Holistic Financial Planning: Healthy Land. Healthy Profits.

Holistic Management

Holistic Financial Planning:Healthy Land. Healthy Profits

Strategicobjective4-05 Part 3 Chapter 13a.m4a

What are your dreams?

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Protect your dreams, always wear a thick skin

Intro to Holistic Financial Planning

Holistic Financial Planning is a component of Holistic Management. It was developed by Alan Savory, founder of the Savory Institute

http://www.savoryinstitute.com/imported-20100211170933-home/month/may-2010

HM is taught by Certified Educators, materials and support can be obtained through Holistic Management International

http://www.holisticmanagement.org/







Why are you in Business?

Family Community

Recreation & Free Time

A Good Quality of LifeHealth

HappinessMoney

True or False:Money is the most important thing in

your life and the driving force behind why you are in business.

Cross out the items that are not important to you:

What tools do you use to plan your business?

To market it?

To capture data?

Are you monitoring your progress? How often?

Define What You Are Managing Towards

Describe the Life you want (holistic goal ): What Quality of life do you want? What behaviors, beliefs, and

infrastructure do you need to realize this quality of life?

Describe how things need to be in the future to maintain the life you want▪ Who will run the business? What must the surrounding community & customers be like? What resources will you need?

Manage toward what you want… rather than what you don’t want

Holistic Goal – Write it down

What must be done/produced toachieve the desired Q of L

Quality of Life

What the future mustbe like to sustain this

Write a quick temporary Holistic Goal for your business

What are you managing your Business towards?

What do you need to produce to achieve your business “goals”?

What will you need to have in the future to continue achieving your business goals?

Example Holistic Goal

Quality of Life:•Our life is low in stress, manageable, comfortable and includes weekly time out for fun.

•We are financially comfortable, live simply, have ample income to travel, see family and friends, and put aside money for retirement

•We are physically healthy and fit, challenged intellectually and feel good about what we do everyday.

Our products help enrich our customers lives, protect the earth’s resources, and promote social justice and peaceForms of Production:

Future Resource Base:

Example Holistic Goal

Forms of Production:•We make time weekly to practice holistic financial planning to ensure adequate savings and to guide our spending•We consciously choose the raw materials and labor that goes into our products to ensure our social and environmental standards are met•We encourage our staff to accomplish their goals, & empower them through education

Future Resource Base:•We live gently consuming less than we desire, minimizing our impact on the planet•We actively support organizations and individuals that support our vision

Describe Your Business Management Structure

Think about what needs doing…Who is in charge? Who reports to whom?

•Write down who is responsible for each job. •How many jobs are you doing? Is that reasonable?•Could anyone else do some of your jobs? •What are the standards that need to be met? •Are the necessary steps written down?•Do you have job descriptions for each job? •Do you have a good communication system? •What is your weakest link?

What’s Your Organizational Structure?

Have You Documented Your Critical Business Systems?

Would your business be able to run without you?

Holistic Financial PlanningDo you use your time as the business owner to focus on

the $100/hr task of financial planning and

management or do you focus on the $10/hr work of

production?14

Holistic Financial Planning• Make sound financial decisions that

move you towards your holistic goal• Plan for profit and cap expenses so

you achieve it • Prioritize expenses to maximize

investing in the weakest link in your chain of production

• Analyze your enterprises so you know which ones give you the biggest return on your investment of time/energy/money

• Monitor your plan and make adjustments proactively so sound management decisions can be made and profits achieved

Holistic Financial Planning

Traditional Business Plan Financials

I – P = E

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WealthGenerating

Maintenance

Inescapable

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Get your team together and figure out a time and process to make the financial plan happen.

How do you integrate what you already do with this process?

What’s Your Process?

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Testing Financial Decisions

Marginal Reaction

Gross Profit Analysis

Energy/Money Source and Use

Sustainability

Society and Culture

Cause and Effect

The Seven Testing Questions include:

1. Cause and Effect2. Weak Link Tests:

social, biological, and financial

3. Marginal Reaction

4. Gross Profit Analysis

5. Energy/Money Source and Use

6. Sustainability7. Society and

Culture

What’s the Point? Making Better Decisions

Before making decisions, look at your Holistic Goal: 1. What are all the creative alternatives you

could consider?2. If you are facing a problem: is the

proposed action/expense addressing the real root cause of this problem?

3. Will the action you are considering upset anyone whose support you need?

4. Which of the actions will bring the greatest return on your investment of time/money /energy (ie. bring you closest to your holistic goal)?


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Starting Net Worth

Monthly Income & Expense

Ending Net Worth

We plan until we get a result we like. Relieves stress, worry and anxiety. We are in control.

We will make it happen!


9 Steps for Financial Success

#1 Review progress toward your holistic goal

#2 Assess starting net worth

#3 Plan Income

#4 Plan Profit

#5 Define weak link per enterprise

#6 Plan & sort expenses (WIM)

#7 Cash Flow

#8 Asses ending net worth

#9 Plan, Monitor, Control, Replan

Step 1: Assess Progress Toward Holistic Goal

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LogjamIs there anything keeping us from making SIGNIFICANT progress toward our holistic goal? (Across the operation)

If so it gets first priority for time or money. This is a wealth generating expense.

