© 2006 October Research Corporation

Operations and Financial Pro Forma Model

Joe PiernockCorporate Development Services

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1. Introductions

2. AfBA Operation

3. Pro Forma Model

4. Contract Negotiation(this afternoon)

Agenda

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Businesses rarely sink by hitting an iceberg….

They usually succumb to a hundred small leaks.

An Observation

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Business and strategic factors:

1. Reduce a coming loss of business

2. Strategic block

3. Reduce business risk

4. Gain the market’s “high ground”

5. Strong partner to grow business

6. Enter a new geographic region

Why bother?

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• Mortgage Originators

• Mortgage Lenders

• Banks

• Mortgage Companies

• Home Builders and Developers

• Real Estate Agents

Potential Partners

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• Title-Related• Title Search• Title Policy• Closings• Property Reports

• Expanded Services• Appraisals• Inspections• Flood• Credit

Potential Products

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• Uncooperative partner• Cumbersome operations

• Can your systems integrate operations?• Can you communicate “to and through”

partner?• Will it increase “leaks” in your processes?

• Cumbersome accounting• Can your systems segregate accounting?• Will it add expense?• Will disagreements waste resources?

• Compliance

Risks

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The Financial Model

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1. Starts with “Applications”

2. Follows business as it flows through the company:• Application• Title Search & Insurance• Close• Appraisal

3. Input into green shaded areas. Everything else is locked.

4. The model can handle multiple locations, but one is OK.

5. The demo contains random numbers that are not meant to be used as guidelines or operational targets.

Revenue Assumptions

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1. The model includes expense categories for large and small companies. Only use what you need.

2. Important: Use the type of measures that fit your situation:

• Fixed, or • Variable

3. Input the correct “Units of Measure”.

Expense Assumptions

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1. Detail Pages – Included so that you can ensure that your results are consistent with your situation.

2. Results – Calculates the following:

• Cash and capital needed to start the AfBA• Cash and capital needed to keep it running• Required manpower• Standard financial statements

3. Partner Overview – a one-page summary

Output

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1. Play with the model.

• Margins are thin. What does it take to succeed?

• What change has the strongest impact on the bottom line?

• Should you offer extended services?

• Can growth starve you for short-term cash?

2. Use the model as a foundation for contract negotiation.

3. If you do not have these business metrics, get them.

Advice