Operations and Financial Pro Forma ModelJoe PiernockCorporate Development Services
Agenda • Introductions • AfBA Operation • Pro Forma Model • Contract Negotiation (this afternoon)
An Observation Businesses rarely sink by hitting an iceberg…. They usually succumb to a hundred small leaks.
Why bother? Business and strategic factors: • Reduce a coming loss of business • Strategic block • Reduce business risk • Gain the market’s “high ground” • Strong partner to grow business • Enter a new geographic region
Potential Partners • Mortgage Originators • Mortgage Lenders • Banks • Mortgage Companies • Home Builders and Developers • Real Estate Agents
Potential Products • Title-Related • Title Search • Title Policy • Closings • Property Reports • Expanded Services • Appraisals • Inspections • Flood • Credit
Risks • Uncooperative partner • Cumbersome operations • Can your systems integrate operations? • Can you communicate “to and through” partner? • Will it increase “leaks” in your processes? • Cumbersome accounting • Can your systems segregate accounting? • Will it add expense? • Will disagreements waste resources? • Compliance
Revenue Assumptions • Starts with “Applications” • Follows business as it flows through the company: • Application • Title Search & Insurance • Close • Appraisal • Input into green shaded areas. Everything else is locked. • The model can handle multiple locations, but one is OK. • The demo contains random numbers that are not meant to be used as guidelines or operational targets.
Expense Assumptions • The model includes expense categories for large and small companies. Only use what you need. • Important: Use the type of measures that fit your situation: • Fixed, or • Variable • Input the correct “Units of Measure”.
Output • Detail Pages – Included so that you can ensure that your results are consistent with your situation. • Results – Calculates the following: • Cash and capital needed to start the AfBA • Cash and capital needed to keep it running • Required manpower • Standard financial statements • Partner Overview – a one-page summary
Advice • Play with the model. • Margins are thin. What does it take to succeed? • What change has the strongest impact on the bottom line? • Should you offer extended services? • Can growth starve you for short-term cash? • Use the model as a foundation for contract negotiation. • If you do not have these business metrics, get them.