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Business Plan Writing
The Purpose…… <ul><li>Pre-venture Counseling </li></ul><ul><li>Business Planning </li></ul><ul><li>Financial Analysis </li...
Ingredients for Success <ul><li>QUALIFIED PERSON </li></ul><ul><li>POTENTIAL BUSINESS OPPORTUNITY </li></ul><ul><li>BUSINE...
THE BUSINESS PLAN <ul><li>THE  BUSINESS PLAN  IS A WRITTEN DOCUMENT WHICH DESCRIBES YOUR BUSINESS IN TERMS OF . . . </li><...
THE BUSINESS PLAN <ul><li>WHO YOU ARE </li></ul><ul><li>WHAT YOU DO </li></ul><ul><li>WHERE YOU ARE HEADED </li></ul><ul><...
WHY YOU NEED A BUSINESS PLAN
Your First Marketing and Sales Tool A Business Plan is:
Typical Business Plan Outline (First Time Entrepreneurs) <ul><li>Overview (Summary) </li></ul><ul><li>The Opportunity </li...
<ul><li>TO ENCOURAGE YOU TO BE SPECIFIC </li></ul><ul><li>TO EVALUATE THE FEASIBLITY OF YOUR IDEAS </li></ul><ul><li>TO PR...
<ul><li>TO IMPROVE YOUR CHANCES OF SUCCESS </li></ul><ul><li>TO PERSUADE POTENTIAL LENDERS AND INVESTORS YOU WILL SUCCEED ...
COMPONENTS OF A BUSINESS PLAN <ul><li>NARRATIVE </li></ul><ul><li>FINANCIAL DATA </li></ul><ul><li>SUPPORTING DOCUMENTS </...
STATEMENT OF PURPOSE <ul><li>WHO IS ASKING FOR THE MONEY? </li></ul><ul><li>WHAT IS THE BUSINESS STRUCTURE? </li></ul><ul>...
DESCRIPTION OF BUSINESS <ul><li>BUSINESS FORM? </li></ul><ul><li>-PROPIETORSHIP </li></ul><ul><li>-PARTNERSHIP </li></ul><...
DESCRIPTION OF BUSINESS (cont.) <ul><li>WHAT IS THE PRODUCT AND/OR SERVICE? </li></ul><ul><li>IS IT A NEW BUSINESS, TAKEOV...
DESCRIPTION OF BUSINESS (cont.) <ul><li>WHEN WILL YOUR BUSINESS OPEN? </li></ul><ul><li>IS IT A SEASONAL BUSINESS? </li></...
PRODUCT/SERVICE <ul><li>WHAT ARE YOU SELLING? </li></ul><ul><li>WHAT BENEFITS ARE YOUR CUSTOMERS BUYING? </li></ul><ul><li...
MARKET <ul><li>WHO BUYS FROM YOU?  DEFINE YOUR TARGET MARKETS. </li></ul><ul><li>ARE YOUR MARKETS GROWING, STEADY, OR DECL...
MARKET (cont.) <ul><li>HAVE YOU SEGMENTED YOUR MARKETS?  HOW? </li></ul><ul><li>ARE YOUR MARKETS LARGE ENOUGH FOR EXPANSIO...
MARKET (cont.) <ul><li>ARE YOU PLANNING TO ENTER OR LEAVE ANY MARKETS? </li></ul><ul><li>HOW DO YOU PRICE YOUR PRODUCTS? <...
COMPETITION <ul><li>WHO ARE YOUR DIRECT COMPETITORS? </li></ul><ul><li>WHO ARE YOUR NEAREST INDIRECT COMPETITORS? </li></u...
LOCATION OF BUSINESS <ul><li>WHERE ARE YOU (OR SHOULD YOU BE) LOCATED? </li></ul><ul><li>WHY IS IT A DESIRABLE AREA OR BUI...
MANAGEMENT <ul><li>HOW DOES YOUR BUSINESS EXPERIENCE HELP YOU IN THIS BUSINESS? </li></ul><ul><li>WHAT RELATED WORK EXPERI...
