Business Planning: An Informed Path to the Future

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Business Planning An Informed Path to the Future

• Public Radio Capital Nevada Public Radio
• Dennis Hamilton Cynthia Dobek
• Erin Moran
• Evran Kavlak
• June 1, 2006
• PBMA Conference Chicago, IL

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About PRC

• PRCs mission secure and expand public radio in
  communities nationwide.
• Goal Create greater program choices for in-depth
  information, unbiased news, diverse music, and
  cultural programming.
• Non-profit organization supported by grants from
  Ford Fdtn., Surdna Fdtn, and others.
• Leading advisor in planning, securing and
  financing new public radio channels.

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• PRC provides
• Business planning
• Consulting
• Station appraisals
• Brokerage representation
• Acquisition services
• Financial advisory services

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About PRC

• Opportunity for socially conscious investors to
  expand and protect public radio programming.
• Option for station sellers to secure public radio
  buyers.
• Projects completed already have secured public
  radio programming for nearly 22M people.
• www.pubcap.org

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Business Planning An Informed Path to the Future

• Overview of Session
• Why is business planning important?
• Who should be involved in business planning?
• When is a good time to create a business model?
• What types of strategic initiatives should be
  modeled?
• How should the business model be completed,
  evaluated and presented?

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Why is Business Planning Important? A goal
without a plan is just a wish. Antoine
de Saint-Exupery
(French writer and aviator)
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Why is business modeling important?

• It provides an opportunity to assess the
  financial viability of various strategic
  initiatives.
• It helps to identify the resources needed to
  implement the initiatives.
• It helps to determine the time needed to make the
  initiatives successful.
• It allows the organization to look out into the
  future and plan for changes over time.

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Who should be involved? Individual
commitment to a group effort -- that is what
makes a team work, a company work, a society
work, a civilization work. Vince
Lombardi (football
coach)
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Who should be involved?

• Every department finance, development,
  programming, engineering
• Plans should evolve from strategies. The role of
  finance is to create financial models of the plan
  objectives and do so by involving all departments
  in the enterprise.
• People are more likely to support an initiative
  when they are involved from the beginning. They
  develop a sense of ownership and have a vested
  interest.

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When is a good time to create a business model?
Organizing is what you do before you do
something, so that when you do it, it is not all
mixed up. A.A. Milne (writer)
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When is a good time to create a business model?

• In conjunction with strategic planning
• When discussions about changing format, content,
  underwriting policies or similar items come
  up.
• When you have not achieved a prior year budget,
  it is a good time assess what changes might be
  implemented and what the impact might be to
  improve the performance of the station.
• When you want to do anything big, complex, or
  long range.

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What type of strategic initiatives should be
modeled? Without leaps of imagination, or
dreaming, we lose the excitement of
possibilities. Dreaming, after all, is a form of
planning. Gloria Steinem

(journalist)
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What types of strategic initiatives should be
modeled?

• Anything that will impact the station operations
• Change in News Content
• Change in Music Content
• Change in amount of Local Content
• Format differentiation by acquisition
• Signal expansion by acquisition
• New format opportunities
• Modeling collaborations and partnerships
• New delivery method (internet, HD, etc.)

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How should the business model be
completed?Knowledge is of two kinds we know a
subject ourselves, or we know where we can find
information upon it. Samuel Johnson (English
writer)
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How should the business model be completed?
Step 1 Assessment of Existing Operations
FY 2000-FY2005
FY20XX
FY2006
FY2007

• Historical Data
• Financial Performance
• Ratio Analysis

• Current FY
• YTD Financial Performance
• Ratio Analysis

Operating Budget for the Following Fiscal year
Long-Term Outlook
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How should the business model be completed?
Step 1 Assessment of Existing Operations
Sources of Data

• Historical financial statements
• Audience data (CUME, loyalty, core audience,
  etc.)
• Operating Budget (current and following fiscal
  years)
• Membership data (number of contributors, average
  contribution amount, etc.)
• Underwriting data ( of weekly spots typically
  sold, average cost per spot, day-time versus
  night-time costs per spot, etc. )
• Strategic Plan (if available)

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How should the business model be completed?
Step 1 Assessment of Existing Operations (Cont.)

• Historical Financial Performance (Horizontal
  Analysis)

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How should the business model be completed?
Step 1 Assessment of Existing Operations (Cont.)

