Scoreboard

Press to see the Offtoa Scoreboard

The Offtoa Scoreboard provides a quick snapshot of the financial health of your company. It shows the state of twelve key financial indicators (rows) over as many consecutive years as you have chosen to examine (columns).

In general,

• A red light means the financial indicator is unhealthy for the fiscal year
• A yellow light means the financial indicator is on the border between healthy and unhealthy for the fiscal year
• A green light means the financial indicator is healthy for the fiscal year, and
• A green light with an exclamation mark (hereinafter called green bang) means the financial indicator is unbelievably (literally!) good (and thus not healthy for you as a business planner) for the fiscal year.

Let's look at specific rows in the scoreboard:

The colors indicate whether the company is experiencing revenues during each of the fiscal years. Here is what colors mean specifically:

• Red light means zero total revenues for the fiscal year.
• Yellow light means total revenues for the fiscal year under $1000.
• Green light means total revenues for the fiscal year over $1,000.

Here are some typical sets of indicators and what they mean:

• Red, then yellow, then constant green: Typical for a company that requires at least a year of ramp-up time before generating revenue. Ramp-up could be necessary to perform such activities as (a) research and development in order to create a product or (b) manufacturing, or (c) staffing up a sales force.
• All green: Typical for a company that does not require a year of ramp-up time before generating revenue.
• All red: Typical for a company before you have defined its products, prices or units sold.
• All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party. Unlikely to attract loans. More likely an opportunity for grants and perhaps high-risk investments.
• Green or yellow, then red: It looks like (a) the market for the company's products dried up after the 2nd year, or (b) you forgot to enter prices or units sold for the later years.

Colors indicate whether the company's revenues are growing year-over-year. Here is what colors mean specifically

• Red light means total revenues for the fiscal year are less than or equal to the previous fiscal year.
• Yellow light means total revenues for the fiscal year are less than 50% greater than the previous fiscal year.
• Green light means total revenues for the fiscal year are less than 100% greater than the previous fiscal year.
• Green bang light means total revenues for the fiscal year are greater than 100% greater than the previous fiscal year.

Here are some typical sets of indicators and what they mean:

• All greens: Typical for a high-growth company with a highly optimistic leader.
• Mostly greens, with a few yellows toward the last few years: Probably more reasonable for a healthy high-growth company.
• Green bang, then green, then yellow: Also reasonable for a healthy high-growth company. Very fast growth in first two years. Great growth for two more years. Moderation in later years.
• All red: Typical for a company before you have defined its products, prices or units sold.
• All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party. Unlikely to attract loans. More likely an opportunity for grants or perhaps high-risk investments.
• All yellow: Typical for a company in which (a) you are being overly conservative in your projections, (b) your market does not need your product, (c) you need to change your marketing and sales approach, or (d) you may have a perfectly reasonable lifestyle company, but it may be difficult for you to attract investors, though you may be able to attract lenders.
• All green bang: You might think your company is going to grow like this, but neither investors nor lenders are going to believe it!

Colors indicate whether the company's EBITDA (Earnings before Income Tax, Depreciation, and Amortization) as a percent of revenue is healthy. Here is what colors mean specifically:

• Red light means EBITDA/revenue for the fiscal year are less than or equal to zero.
• Yellow light means EBITDA/revenue for the fiscal year are less than or equal to 20%.
• Green light means EBITDA/revenue for the fiscal year are less than or equal to 50%.
• Green bang light means EBITDA/revenue for the fiscal year are greater than 50%.

Here are some typical sets of indicators and what they mean:

• Red, then yellow, then green: Typical for a healthy high-growth company. Most companies take 1 to 3 years before they become profitable because some volume of sales is required to offset the inevitable fixed costs of doing business.
• Any green bang: Companies with EBITDAs greater than 50% are extremely rare. Respectable investors and lenders should raise questions to verify that this is really possible.
• All red: Typical for a company before you have defined its products, prices or units sold.
• All red: Your company could have a big problem; it never achieves enough revenue to compensate for the expenses it incurs. Use the analysis tools of Offtoa to solve the problem.
• Red, then yellow or green, then red: The company started off well, but then your expenses got out of control. Use the analysis tools of Offtoa to solve the problem.

Colors indicate whether the company has retained earnings or accumulated deficit to date. Here is what colors mean specifically:

• Red light means that at fiscal year end, the sum of this and all previous years' earnings after tax is negative.
• Green light means that at fiscal year end, the sum of this and all previous years' earnings after tax is positive.

Here are some typical sets of indicators and what they mean:

• Red for a few years, then green: Typical for a healthy high-growth company. Retained earnings will lag profitability by 1-2 years.
• All red: Typical for a company before you have defined its products, prices or units sold.
• All red: This could be acceptable for a company that has no intent of ever being profitable, but instead is validating a technology with the expectation of being acquired by a third party.

Colors indicate whether the company's products have healthy gross margins. Here is what colors mean specifically:

• Green light means gross profit/revenues for the fiscal year is within 20 percentage points (plus or minus) of industry averages
• Yellow light means gross profit/revenue for the fiscal year is less than 20 percentage points below industry averages.
• Red light means gross profit/revenue for the fiscal year is less than 40 percentage points below industry averages.
• Green bang light means gross profit/revenue for the fiscal year is more than 20 percentage points above industry averages.

Here are some typical sets of indicators and what they mean:

• All green: Typical of most companies.
• Red, then yellow, then green: In some industries, it might take a year or two for a company to obtain volumes necessary to achieve healthy gross margins.
• Yellow, then green: In some industries, it might take a year or two for a company to obtain volumes necessary to achieve positive gross margins.
• All red, then yellow: This company is struggling. It is doubtful that it will be able to achieve enough gross profit with its current assumptions to cover its fixed costs of doing business. Use the analysis tools of Offtoa to solve the problem.
• Any green bang: You will have to understand why you believe you can achieve better efficiencies than the competition and be able to explain this to investors and lenders. Otherwise, they will not believe you.