MANAGEMENT (cont.) <ul><li>WHAT ARE THEIR STRENGTHS AND WEAKNESSES? </li></ul><ul><li>WHAT ARE THEIR DUTIES? </li></ul><ul...
PERSONNEL <ul><li>WHAT ARE YOUR CURRENT PERSONNEL NEEDS? </li></ul><ul><li>WHAT SKILLS WILL YOUR EMPLOYEES NEED?  IN FIVE ...
APPLICATION/EXPECTED EFFECT OF THE LOAN (INVENSTMENT) <ul><li>HOW WILL THE LOAN (INVESTMENT) MAKE YOUR BUSINESS MORE PROFI...
FINANCIAL DATA <ul><li>SOURCES ANDAPPLICATIONS OF FUNDING </li></ul><ul><li>ASSUMPTIONS </li></ul><ul><li>WAGE/REVENUE SCH...
Goal for Session <ul><li>Quick Introduction to Business Plan Financial Analysis </li></ul><ul><ul><li>Help you understand ...
What should it be ? <ul><li>What is the Purpose of Business Plan Financials? </li></ul><ul><li>Passing the “ Taste Test ” ...
Business Plan  Financials
What is the Purpose of Your Business Plan Financials?
Business Plan Financials Phase I <ul><li>Helps you: </li></ul><ul><ul><li>test various potential business models </li></ul...
Business Plan Financials Phase II <ul><li>Helps potential investors:  </li></ul><ul><ul><li>test the viability of your bus...
“ The Taste Test”
Job 1:  Pass the “Taste Test” <ul><li>Tom Canfield of Equity Catalysts: </li></ul><ul><li>“Can you taste $25-$50 million i...
So, how do you convince someone that your revenue scenarios are credible?
Tips for Credibility <ul><li>Show your assumptions and be able to back them up with  FACTS   based on market research and/...
Showing a Potential Market
Mistakes to Avoid <ul><li>Assumptions you can’t justify </li></ul><ul><ul><li>Too high a market share </li></ul></ul><ul><...
Summary Financials
Summary Financials <ul><li>Pro-forma Income Statement </li></ul><ul><li>Pro-forma Return to Investors </li></ul>
Income Statement
What is an Income Statement?   <ul><li>Shows financial results of a company over a given period of time </li></ul><ul><li>...
Sample Income Statement
Income Statement Questions <ul><li>What is Revenue? </li></ul><ul><ul><li>How would a magazine account for a subscription?...
Pro-forma Income Statement   <ul><li>Summary Table showing 3-5 years of  </li></ul><ul><ul><li>Revenues </li></ul></ul><ul...
Pro-forma Income Statement Income Statement (MM) 21.4% 20.6% 17.3% -12.2% -201.2% Operating Margin $68.8 $47.4 $24.8 -$6.6...
Required Capital, Equity Structure and Rate of Return <ul><li>How much cash will you need? </li></ul><ul><li>What is the v...
Rate of Return Assumptions
Rate of Return Calculation
Detailed Financials (“Appendix”)
Exhibits for Detailed Financials <ul><li>Typically:  5 years on an annual basis and month-to-month for the first year </li...
Assumptions and Outcomes <ul><li>Shows key assumptions and the outcomes in terms of profits, etc. </li></ul><ul><li>Helps ...
Income Statement and  Related Exhibits
Income Statement <ul><li>Revenues </li></ul><ul><ul><li>Summarizes components of revenue </li></ul></ul><ul><li>Expenses <...
Detailed Revenue <ul><li>Shows revenue over time divided into key components: </li></ul><ul><ul><li>Product areas </li></u...
Detailed Expenses <ul><li>Summarizes key expense categories in major detail </li></ul><ul><li>Documents assumptions not su...
Payroll and Headcount <ul><li>Who are you going to hire </li></ul><ul><li>When will they start? </li></ul><ul><li>How much...
Return on Investment <ul><li>Expected investment </li></ul><ul><li>Expected share of ownership </li></ul><ul><li>Change in...
Balance Sheet
What is a Balance Sheet? <ul><li>A snapshot of a company’s financial position at a moment in time </li></ul><ul><li>Left h...
Balance Sheet
What is an Asset? <ul><li>Assets are valuable resources owned by an entity and include: </li></ul><ul><ul><li>Cash </li></...