Often is leadership, attitude, debt, lack of capital

Adverse Factors“Are other factors adversely affecting the business as a whole?”

This is a wealth generating expense.

Could be location, lack of reliable labor, competitive market, etc.

Step 1: Assess Progress Toward Holistic Goal

Step 2:Beginning Net Worth

Assets:Inventory $200,000Real estate $75,000Equipment(list) $50,000Other $200,000Total

$525,000Liabilities:Bank loan $100,000Op. loan $25,000Total $125,000Net worth

$400,000

How to Increase Net Worth?

Increase Assets New equipment Livestock Land Supplies and Inventory

Cash on Hand Decrease liabilities such as debts

and loans

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Step 3:Planning Income

26

27

Income July August

Sept Total

Sales product x $1000

$1000

$1000

$3000

Sales Service y $2000

$1000

$1000

$4000

Total Income

$7000

Step 3:Planning Income

Step 4. Plan for Profit

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Decide what you need to make, for the effort to be worth your while: I want a profit of $ 1M or 75%.

•How much Savings (buffer) do you need?

•How much for Investing (wealth generating or addressing key problems like logjam)?

•How much for Increased Net Worth?

•How much for Improved Quality of Life?

Planning Income & Profit

Income $100,000

Expense

$50,000

$40,000

Debt Service $20,000

Profit A

50%Profit B40% ,but alsoreducing

debt

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The 9 Steps to Financial Success



#3 Plan Income

#4 Plan Profit#5 Define weak link per enterprise


#7 Cash Flow

#8 Assess ending net worth


Step 5. Financial Weak Link

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Resource Conversion

Product Conversion

Marketing Conversion

Sunlight and/or raw resources including money

Products and/or services

Marketing of products and/or services

Chain of Production


32

Resource Conversion

Product Conversion





Chain of Production

Do you need to convert more sunlight/raw material to have something to make into product?


33

Resource Conversion

Product Conversion





Chain of Production

Are you making your raw materials into a product that you can sell, or are resources being left to “rot on the vine”?


34

Resource Conversion

Product Conversion





Chain of Production

Do you need more customers because you have have more product than you can sell?


35

Wealth-Generating Expenses:

•Education (about how to improve resource)

•Capitol Improvements

•Additional labor for resource conversion

Resource Conversion



•Education (how to improve product)

•Expense to get more efficient

•Get more product per unit of effort or cost or better quality

Product Conversion


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•Education (how to sell your product)

•Change Enterprises (due to market conditions)

•Time of Marketing

•Brochure


Step 6:Prioritizing Expenses

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W: Generate wealth. Fix the weak link (or logjam or adverse factor).

I: Inescapable. (essential and constant or morally obligated)

M: All expenses that aren’t W or I. Maintenance.

Step 6: Inescapable Expenses

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•Land taxes

•Lease fees

•Loan Interest

I Expenses

Step 6:Maintenance Expenses

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•Living expense

•Phone

•Utilities

•Repairs

M Expenses

Step 6: Prioritizing Expenses

41

You want to free up as much money to invest back into the business in the best place to move you toward your holistic goal.

When adjusting cash flow, cut maintenance first, then inescapable, then wealth generating. Logjam is last to cut.

Brainstorm additional income sources before cutting wealth generating expenses.

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#3 Plan Income

#4 Plan Profit



#7 Cash Flow



Step 7:Cash Flow

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Step 7. Cash Flow

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45

Step 7.: Cash Flow

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Step 8:Ending Net Worth

Assets: Start EndCows 250 head @ $800 $200,000

End: 300 head@ $800 $240,000Hay 1500 tons @ $50 $75,000 $75,000Equipment (list) $50,000 $45,000Land $200,000 $200,000Savings and checking $15,000 $10,000Total $540,000

$570,000

Liabilities:Bank loan $100,000 $90,000Operating loan $25,000 $20,000Total $125,000

110,000Net worth $415,000

$460,000

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Step 8:Net Worth & Profit

Profit=Increased Net WorthAn Increase of $45,000Can be Held As:

Increased AssetsDecreased LiabilitiesCash

Net Worth & Profit

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Increased Net Worth

Plus Living Improved Quality of Life.

Are we satisfied?

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#3 Plan Income

#4 Plan Profit



#7 Cash Flow



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Step 9:Monitor and Control Your Plan

Monitor within 10 days after month’s end

Control within an enterpriseReplan if control is not possible

Step 9:Monitor and Control Your Plan

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Now the Choice is Yours:

Stumble in the dark, and be a victim, watch business flounder and wonder why you feel stressed out making financial decisions, Or

Do a Financial Plan/Develop Discipline to Monitor It.

•A map of where we are going•A light to travel by•A way to check progress•Knowledge that all our hard work is taking us where we want to be

Thank you, send any questions to me, Mary Johnson at [email protected]

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Holistic Financial Planning: Healthy Land. Healthy Profits.

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