Activity 2: What are the key business drivers?
What are the main Key Success Factors that John needs to consider before he decides to proceed with his growth plans?
Activity 3: What revenue is earned?
From Activity 2, John has estimated that his median loan size is $350,000 and that the average life cycle of the loans he generates is 4 years. Assuming the same commission structure of 0.50% up front, 0.10% 1st year trail commission and 0.20% commission for subsequent year trail commissions, what is the average income per loan for John’s brokering business?
Use the same discount rate as suggested in the example above.
Median Loan $_
|
Assume average loan life is 4 years |
||||
Commission |
Year 0 |
Year 1 |
Year 2 |
Year 3
|
Year 4 |
Up Front
|
0.50% |
||||
Trail commission
|
0.10% |
0.20% |
0.20% |
0.20% |
|
Remaining Balance after Run-Off
(20%)
|
$ |
$ |
$ |
$ |
$ |
Revenue
|
$ |
$ |
$ |
$ |
$ |
Discount Factor (Use 20% rate) |
1.0000 |
0.8333 |
0.6944 |
0.5787 |
0.4823 |
Present Value of Revenue
|
$ |
$ |
$ |
$ |
$ |
Net Present value of Revenue |
$ |
Activity 5: What Are the Other Breakeven Points?
Use the information on the previous pages (loan margin, and total costs for each business model) to calculate the BEP for each model.
Activity 6: What should John consider is an adequate level of profit?
What advice would you give John about the profit target he should work towards?
Activity 7: How many loans does John need to sell?
Assume John is considering starting either with an administrative assistant and a small office, or with a larger office and two sales staff as well as an administrative assistant. How many loans will the business need to sell to achieve the profit target?
Activity 8: What changes would you make to the point at which a new model is introduced?
Examine the line graph and suggest what changes you would make in terms of the number of loans that should be achieved before additional staff and other resources are introduced?
Activity 12: What activity levels will be needed for each model?
Consider John’s choices of broker models. Remember the breakeven point at profit planning targets? If we apply the Pareto Principle, how many people will John need to prospect and subsequently qualify to make the BEPs?
Activity 14: How do we generate leads?
Try to list as many sources and methods of generating leads for your products. Don’t eliminate any ideas until you have completed the list, and you need to review those sources first.
Consider what strategies could be used to use the list you have generated to develop new leads.
Lead Source | Strategy to use |
Activity 25: What is your Scorecard?
Use the table below to develop a Scorecard: Focus on the assumption that you already have a broker business but now want to consolidate and increase the scale of the business.
Scorecard Area |
KSF (Key Success Factors) |
Strategy |
Measure (KPI) |
Financial
|
|
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Customers
|
|
||
Business Processes
|
|
||
Learning
& Growth (People)
|
Describe how you would set-up a break even chart to plan your sales activity and manage resources.
How would you recommend a business to incorporate ethical practices into a broker business?
Why is discounting of cash flows used to work out the true value of profits?
Explain how lead generation is developed. What top three or four sources would you utilise?
How are business buyers different to retail buyers when providing finance products?
Why is it important to review and adjust the business plan in your Organisation/business? How are such changes documented?
What innovations (including the utilisation of existing, new or emerging technologies,) are used to optimise business performance