• Historical Financial Performance (Vertical
  Analysis)

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How should the business model be completed?
Step 1 Assessment of Existing Operations (Cont.)
Ratio Analysis

• Listeners and Members
• Weekly CUME Audience/Population Served
• Sources
• CUME Arbitron Surveys (www.rrconline.org)
• Service Area Population Engineering Studies or
  US Census Data
• of Contributors/CUME Audience

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How should the business model be completed?
Step 1 Assessment of Existing Operations (Cont.)
Ratio Analysis (Cont.)

• Operations
• Membership Revenue per Listener
• Underwriting Revenue per Listener
• Fundraising Revenues/Non-Federal Financial
  Support
• Fundraising costs as of Fundraising Revenues

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How should the business model be completed?
Step 1 Assessment of Existing Operations (Cont.)
Long-Term Outlook
How do we want to position our organization for
the future?
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How should the business model be completed?
Step 2 Identifying Strategic Initiative Options

• No change in existing programming
• Increased News content
• Increased Music content
• Format differentiation by acquisition
• Signal expansion by acquisition
• New format opportunities

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How should the business model be completed?
(cont.)
Step 3 Refining Strategic Initiatives

• Costs
• New personnel (administrative, development, on
  air etc.)
• Programming (content acquisition, subscription
  services etc.)
• Administrative (utilities, supplies etc.)
• Development (mailing, telemarketing etc.)
• Investment in Capital Assets (new equipment)
• Station acquisition costs
• Internal Capacity (cash reserves, capital
  campaign etc.)
• External Financing

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How should the business model be completed?
(cont.)
Step 3 Refining Strategic Initiatives

• Benefits
• Increased listeners
• Increased loyalty
• Increased membership
• New major gifts
• New underwriters
• Other (Foundation or Friends revenues)
• Increased financial strength
• Increased service

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How should the business model be completed?
(cont.)
Step 3 Benchmark Analysis

• Have any other stations taken the same strategic
  decisions?
• How do they perform?
• Change in CUME
• Change in Membership Underwriting Income
• Change in operating expenses
• Sources to use
• Arbitron Database www.rrconline.com, station
  websites, National/regional publications, contact
  other station personnel.

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How should the business model be completed?
(cont.)
Step 4 Quantifying Benefits (short-run)

• Listeners
• Estimated change in CUME

• Benefits
• Increased membership
• New major gifts
• New underwriters
• Other

• Listener Sensitive Income
• change in membership penetration
• change in underwriting spots sold
• of new major givers
• Average gift from new major givers

• Other Income
• CPB Grants
• Other revenues sources

Benchmark Analysis
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How should the business model be completed?
(cont.)
Step 5 Quantifying Costs (short-run)

• Costs
• New personnel
• Programming
• Administrative
• Development
• Investment in Capital Assets
• External Financing

Benchmark Analysis
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How should the business model be completed?
(cont.)
Step 6 Modeling (long-run)

• Other Factors
• New Technologies
• Competition
• Institutional Support
• Government Support
• Inflation
• Other

• Assumptions
• growth in
• Population
• CUME
• Members
• Underwriting
• Other Revenues
• Expenses

Benchmark Analysis
Assessment of Existing Operations
Cost Benefits of the Strategic Decision
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How should the business model be completed?
(cont.)
Modeling SAMPLE-
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How should the business model be completed?
(cont.)
Modeling SAMPLE-
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How should the business model be completed?
(cont.)
Modeling SAMPLE-
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How should the business model be completed?
(cont.)
Modeling SAMPLE-
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• Evaluate the models by
• Financial outcome
• Feasibility
• Timing
• Public Service potential
• Compliance with the mission statement
• Organizational readiness
• (Is the organization ready for the change?)

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How should the business plan be presented?

• Audience can be Upper Management, Stakeholders,
  The Board, Banks or other lenders (foundations).
• Summarize the initiative, business justification,
  expected results (good or bad), time to
  implement, and social and financial impact.
• Utilize graphics to quickly illustrate the
  expected outcomes.

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When you discover your mission, you will feel
its demand. It will fill you with enthusiasm and
a burning desire to get to work on
it. W. Clement Stone

(philanthropist writer)
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QUESTIONS