Edmonton Business Consultant | Operations Facilities & Equipment
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Yeah. You have to be very specific. Like the, the bank is even going to give you any financing unless you’re specific to the point that you actually have estimates or listings for what you’re actually going to purchase. It’s not just, hey, I’m going to purchase equipment for an estimate of half a million dollars. Yeah, I can see why with the I can be [inaudible] cause it’s not. Hi, thanks for joining us for another episode of Aspirus Burl CPA. Today as the EBITDA business consultant, we’re talking about the business plan, specifically the operations facilities and equipment. I have Denise here with me again. Uh, Denise, how long have you been here now? A seven and a half years. Seven and a half years. And have we learned a lot about different types of equipment, facilities and stuff that we’d never thought we know of him. Please give us a call now if you are focused on amazing Edmonton Business Consultant today Yeah. Yeah. What’s some of your favorite?
Uh, oh, I don’t know. Um, I guess like the medical and the dental, those ones are the big ones that we have, right? Yeah, yeah. A lot of them actually have a lot of equipment that they have to Yup. Um, finance and, and get in before you can even see patients. For sure. We know what it costs and we don’t know how to use it yet. Yeah, that’s about it. Uh, the, the call, it’s a zig Ziglar colt when it talks about planning. It says when you stop planning and preparing, you stopped winning. And you know, 50% of all Canadian small businesses will go out of business in the first five years and 29% of these failed business owners, Willis running out of cash as one of their primary reasons for failure making, running out of cash as the second most common reason for business failure. And the story that we have is we see business plans that don’t take into account the actual location and facilities of the business when making these projections that causes them to run out of cash. So Denise, what are the questions that these business owners should be asking? You know, we’re guarding working into the facilities and equipment in their business plan. Yeah. So should you be specific about construction or facility purchase costs for financing? Yeah, you have to be very specific. Like the bank isn’t even going to give you any financing unless you’re specific to the point that you’ve actually have estimates or listings for what you’re actually going to purchase. It’s not just, hey, I’m going to purchase equipment for an estimate of half a million dollars. We need to have it itemized in terms of equipment by equipment and actually have potential suppliers lined up actually giving quotes that they’re actually going to finance upon. So the banks are not gonna, you know, finance on an estimate at all. They’re going to find this on very specific numbers. You know, and you know, from a business planning perspective and a cashflow planning perspective, we need to know exactly what those are.
Because these, you know, facilities and equipment tend to have this really pervasive materiality. You know, there, they’re much different than missing the, uh, uh, you know, if you miss or a revenue or an expense projection by 10%, that’s one thing. But if you miss the, the, uh, you know, the build out costs by 10%, when that bill though does $1 million, that $100,000, it can be catastrophic. And cause you to run out of cash. Um, do you, do you include location and facilities within the operations strategy of the plan? That’s usually the, the, the section that I have. So we in a business plan, I have an operations strategy and within that, one of the subheadings is going to be the actual locations and facilities and, and a space for description, a buck, a boat, those location and facilities. Reach out now if you need the top Edmonton Business Consultant today! Well, lenders generally want to know the square footage of the location. That’s one of the big ones. You also have their lending, especially for a purchase or a build out. They want to be able to conceptualize what sort of deal they are getting, what sort of price per square foot. Because on the backend, you know, they’re analyzing the potential a deal and the risks around the deal and they want to make sure we’re not building out a small space with, uh, uh, you know, uh, uh, marvel floors everywhere and uh, crystal Chandelier’s at every opportunity and something that’s not lucky to provide a rate of return. So one of the things that they’re always going to look at is the, the square footage for sure. Um, and so should you assume that the lender will know anything about the neighborhood? You should assume the lender knows absolutely nothing about the neighborhood. Um, and, and let’s take this in perspective because a lot of times you’re going to submit this business plan and you’re submitting this business plan as an experienced professional in the industry.
Um, you know, whether construction, professional, medical professional, or any other business professional, your super experienced in your industry and you’re super experienced in your city. And you might even be talking to a banker who, you know, your front line banker is also familiar with the city and they might, you know, let on that their experience in the industry. But a lot of times that plant is going to go to an underwriter who doesn’t even live in the same city. So it’s an underwriter who works with the bank. So your banker sends it to an underwriter within their bank, uh, that likely works in a completely different city. So you should be very, very specific about the demographics of that neighborhood and you know, the, um, you know, what the, the foot traffic is or the car traffic is in front of it or you know, the, the income levels of that neighborhood. Reach out now for the most amazing Edmonton Business Consultant today!
