – 30-60 days
• Pending, Activity, Booked Business
• Changes in Marketplace

➢ Expense

• What has changed since our budget?
• Where is our revenue performance?

‐ Revenue-related expense ‐ Spend More/Pull Back

• Any items we know are going to be different?

Forecasting Basics

FORECAST

Revenues BUDGET FORECAST VARIANCE Local Revenue $ 2,503,421 $ 2,688,732 $ 185,311 National Revenue $ 500,684 $ 356,744 $ (143,940) NTR $ 237,540 $ 215,600 $ (21,940) Digital $ 103,450 $ 156,930 $ 53,480 Network $ 53,263 $ 50,000 $ (3,263) Total Gross Revenue $ 3,398,358 $ 3,468,006 $ 69,648 Local Agency Commission $ 187,757 $ 201,655 $ 13,898 National Agency Commission $ 75,103 $ 53,512 $ (21,591) Net Revenue $ 3,135,499 $ 3,212,840 $ 77,341 Operating Expenses Technical $ 103,874 $ 163,980 $ (60,106) Programming $ 459,336 $ 452,676 $ 6,660 Promotions $ 75,689 $ 80,555 $ (4,866) Sales $ 939,255 $ 1,034,865 $ (95,610) Digital $ 43,925 $ 44,966 $ (1,041) G&A $ 387,215 $ 401,742 $ (14,527) Total Expense $ 2,009,294 $ 2,178,784 $ (169,490) Net Profit (Loss) $ 1,126,205 $ 1,034,056 $ (92,149) Profit Margin 33.14% 29.82%

➢ Budget = Educated Guess

• Make your Controller your friend
• Work with your team on goal and strategy
• Use Assumptions (history, Miller Kaplan,
• ther data) to create your road map
• Have a plan for the unplanned

➢ Forecast & P&L

• Be aware of your performance
• Be educated about changes that will shift

your projections

• Work with your team to resolve issues quickly

Budgeting/Forecasting/P&L - Takeaways

If you need any additional tips, guidance, etc. Feel free to reach out to me at any time!

Erika Sylvia

Market Controller, Emmis Communications esylvia@indy.emmis.com

Budgeting, Forecasting, & P&L