Opex, Capex, Ebitdar… these were all terms being used with ease by the most recent ALTO speaker, who delivered a business insight seminar to members in Berlin.
Staying close to the financial operations of a business is vital for all company owners, who are otherwise "missing a trick”, explained Andrew Needham, CEO of Embedding Performance. An expert in understanding how running a tight financial ship leads to better steering of any company, he delivered an interactive, intense afternoon designed to get members thinking about balance sheets, measuring success, growing a company and acquiring a new one.
A company’s accounts will never provide answers, Needham counselled, but they will tell you where to ask the right questions.
He got ALTO members to interpret income statements, balance sheets and cash-flow statements from a fictional language school to understand how financial accounts offered a healthcheck of a company and highlighted areas for concern.
"People think they measure KPIs [Key Performance Indicators] when they have Key Results Indicators (KRIs),” he told the audience. "You have to understand what KPIs are and how they happen to see their value.” KRIs he listed as Profit margin, market share, student numbers, student satisfaction, staff retention, explaining that a KPI would be a non-financial measure that is essential to driving achievement of KRIs.
Delegates had a discussion on how best to value a business – with a consensus that basing a valuation on cash-flow takes into the account an investment made into a business, whereas an EBITDA figure does not. Knowing how to read the financial accounts well would be crucial if making an acquisition, delegates soon understood.
Needham used insight from other sectors such as the airline industry and the UK postal service to help members understand how accounts can be managed when income is received for a product or service that is not delivered straight away; very pertinent to both education agencies and language schools.
When consulting for the postal service with Ernst & Young, he gave an interesting example of how good financial management led to a sound business outcome. He explained that paying tax on "revenue” when stamps were sold was an accounting anomaly, as the tax was not due until the stamp was actually used. A simple accounting shift – meaning a decrease in revenue and profit recorded, while cash remained stable – meant a saving of millions of pounds in tax. (The postal service had statisticians who were able to estimate/calculate how many stamps were bought and unused).
Needham also covered the financial evolution of companies, pointing out that capital growth in the value of a business achieves the same outcome for shareholders as paying dividends. Microsoft, set up in 1973, paid its first dividends 30 years later.
Debt was not always a problem, either, he advised. "Debt is only a problem if you can’t afford it."
The above insightful professional development seminar was part of the ALTO Day, held as usual on the opening day of the ICEF Berlin Workshop and which this year attracted 98 participants.
The association held its Annual General Meeting in the morning where amongst other plans, the Board presented a blueprint from an independent accounting firm to launch an industry wide benchmarking exercise in 2014. ALTO would look to run this as a self-funding project, but is also prepared to provide some financial support if necessary.
The membership also elected a new Board during the meeting, which is now comprised of: Juan Manuel Elizalde ASEPROCE, David Brown (Chairman, ISIS Education), Leanne Linacre (LILA*Liverpool), Andrew Mangion (Treasurer, EC English Language Centres), Inigo Alvarez (Astex) and Thiago Espana (World Study Brazil). Photo below.
During our networking lunch Markus Badde, CEO of ICEF received the ALTO Honorary membership award for his outstanding contribution to the language travel industry. Please see photo of Markus and David Anthonisz outgoing Chairman of ALTO to the right.
ALTO events are increasingly gaining a reputation for their outstanding guest speakers and their value to Industry leaders, and the Berlin event was no exception, with 85% of participants rating the speaker Andrew Needham excellent or very good, and 82% rating the take home value of the event excellent or very good.
"There's nothing else like it [ALTO]. The focus on professional development in the first few years of ALTO has been really good and again nobody is doing it as well. You do a lot of networking, and at the same time you get to develop yourself professionally, so I think it's extremely valuable" - Jan Capper, IALC
"To have a group of people who've been through it, done it before and experienced it, then to discuss it ... it's fascinating. It's very hard to get this kind of group of people together in one place in other circumstances." - Ian Pratt, Lexis English & Lexis Korea
"It makes me want to look into it [finances] more and to take charge of this area of the business which obviously is incredibly important" - Remco Weeda, CERAN Belgium
The full length of Andrew Needham’s financial seminar is available on the ALTO website members’ area. Please log in, pull your cursor over Document Store menu item (only visible when you are logged in) and select "Andrew Needham video”. To see ALTO’s future events, please visit the webpage: 2014 Events