What is a Liability? <ul><li>Liabilities are the claims of creditors and include: </li></ul><ul><ul><li>Accounts payable <...
What is an Equity? <ul><li>Equities reflect the “claims” of investors and include: </li></ul><ul><li>Paid in capital </li>...
Cash Flow Statement
Cash Flow Statement <ul><li>Records the Flow of Cash during a given period </li></ul><ul><li>Cash inflows include: </li></...
Cash Flow Statement
Business Plan Financial Projection Workshop Handout Example Statements and Recommended Readings
Q and A
Thanks and from Heinz .Com
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  1. 1. Business Plan Writing
  2. 2. The Purpose…… <ul><li>Pre-venture Counseling </li></ul><ul><li>Business Planning </li></ul><ul><li>Financial Analysis </li></ul><ul><li>Franchise Evaluation </li></ul><ul><li>International Trade </li></ul><ul><li>Loan Packaging </li></ul><ul><li>Market Research </li></ul><ul><li>New Product Commercialization </li></ul><ul><li>Strategic Planning </li></ul><ul><li>Human Resource Mgmt </li></ul>
  3. 3. Ingredients for Success <ul><li>QUALIFIED PERSON </li></ul><ul><li>POTENTIAL BUSINESS OPPORTUNITY </li></ul><ul><li>BUSINESS PLAN </li></ul><ul><li>SUFFICIENT CAPITAL </li></ul><ul><li>LUCK </li></ul>
  4. 4. THE BUSINESS PLAN <ul><li>THE BUSINESS PLAN IS A WRITTEN DOCUMENT WHICH DESCRIBES YOUR BUSINESS IN TERMS OF . . . </li></ul>
  5. 5. THE BUSINESS PLAN <ul><li>WHO YOU ARE </li></ul><ul><li>WHAT YOU DO </li></ul><ul><li>WHERE YOU ARE HEADED </li></ul><ul><li>HOW AND WHEN YOU EXPECT TO GET THEER </li></ul><ul><li>WHY YOU WILL BE SUCCESSFUL </li></ul>
  6. 6. WHY YOU NEED A BUSINESS PLAN
  7. 7. Your First Marketing and Sales Tool A Business Plan is:
  8. 8. Typical Business Plan Outline (First Time Entrepreneurs) <ul><li>Overview (Summary) </li></ul><ul><li>The Opportunity </li></ul><ul><li>The Solution </li></ul><ul><li>The Business Model </li></ul><ul><li>Operations </li></ul><ul><li>Financials </li></ul><ul><li>Required Capital, Equity Structure and Rate of Return </li></ul><ul><li>Management Team </li></ul>
  9. 9. <ul><li>TO ENCOURAGE YOU TO BE SPECIFIC </li></ul><ul><li>TO EVALUATE THE FEASIBLITY OF YOUR IDEAS </li></ul><ul><li>TO PROVIDE PLANNING, OPERATING, AND POLICY GUIDES </li></ul><ul><li>TO IMPROVE DECISION-MAKING, EFFICIENCY, AND CONTROL </li></ul>
  10. 10. <ul><li>TO IMPROVE YOUR CHANCES OF SUCCESS </li></ul><ul><li>TO PERSUADE POTENTIAL LENDERS AND INVESTORS YOU WILL SUCCEED </li></ul><ul><li>NOTE: DO NOT WRITE A BUSINESS PLAN JUST TO OBTAIN FINANCING, WRITE IT FOR YOUR BENEFIT. </li></ul>
  11. 11. COMPONENTS OF A BUSINESS PLAN <ul><li>NARRATIVE </li></ul><ul><li>FINANCIAL DATA </li></ul><ul><li>SUPPORTING DOCUMENTS </li></ul>
