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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Management and Holistic Management International/Healthy Land/Sustainable
Future are registered trademarks of Holistic Management International. Copyright
©2012 Holistic Management International. All rights reserved.
Holistic Financial Planning
How it has worked for PACE
Plan for Success!!!!
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HOLISTIC MANAGEMENT INTERNATIONAL
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning
Daily
Action List
Targets (Intermediate)
Objectives
(Long Range)
Strategy
Policy
Holistic Goal Quality of life, Behaviors & Systems, and Vision Statements
Financial Decisions Productivity Pyramid
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning
• Making financial decisions toward your Holistic Goal
• Facilitating important conversations
• Analyzing your enterprises
• Assessing potential new enterprises
• Planning for profit upfront (not just production)
• Defining income streams
• Calculating a cap for all expenditures
• Prioritizing expenses to reinvest in your operation
• Monitoring your plan proactively
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning The Nine Steps to Financial Success
#1
Annual Review
#2
Assess Starting Net Worth
#3
Plan Income
#4
Plan Profit
#5
Enterprise Investment
Analysis
#6
Prioritize Expenses
#7
Cash Forecast
#8
Assess Ending Net Worth
#9
Monitor for Results
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning Financial Planning vs. Accounting
Production vs. Profit Focus
Traditional Model:
I – E = P
Holistic Financial Planning:
I – P = E
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning
Plan
The best we can do at a given time
Replan
Does not mean our first plan was wrong.…conditions changed.
…allows us to reach our goals.
…we are responsible.
…we make it happen
…what doesn’t change is our Holistic Goal
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning
What’s your Process?
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?
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HOLISTIC MANAGEMENT INTERNATIONAL
Step One: Annual Review - Assess
Progress Toward Holistic Goal
Logjam
Is there anything keeping us from making SIGNIFICANT
progress toward our Holistic Goal? (Across the operation)
If so, this is a Top Priority Investment.
Adverse Factors
Are other factors adversely affecting the business as a
whole?”
These investments are also top priority.
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Two: Assess Starting Net
Worth - Building Net Worth
Assets
Cash (last year sale goats) 6,000
Hay, grass 2,000
Equipment (list) 12,000
Other (savings) 50,000
Total $70,000
Liabilities
Loan $1,000
Total $1,000
Net Worth $69,000
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Two: 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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HOLISTIC MANAGEMENT INTERNATIONAL
Step Three: Planning Income
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Three: Planning Income
Tools to help
•Your Holistic Goal
•Gross Profit Analysis
•Enterprise Budgets
•Your Dreams
•Your Passion & Skills
•Matches to your infrastructure and
resources (management inventory)
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Three: Planning Income
Income PACE July, 2013 Sept., 2013
Goats 50 hd. $120/hd. $6000
Tomato 100Bu. $40/Bu. $4,000
Total Income $10,000
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Four: Planning Profit
Income
$10,000
Expense
$3,000 $1,000
Debt Service
$1,000
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Four: Planning Profit
I want a
profit of X$ or X%.
For:
Savings (buffer)
Investing (addressing key problems like logjam, enterprise weak links, or adverse factors)
Increased Net Worth
Improved Quality of Life
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Five: Enterprise Investment
Analysis
Resource Conversion
Product Conversion
Marketing Conversion
Sunlight and/or raw
resources including
money
Products and/or
services
Marketing of products
and/or services
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Five: Enterprise Investment
Analysis
• A tool/method to prioritize expenditures
• Perform it on each enterprise.
• Identify the weak link and brainstorm solutions.
• Use the testing questions to select solutions.
• Cost out solutions and record it on the “Investment”
Worksheet.