If they’re specific, you know, if they’re critical to your business plan, you better outline them because the lender a is likely not going to know anything about your neighborhood. Uh, again, at all, all levels of that lender, especially the underwriter, uh, are the number of exam numbers normally a constraint for medical practices. Yeah. So the number of exams that you can actually, you know, complete in that facility. So started looking at the exam rooms and how long it takes to complete each exam. I mean, you need to know that because if there’s only a certain number of exam rooms and there’s only, it takes so long to complete it, each exam that gives you the number of exams that you can actually complete in that facility. Um, it starts to give you like the constraint where it doesn’t matter how much money you spend on, on marketing, you’re never going to get above this level because there’s only so many patients that you can see at that facility Be sure to call us now at 780-665-4949 or go to spurrell.ca as soon as you can!
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Um, well the opera, sorry. Well, the hours of operation a set, the capacity constraints almost always. Yeah. So the hours that you have, what time do you open, what time you close? You know, we start looking at that example. Now we know the number of exam rooms, then we know the number of exams we can fit in in a day. Um, that’s gonna set the, you know, the, the constraints for sure, uh, is those hours. So writing down those hours of, of when it’s open, when it closes or you open Saturday, are you not open Saturday? Please call now if you want the most amazing Edmonton Business Consultant today! Are you open on evenings? Are you open Sunday? Those are constraints and they should, you know, flow through. Do your, your financial projections and you know, potentially the lender is also testing the reason, ability of, of your projections based on those constraints as well. Yeah. Um, so do many businesses have to extend hours to increase their revenue? They do. They don’t want to hear,
they don’t want to hear that. They don’t want to hear that. They want to hear, we can go from a million to 2 million work, 10 to three every day. Yeah. And sometimes the answer is, you know, we can hit your revenue projections, uh, or you know, sometimes the answer is you’re going to run out of cash unless you start opening evenings, unless you start opening weekends. And it’s often not the conversation that they want to hear, but it’s often the truthful conversation and there’s, there’s no financial projection that you could assemble without a deep understanding of those hours and the capacity and the capacity constraints that those hours represents. So often that is a more realistic retort that comes back when people want realistic projections and actually a solution to the problem rather than to be a, you know, pacified. Yeah. Sometimes the hours have to be adjusted and expanded. Yeah. That’s great. Um, so is it important to understand the capacity before doing financial projections?
Yeah. So I mean, doing projections before you understand, you know, things like how big the space is, how many customers you can actually service during the day, what are the hours of operations. Please reach out now if you are ready to get themost amazing Edmonton Business Consultant. So you know, how long that day is to try to do financial projections before those things are understood. Yeah. Know, just create unrealistic financial projections and you’ll that creates that risk that you’re gonna run out of cash. Right? Yeah. And become one of those statistics and become one of, you know, the 50% of Canadian business to go out of business because you didn’t underst understand your capacity constraints and thus your revenue and your income projections were completely unrealistic. So does revenue generally increase suddenly, even if the capacity is increased? No. So you had to think of know business who starting from scratch, you know, they go from zero to, they have all this capacity, but that doesn’t mean all the customers just walk through the door that if you build it, they will come.
Maybe eventually. But I think even in the movie, it took a while. No one showed up for a long time and they had started to doubt themselves. So, um, you know, in real business it takes a while to advertise on that. And so that’s just not just for new starts, but that’s for existing businesses that expand their location and expand their, their capacity. Generally that capacity is willing to have to income increase first and the customers to fill that capacity will happen second. You know, it’s not realistic. That may happen overnight. Even if you have a bit of a wait list. Wait, lists aren’t like, um, you know, uh, existing customers, cause some people on weightless have found other solutions already. And even like I said, they’re waiting and when it comes time to actually start the service, they pull out. Does any business operate at 100% cap capacity longterm?
No, they never operated a hundred percent capacity longterm in almost every business plan that I look at that comes in from clients assumes that they’re going to hit 100% capacity. That means they’re never going to have a severe weather event. They’re never going to have a major staffing problem. They’re never going to have a health risk themselves. They’re never going to take a vacation. Um, the customers are never going to say no to them. They’re going to sell every single customer and they’ll always be booked out. Be sure to call us now if you want the most epic Edmonton Business Consultant. Then they’ll have customers cancel on them. It’s unrealistic. So although you can hit a hundred percent capacity at times, you’ll never sustain that over the long term. So you have to assemble realistic financial projections that you know, never get to capacity, whether that’s 95% or 90% even though your goal is to get to capacity, you have to understand that you’re going to bounce between somewhere less than ideal capacity and to capacity. They’ll always be events that will happen that will prevent you from sustaining 100% capacity all the time. So I think that’s what we have here today. As always, you don’t hit that like and subscribe button. So we can continue to deliver you tips on how to beat the odds at business. And if you have any, you know, comments, you’ll feel free to leave them below so we can respond back and use your input for future videos. Reach out now to spurrell.ca or call now at 780-665-4949 as soon as you can! Thanks very much.