  12. 12. STATEMENT OF PURPOSE <ul><li>WHO IS ASKING FOR THE MONEY? </li></ul><ul><li>WHAT IS THE BUSINESS STRUCTURE? </li></ul><ul><li>HOW MUCH MONEY? </li></ul><ul><li>WHAT IS THE MONEY NEEDED FOR? </li></ul><ul><li>HOW WILL THE FUNDS BENEFIT THE BUSINESS? </li></ul><ul><li>WHY DOES THE LOAN MAKE SENSE? </li></ul><ul><li>HOW WILL THE FUNDS BE REPAID? </li></ul>
  13. 13. DESCRIPTION OF BUSINESS <ul><li>BUSINESS FORM? </li></ul><ul><li>-PROPIETORSHIP </li></ul><ul><li>-PARTNERSHIP </li></ul><ul><li>-CORPORATION </li></ul><ul><li>TYPE OF BUSINESS? </li></ul><ul><li>-MERCHANDISING </li></ul><ul><li>-MANUFACTURING </li></ul><ul><li>-SERVICE </li></ul>
  14. 14. DESCRIPTION OF BUSINESS (cont.) <ul><li>WHAT IS THE PRODUCT AND/OR SERVICE? </li></ul><ul><li>IS IT A NEW BUSINESS, TAKEOVER, OR EXPANSION? </li></ul><ul><li>WHY WILL THE BUSINESS BE PROFITABLE? </li></ul>
  15. 15. DESCRIPTION OF BUSINESS (cont.) <ul><li>WHEN WILL YOUR BUSINESS OPEN? </li></ul><ul><li>IS IT A SEASONAL BUSINESS? </li></ul><ul><li>WHAT HAVE YOU LEARNED ABOUT YOUR BUSINESS FROM OUTSIDE SOURCES? </li></ul>
  16. 16. PRODUCT/SERVICE <ul><li>WHAT ARE YOU SELLING? </li></ul><ul><li>WHAT BENEFITS ARE YOUR CUSTOMERS BUYING? </li></ul><ul><li>WHICH PRODUCTS ARE RISING STARS, STEADY CASH COWS, IN DECLINE (INVESTMENT EGOS)? </li></ul><ul><li>WHAT IS DIFFERENT ABOUT YOUR GOODS AND SERVICES? </li></ul>
  17. 17. MARKET <ul><li>WHO BUYS FROM YOU? DEFINE YOUR TARGET MARKETS. </li></ul><ul><li>ARE YOUR MARKETS GROWING, STEADY, OR DECLINING? </li></ul><ul><li>IS YOUR MARKET SHARE GROWING, STEADY, OR DECLINING? </li></ul>
  18. 18. MARKET (cont.) <ul><li>HAVE YOU SEGMENTED YOUR MARKETS? HOW? </li></ul><ul><li>ARE YOUR MARKETS LARGE ENOUGH FOR EXPANSION? </li></ul><ul><li>HOW WILL YOU ATTRACT, HOLD, AND INCREASE YOUR MARKET SHARE? </li></ul>
  19. 19. MARKET (cont.) <ul><li>ARE YOU PLANNING TO ENTER OR LEAVE ANY MARKETS? </li></ul><ul><li>HOW DO YOU PRICE YOUR PRODUCTS? </li></ul>
  20. 20. COMPETITION <ul><li>WHO ARE YOUR DIRECT COMPETITORS? </li></ul><ul><li>WHO ARE YOUR NEAREST INDIRECT COMPETITORS? </li></ul><ul><li>HOW ARE THEIR BUSINESSES SIMILAR TO AND DIFFERENT FROM YOURS? </li></ul><ul><li>WHAT HAVE YOU LEARNED FROM THEIR OPERATIONS, ADVERTISING? </li></ul>
  21. 21. LOCATION OF BUSINESS <ul><li>WHERE ARE YOU (OR SHOULD YOU BE) LOCATED? </li></ul><ul><li>WHY IS IT A DESIRABLE AREA OR BUILDING? </li></ul><ul><li>WHAT KIND OF SPACE DO YOU NEED? </li></ul><ul><li>ARE ANY DEMOGRAPHICS OR OTHER MARKET SHIFTS GOING ON? </li></ul>
  22. 22. MANAGEMENT <ul><li>HOW DOES YOUR BUSINESS EXPERIENCE HELP YOU IN THIS BUSINESS? </li></ul><ul><li>WHAT RELATED WORK EXPERIENCE DO YOU HAVE? </li></ul><ul><li>WHO IS ON THE MANAGEMENT TEAM? </li></ul>