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Five: Enterprise Investment
Analysis – Identify Weak Link
Resource Conversion
Top Priority Investments:
• Education (about how to improve resource)
• Fences
• Water Development
• Soil Amendments
• Additional labor for planting/harvesting
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Five: Enterprise Investment
Analysis – Identify Weak Link
Product Conversion
Top Priority Investments:
• Education (how to improve product)
• Expense to get more milk per animal
• Get more animals or better genetics
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Step Five: Enterprise Investment
Analysis – Identify Weak Link
Marketing Conversion
Top Priority Investments:
• Education (how to sell your product)
• Change Enterprises (due to market conditions)
• Time of Marketing
• Brochure
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Six: Prioritizing Expenses
• Be a price maker not a price taker
• Invest in your business (all expenses are not equal)
I – P = E
Top Priorities
Maintenance
Liabilities
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Six: Prioritizing Expenses
• T: Top Priority Investment. Fix the weak link (or
logjam or adverse factor).
• L: Liabilities (essential and constant or morally
obligated)
• M: All expenses that aren’t “T” or “L” are
Maintenance.
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Step Six: Prioritizing Top Priority
Expenses
T = 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
liabilities, then top priority investments. Logjam is
last to cut.
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Step Six: Prioritizing Liability
Expenses
L
Land taxes
Lease fees
Loan interest
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Six: Prioritizing Maintenance
Expenses
M
Living expense
Phone
Utilities
Repairs
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Step Six: Prioritize Expenses
Expense PACE Jan 1/06 Dec 31/ 06
(T) Goats, crop $4,000 Mar.
(L) Lease $500 Jan.
(M) Water $500 yr.
Total Expense $6,000
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Step Seven: Cash Forecast
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Step Seven: Cash Forecast -
Balance Plan
Subtract total expenses from total income plus the profit
you planned to make sure your PLAN balances. If your
PLAN does not balance you can:
• Cut expenses
• Use other revenues to offset deficit
• Increase income (higher prices, sell more products,
change enterprise mix, adjust production systems, etc.)
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Seven: Cash Forecast
Goats Tomatoes
July Plan 3,000
- Actual 2,500
Difference (500)
Cumulative Difference to date (500)
Sept Plan 3,000
- Actual 5,000
Difference 2,000
Cumulative Difference to date 1,500
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Step Eight: Ending Net Worth
Assets Start End
Cash $6,000 $7,500
Hay/grass $2,000 $3,000
Equipment (list) $12,000 $11,000
Other (Savings) $50,000 $49.000
Total $70,000 $70,500
Liabilities Start End
Bank Loan $1,000 $0
Total $0 $0
Net Worth $69,000 $70,500
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Eight: Net Worth & Profit
Profit=Increased Net Worth
An Increase Can Be Held As:
Increased Assets
Decreased Liabilities
BUT
Lost Profit ???
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HOLISTIC MANAGEMENT INTERNATIONAL
Step Eight: Net Worth & Profit
Strategic Growth in Operation
(5-10 year program to double grass/stocking rate)
# of Goats 50 60 70 80 90 100
Income/Goat $160 $160 $160 $160 $160 $160
Variable Cost $60 $60 $60 $60 $60 $60
Gross Profit $100 $100 $100 $100 $100 $100 $100
Overheads $10 $9 8 8 8 8
Net Profit/Cow $90 $91 $92 $92 $92 $92
Profit/Ranch $4,500 $5,460 $6,440 $7,360 $8,280 $9,200
Increase +1.21 +1.43 +1.63 +1.84 +2.04
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Step Eight: Net Worth & Profit
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!
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Step Nine: Monitor & Control Your
Plan
Do a financial plan and monitor it
• A map of where we are going
• A light to travel by
• A way to check progress
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Testing Financial Decisions
The Seven Testing Questions
1. Root Cause
2. Weak Link Tests: social,
biological, and financial
3. Comparing Options
4. Gross Profit Analysis
5. Input Analysis
6. Vision Analysis
7. Gut Check
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Financial Planning
Plan
The best we can do at a given time
Replan
Does not mean our first plan was wrong.…conditions changed.
…allows us to reach our goals.
…we are responsible.
…we make it happen
…what doesn’t change is our Holistic Goal
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HOLISTIC MANAGEMENT INTERNATIONAL
Holistic Management and Holistic Management International/Healthy Land/Sustainable
Future are registered trademarks of Holistic Management International. Copyright
©2012 Holistic Management International. All rights reserved.
Lisa Bellows, Ph.D.
[email protected]
(940) 736-3996