Colors indicate whether the company can cover its short-term debt payments. Here is what colors mean specifically:

• Red light means current ratio at the end of the fiscal year is less than or equal to 0.
• Yellow light means current ratio at the end of the fiscal year is less than or equal to 1.
• Green light means current ratio at the end of the fiscal year is greater than 1.
  

Here are some typical sets of indicators and what they mean:

• Yellow, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company to stabilize.
• All green: This is also possible (envious, but possible).
• Never turns green: This company is struggling to stay afloat. Use the analysis tools of Offtoa to solve the problem.

Colors also indicate whether the company can cover its short-term debt payments. Here is what colors mean specifically:

• Red light means net working capital (NWC)/revenue at the end of the fiscal year is less than or equal to 0.
• Yellow light means NWC/revenue at the end of the fiscal year is less than or equal to .1 .
• Green light means NWC/revenue at the end of the fiscal year is less than or equal to .25 .
• Green bang light means NWC/revenue at the end of the fiscal year is greater than .25 .

Here are some typical sets of indicators and what they mean:

• Red, then yellow, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company to stabilize.
• All green: This is also possible (envious, but possible).
• Green, then green bang: This company is holding on to too much cash. Ideally, the cash should be reinvested in the company. Otherwise it could be used for dividends or for repurchasing stock or repaying loans.
• Red, or stays yellow: This company is struggling to stay afloat. Use the analysis tools of Offtoa to solve the problem.

The company's industry turnover (IT) relative to other companies in its industry. Here is what colors mean:

• Red light means the IT for the fiscal year is less than 75% of industry average.
• Green bang light means the IT for the fiscal year is more than 125% of industry average.
• Green light means otherwise.

Colors indicate whether the company's business is generating cash. Here is what colors mean specifically:

• Red light means the net cash generated from operations (NCGFO) for the fiscal year is less than or equal to 0.
• Green light means NCGFO / revenue for the fiscal year is greater than -0.

Here are some typical sets of indicators and what they mean:

• Red, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company's business to generate cash. Until then, cash is generated from loans and/or investments.
• All red: This company's core business never generates cash. Use the analysis tools of Offtoa to solve the problem.
• All red: This could be acceptable for a start-up company that has no intent of ever generating cash from selling product, but instead is validating a technology with the expectation of being acquired by a third party. No chance of attracting loans. It might be a good candidate for grants or perhaps high-risk investments.

Colors indicate whether the company has cash at the end of the fiscal year. Here is what colors mean specifically:

• Red light means the cash at the end of year is less than or equal to 0.
• Yellow light means cash at the end of year / revenue for the fiscal year is less than or equal to .2 .
• Green light means cash at the end of year / revenue for the fiscal year is greater than .2 .

Here are some typical sets of indicators and what they mean:

• One red, then all yellows and greens: This company needs at least one infusion of cash starting in year 1 to sustain itself until the company is able to generate its own cash.
• Two reds, then all yellows and greens: This company needs at least one infusion of cash starting in year 1 (and possibly another in year 2, but that depends) to sustain itself until the company is able to generate its own cash.
• Three reds, then all yellows and greens: This company needs at least one infusion of cash starting in year 1 (and possibly more in years 2 and 3, but that depends) to sustain itself until the company is able to generate its own cash.
• One green, then one red, then all yellows and green: This may be for a company that has had an investment round or loan in year 1, and will be self-sustaining, but still needs another traunch of investment money in year 2.
• Any sequence ending with reds: This company will be in trouble. It needs a different financing strategy to survive. Use the analysis tools of Offtoa to solve the problem.
• All greens: This is the only possible set of indicators that shows a company without a need for additional investments or loans.

Colors indicate whether investors will receive satisfactory IRRs. Here is what the color means specifically:

• Red light means that if a liquidity event occurs in the indicated fiscal year, at least one class of investors will receive an internal rate of return less than 30% .
• Yellow light means the if a liquidity event occurs in the indicated fiscal year, at least one class of investors will receive an internal rate of return less than 50% .
• Green light means the if a liquidity event occurs in the indicated fiscal year, all investors (excluding optionholders, for whom it is impossible to compute IRRs at this planning stage) will receive an internal rate of return greater than 50% .
• Note: No green bang light exists for IRR Satisfactory because there is no such thing as too much return.

Here are some typical sets of indicators and what they mean:

• Last few years red: If your company is expecting to attract outside investors, it will need a lot of work using the Offtoa problem solving tools. At this point, it is highly unlikely that it will attract investors. It also might indicate that you (the entrepreneur) are being greedy.
• All red: If this is a lifestyle company, you might not care if it attracts investors. You still might be able to attract loans.
• Last few years yellow: This could be an attractive investment for some investors, but only if they have strategic or personal interests. You will certainly not have difficulty attracting lenders assuming you have collateral and/or a good financial history.
• Last few years green: This could be a very attractive investment for some investors. It shows a nice IRR for all investors if the liquidity event occurs after the company matures.
• All red or yellow, with one year green. This is a very strange situation, but it means you should set your planned liquidity event to occur during the green year.

Only one color light is shown; and it appears in the year of the liquidity event. Color indicates whether investors are receiving consistent IRRs. Specifically:

• Red light means that at least one class of investors is receiving a better IRR than an earlier round of investors. This can certainly happen in real companies as the result of a down-round, but an entrepreneur would never want to plan a company this way!
• Green light means every round of investors is receiving a better return than subsequent investors.