  23. 23. MANAGEMENT (cont.) <ul><li>WHAT ARE THEIR STRENGTHS AND WEAKNESSES? </li></ul><ul><li>WHAT ARE THEIR DUTIES? </li></ul><ul><li>ARE THESE DUTIES CLEARLY DEFINED? HOW? </li></ul><ul><li>WHAT ADDITIONAL RESOURCES ARE AVAILABLE TO YOUR BUSINESS? </li></ul>
  24. 24. PERSONNEL <ul><li>WHAT ARE YOUR CURRENT PERSONNEL NEEDS? </li></ul><ul><li>WHAT SKILLS WILL YOUR EMPLOYEES NEED? IN FIVE YEARS? </li></ul><ul><li>WHAT ARE YOUR PLANS FOR HIRING AND TRAINING PERSONNEL? </li></ul>
  25. 25. APPLICATION/EXPECTED EFFECT OF THE LOAN (INVENSTMENT) <ul><li>HOW WILL THE LOAN (INVESTMENT) MAKE YOUR BUSINESS MORE PROFITABLE? </li></ul><ul><li>WILL YOU BUY OR LEASE (EQUIPMENT, PLACE OF BUSINESS)? </li></ul><ul><li>DO YOU NEED THIS MONEY? </li></ul>
  26. 26. FINANCIAL DATA <ul><li>SOURCES ANDAPPLICATIONS OF FUNDING </li></ul><ul><li>ASSUMPTIONS </li></ul><ul><li>WAGE/REVENUE SCHEDULE </li></ul><ul><li>BALANCE SHEET </li></ul><ul><li>THREE YEAR INCOME STATEMENT </li></ul><ul><li>THREE YEAR CASH FLOW STATEMENT </li></ul>
  27. 27. Goal for Session <ul><li>Quick Introduction to Business Plan Financial Analysis </li></ul><ul><ul><li>Help you understand what is important </li></ul></ul><ul><li>Not a class in accounting! </li></ul>
  28. 28. What should it be ? <ul><li>What is the Purpose of Business Plan Financials? </li></ul><ul><li>Passing the “ Taste Test ” </li></ul><ul><li>Executive Summary Financials </li></ul><ul><li>Detailed (Appendix) Financials </li></ul>
  29. 29. Business Plan Financials
  30. 30. What is the Purpose of Your Business Plan Financials?
  31. 31. Business Plan Financials Phase I <ul><li>Helps you: </li></ul><ul><ul><li>test various potential business models </li></ul></ul><ul><ul><li>isolate critical assumptions </li></ul></ul><ul><ul><li>determine whether this is a viable business opportunity </li></ul></ul><ul><ul><li>determine how much money you’ll need </li></ul></ul>
  32. 32. Business Plan Financials Phase II <ul><li>Helps potential investors: </li></ul><ul><ul><li>test the viability of your business model </li></ul></ul><ul><ul><li>evaluate your critical assumptions </li></ul></ul><ul><ul><ul><li>Are they credible? </li></ul></ul></ul><ul><ul><ul><li>Do you understand your business? </li></ul></ul></ul><ul><ul><li>evaluate you as someone who understands how business works from a financial perspective </li></ul></ul><ul><ul><li>determine whether the investment is potentially attractive </li></ul></ul><ul><ul><li>evaluate your true financial needs </li></ul></ul>
  33. 33. “ The Taste Test”
  34. 34. Job 1: Pass the “Taste Test” <ul><li>Tom Canfield of Equity Catalysts: </li></ul><ul><li>“Can you taste $25-$50 million in revenues?” </li></ul><ul><ul><ul><li>Is the revenue scenario credible or will you have to achieve miracles to hit your forecast numbers? </li></ul></ul></ul>
  35. 35. So, how do you convince someone that your revenue scenarios are credible?
