AN INTRODUCTION TO EXPENSE REDUCTION ANALYSTS

Ted LeitchDirector – Central and Southeast Texas

TLEITCH@EXPENSEREDUCTION.COMWWW.EXPENSEREDUCTION.COM

Who is ERA?

• A premier cost management consultancy which A premier cost management consultancy which identifies and implements effective cost reduction identifies and implements effective cost reduction strategies.strategies.

• We assist our clients in increasing their profitability We assist our clients in increasing their profitability through cost reduction while meeting their quality through cost reduction while meeting their quality and operational requirements.and operational requirements.

• We focus on non-core operating expenses (G&A). We focus on non-core operating expenses (G&A). Savings goes directly to the bottom-line.Savings goes directly to the bottom-line.

• We work on a contingent fee basis.We work on a contingent fee basis.

Demonstrated Experience and Results

Our Profile

• Established in 1992.Established in 1992.

• Over 700 consultants operating in more than Over 700 consultants operating in more than 30 countries.30 countries.

• Greater than 14,000 projects completed world-Greater than 14,000 projects completed world-wide.wide.

• Average cost savings across all expense Average cost savings across all expense categories is 19.7%.categories is 19.7%.

Demonstrated Experience and Results

A Global Cost Reduction Consultancy

Argentina Australia Austria Belgium Brazil Canada Chile Colombia Cyprus Ecuador Finland France Germany Greece Hungary Ireland Italy Jordan Korea Luxembourg Mexico Morocco Netherlands New Zealand Panama Portugal Spain Switzerland United Kingdom United States Uruguay

Some Key Clients

Broad Industry Experience

Expense Categories – Non Core

Couriers

Factory Consumables

Fleet Management

Food Services

Fork Lift Services

Freight

Information Technology

Insurance

Janitorial Services

Laboratory Supplies

Merchant Card Fees

Office Products

Packaging

Payroll Processing

Print

Records Management

Telecommunications

Temporary Labor

Uniforms

Utilities

Waste Management

Customer Specific

Common Savings Opportunities for Businesses Worldwide

Why ERA?

Best-In-Class Expertise Best-In-Class Expertise Independent and ObjectiveIndependent and Objective

Transparent ProcessTransparent Process Strong Implementation FocusStrong Implementation Focus

Contingency Fee StructureContingency Fee Structure

We Implement. Not Just Recommend.

Column1Baseline

20% CostReduction

EquivalentIn Sales

Revenue $ 100 $ 100 $ 140

Direct operating costs $ 35 $ 35 $ 49

Labor costs $ 35 $ 35 $ 49

Non-core indirect costs $ 20 $ 16 $ 28

Net profit $ 10 $ 14 $ 14

After tax (40%) $ 6 $ 8 $ 8

Business Value = 6 P/E $ 36 $ 48 $ 48

Cost reduction can be profitable

20% cost reduction = 40% increase in Net Profit$4M in expense savings = $40M revenue increase

Our Compensation

• Half of actual measured savings for 24 months after implementation

•10% deposit of estimated savings paid upon acceptance of recommendation and 10% deposit paid upon implementation

•Actual fee is billed monthly for the 24 months based on actual realized savings less a credit for amortizing the deposits

No Savings = No Fee

Client Case Studies - Examples

• Mortgage Company• $1,000,000 spend on small package freight and courier costs reduced by 16% with incumbent vendor

• Architectural Firm• $74,000 spend on office supplies costs reduced by 55% with leading new vendor

• Book Distributor• $108,000 spend on merchant card processing costs reduced by 34% with a new vendor

• Cable Manufacturer• $1,500,000 spend on ground freight - costs reduced by 18.4% with incumbent vendor

• Medical Charity• $105,000 spend on telecom costs reduced by 51% with incumbent vendor

• Retailer• $763,000 spend on telecommunications costs reduced by 30% with leading new vendor

The ERA Process

Deliv

era

ble

Act

ivit

ies

Tim

e

Analyze Recommend Implement

3 – 4 weeks/category

Define project scope and sign agreement

Obtain financial data

Obtain incumbent supplier contracts

Understand volumes and activity

Understand business requirements with stakeholders

3 – 4 weeks/category

Confirm business requirements

Prepare RFP

Identify and meet relevant suppliers

Manage bidding process

Benchmark costs and assist in supplier selection

24 months

Appoint supplier

Facilitate/assist implementation

Measure actual savings

Ongoing monitoring of supplier relationship and contract terms

BaselineReport

RecommendationsReport

Implementation24 Month Savings

Reviews

ER

AFe

es

None10% of

Total Savings

10% of Total Savings/Balance Over

24 Months

Critical Success Factors

High Level Project SponsorHigh Level Project Sponsor

++

Communicate project goals to all key stakeholdersCommunicate project goals to all key stakeholders

==

Project “buy-in” across the organizationProject “buy-in” across the organization

Find Extra Profit

Thank you for your time and interest.

Ted LeitchDirector – Central and Southeast Texas

TLEITCH@EXPENSEREDUCTION.COMWWW.EXPENSEREDUCTION.COM