  36. 36. Tips for Credibility <ul><li>Show your assumptions and be able to back them up with FACTS based on market research and/or some compelling rationale </li></ul>
  37. 37. Showing a Potential Market
  38. 38. Mistakes to Avoid <ul><li>Assumptions you can’t justify </li></ul><ul><ul><li>Too high a market share </li></ul></ul><ul><li>Too much detail </li></ul><ul><li>Too little detail </li></ul><ul><li>Not enough growth </li></ul><ul><li>Too much profit (in later years) </li></ul>
  39. 39. Summary Financials
  40. 40. Summary Financials <ul><li>Pro-forma Income Statement </li></ul><ul><li>Pro-forma Return to Investors </li></ul>
  41. 41. Income Statement
  42. 42. What is an Income Statement? <ul><li>Shows financial results of a company over a given period of time </li></ul><ul><li>Includes: </li></ul><ul><ul><li>Revenues </li></ul></ul><ul><ul><li>Cost of Sales (costs directly attributable to the products/services sold) </li></ul></ul><ul><ul><li>Other Operating Expenses </li></ul></ul><ul><ul><ul><li>Marketing, Sales </li></ul></ul></ul><ul><ul><ul><li>Research and Development </li></ul></ul></ul><ul><ul><ul><li>General and Administrative </li></ul></ul></ul><ul><ul><li>Earnings before TaxOperating Income </li></ul></ul><ul><ul><li>Tax </li></ul></ul><ul><ul><li>Earnings after Tax </li></ul></ul>
  43. 43. Sample Income Statement
  44. 44. Income Statement Questions <ul><li>What is Revenue? </li></ul><ul><ul><li>How would a magazine account for a subscription? </li></ul></ul><ul><ul><li>How would a software company account for a software license? </li></ul></ul><ul><li>What is Cost of Goods sold? </li></ul><ul><li>What are some of the components of operating expenses? </li></ul><ul><li>What is operating profit? </li></ul>
  45. 45. Pro-forma Income Statement <ul><li>Summary Table showing 3-5 years of </li></ul><ul><ul><li>Revenues </li></ul></ul><ul><ul><li>Cost of Sales </li></ul></ul><ul><ul><li>Other Operating Expenses </li></ul></ul><ul><ul><li>Operating Income </li></ul></ul><ul><li>Plus: Brief text on how can you support these financials </li></ul><ul><ul><li>The key assumptions </li></ul></ul>
  46. 46. Pro-forma Income Statement Income Statement (MM) 21.4% 20.6% 17.3% -12.2% -201.2% Operating Margin $68.8 $47.4 $24.8 -$6.6 -$26.3 Operating Income $140.3 $100.4 $64.5 $32.1 $23.8 Other Operating Expenses $112.1 $82.4 $54.1 $28.8 $15.6 Cost of Goods Sold $321.2 $230.2 $143.3 $54.3 $13.1 Revenues 5 4 3 2 1 Years
  47. 47. Required Capital, Equity Structure and Rate of Return <ul><li>How much cash will you need? </li></ul><ul><li>What is the value of the company? </li></ul><ul><li>How much will the management team contribute, if any? </li></ul><ul><li>What is the rate of return on capital for the investors? </li></ul>
  48. 48. Rate of Return Assumptions
  49. 49. Rate of Return Calculation
  50. 50. Detailed Financials (“Appendix”)
  51. 51. Exhibits for Detailed Financials <ul><li>Typically: 5 years on an annual basis and month-to-month for the first year </li></ul><ul><li>Components: </li></ul><ul><ul><li>Assumptions and Outcomes Page </li></ul></ul><ul><ul><li>Income Statement </li></ul></ul><ul><ul><li>Detailed Revenue </li></ul></ul><ul><ul><li>Detailed Expenses </li></ul></ul><ul><ul><li>Headcount </li></ul></ul><ul><ul><li>Return on Investment </li></ul></ul><ul><ul><li>Balance Sheet </li></ul></ul><ul><ul><li>Cash Flow </li></ul></ul>
  52. 52. Assumptions and Outcomes <ul><li>Shows key assumptions and the outcomes in terms of profits, etc. </li></ul><ul><li>Helps show the reasonableness of your analysis </li></ul><ul><li>Tells the story in summary form, in case someone only looks at this page </li></ul>
  53. 53. Income Statement and Related Exhibits
  54. 54. Income Statement <ul><li>Revenues </li></ul><ul><ul><li>Summarizes components of revenue </li></ul></ul><ul><li>Expenses </li></ul><ul><ul><li>Cost of goods sold </li></ul></ul><ul><ul><li>Other major components of operating expenses </li></ul></ul><ul><ul><ul><li>Sales, marketing, general and administrative </li></ul></ul></ul><ul><ul><ul><li>Research and Development, etc. </li></ul></ul></ul><ul><li>Earnings before income and tax (or operating income) </li></ul><ul><li>Tax </li></ul><ul><li>Profit after tax </li></ul>
  55. 55. Detailed Revenue <ul><li>Shows revenue over time divided into key components: </li></ul><ul><ul><li>Product areas </li></ul></ul><ul><ul><li>Geographies </li></ul></ul><ul><ul><li>Any components that make sense </li></ul></ul><ul><li>Documents assumptions and their effects </li></ul>
  56. 56. Detailed Expenses <ul><li>Summarizes key expense categories in major detail </li></ul><ul><li>Documents assumptions not summarized elsewhere </li></ul>
  57. 57. Payroll and Headcount <ul><li>Who are you going to hire </li></ul><ul><li>When will they start? </li></ul><ul><li>How much will they earn? </li></ul><ul><li>Cost of benefits, etc. </li></ul>
  58. 58. Return on Investment <ul><li>Expected investment </li></ul><ul><li>Expected share of ownership </li></ul><ul><li>Change in share of ownership due to other investments </li></ul><ul><li>Returns on the investment, including dividends and some “terminal value” </li></ul><ul><li>Discount cash flows to show Internal Rate of Return and Net Present Value </li></ul>
  59. 59. Balance Sheet
  60. 60. What is a Balance Sheet? <ul><li>A snapshot of a company’s financial position at a moment in time </li></ul><ul><li>Left hand side = Assets </li></ul><ul><li>Right hand side = Liabilities and Equities </li></ul><ul><li>Assets must equal liabilities plus equities (hence it is a “balance” sheet) </li></ul>
  61. 61. Balance Sheet
  62. 62. What is an Asset? <ul><li>Assets are valuable resources owned by an entity and include: </li></ul><ul><ul><li>Cash </li></ul></ul><ul><ul><li>Things that are likely to become cash soon (inventories, accounts receivable) </li></ul></ul><ul><ul><li>Valuable things that help the business produce revenues over a longer period (property, plant, and equipment, etc.) </li></ul></ul>
  63. 63. What is a Liability? <ul><li>Liabilities are the claims of creditors and include: </li></ul><ul><ul><li>Accounts payable </li></ul></ul><ul><ul><li>Notes payable this year </li></ul></ul><ul><ul><li>Longer term obligations, such as long term debt </li></ul></ul>
  64. 64. What is an Equity? <ul><li>Equities reflect the “claims” of investors and include: </li></ul><ul><li>Paid in capital </li></ul><ul><li>“ Retained Earnings” or the sum total of profits after tax that haven’t been paid out through dividends </li></ul><ul><li>Note: You can’t cash in equities—they represent a claim on the business not an asset. </li></ul>
  65. 65. Cash Flow Statement
  66. 66. Cash Flow Statement <ul><li>Records the Flow of Cash during a given period </li></ul><ul><li>Cash inflows include: </li></ul><ul><ul><li>Profits </li></ul></ul><ul><ul><li>Sale of assets </li></ul></ul><ul><ul><li>Reduction in: </li></ul></ul><ul><ul><ul><li>Accounts Receivables </li></ul></ul></ul><ul><ul><ul><li>Other assets </li></ul></ul></ul><ul><li>Cash outflows include: </li></ul><ul><ul><li>Losses </li></ul></ul><ul><ul><li>Purchase of assets </li></ul></ul><ul><ul><li>Increase in: </li></ul></ul><ul><ul><ul><li>Accounts Receivables </li></ul></ul></ul><ul><ul><ul><li>Other assets </li></ul></ul></ul>
  67. 67. Cash Flow Statement
  68. 68. Business Plan Financial Projection Workshop Handout Example Statements and Recommended Readings
  69. 69. Q and A
  70. 70. Thanks and from Heinz .Com
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