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Menneskeansigt
 

Menneskeansigt

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  • We’re in the midst of working on the context of your business -- on the environment, industry, competition -- on what the world gives you to work with. Before this we looked a little at what you bring to the table: your vision, skills, idea, networks. The next step is to combine the two. To take stock of what the world offers and what you bring and to fit them together into a strategy in which you use your strengths to take advantage of opportunities, shore up weaknesses, stave off threats, etc. Your strategy is summarized as a business model -- the gist of your plan to take advantage of an opportunity. This is the heart of your plan. Once you have the model, it’s a matter of working out the details of how you will implement the model. And then reassuring the investors that you’ve thought through the risks.
  • Allows one to test: Will the firm live long enough to turn a profit? To repay investors? To survive ebbs and flows?
  • Assets platform for growth Liabilities & equity source of capital A = L + E

Menneskeansigt Menneskeansigt Presentation Transcript

  • Financial Projections Burrill Competition Spring 2007
  • Business plan outline
    • Executive Summary
    • Company Description
      • Including product/service & technology/core knowledge
    • Target Market
    • Industry Analysis & Trends
    • Competition
    • Strategy/Business Model
    • Marketing & Sales Sketch
    • Production & Operations Sketch
    • Development & Milestones
    • Basic Financials
      • Revenue model
      • Rough costs
      • Break even
    • Appendix
  • A Brief Exercise…
    • Take a few minutes and try to think of the various categories of expenses your venture will have for the first 12 months or so.
    • Income Statement
      • Definition: Profit or loss of a business over time
      • Use: Project & monitor profit & so operating efficiency
    • Cash Flow Statement
      • Definition: Tracks the inflows & outflows of cash
      • Use: Project & monitor the cash available for operations & growth
    • Balance Sheet
      • Definition: Snapshot of a firm’s wealth – and how it has funded that wealth
      • Use: Project & monitor the growth or decline of a firm’s value/capital - and so potential
    Financial statements
    • + Net Revenues
    • - Cost of Goods Sold
    • = Gross Profit
    • - Operating Expenses
    • = Operating Profit
    • +/- Other Income/Expenses
    • = Profit before tax
    • - Tax
    • = Profit after tax
    Income statement
    • Income Statement
      • Definition: Profit or loss of a business over time
      • Use: Project & monitor profit & so operating efficiency
  • Income statement Gross Profit Operating Profit Net Profit P.A.T . COGS Op. Exp. Other Exp. Tax Revenues Other Income Div>CF R/E>B/S
    • + Net Revenues
    • - Cost of Goods Sold
    • = Gross Profit
    Income statement
    • Net Revenues
      • Sales after discount, less returns
    • Cost of Goods Sold
      • Direct goods + direct labor per unit sold
    • Gross Profit
      • Amount left to cover operations
    • COGS/Sales
      • Constant or improving as percentage
      • Perils and pleasures of volume
    • = Gross Profit
    • - Operating Expense
    • = Operating Profit
    Income statement
    • Operating Expenses
      • Salaries (benefits, taxes)
      • Sales & Marketing
      • General Administration (supplies, IT, insurance)
      • Space (rent, maintenance, utilities)
      • Depreciation (spreading capital expense over use/ time)
      • Professional fees
    • Operating Profit
      • Basic measure of success
    • = Operating Profit
    • +/- Other Inc or Exp
    • = Profit before taxes
    Income statement
    • Other Income
      • Sidelines (can be very valuable and/or indicate new businesses or products)
      • Interest
    • Other Expense
      • Cost of financing, especially interest on loans
      • Other miscellaneous expenses
    • Profit before Taxes
      • Net income
    • = Profit before Taxes
    • - Income Taxes
    • = Profit after Taxes
    Income statement
    • Income Taxes
      • State and local
      • Don’t confuse tax management with management
    • Profit after Taxes
      • Captured wealth
      • Reinvest (retained earnings) > B/S
      • Distribute (dividends) > CF
  • Account categories that matter
    • Revenues
      • Major lines and/or channels
      • Other income sources
    • COGS
      • Direct labor, raw materials, subcontracts
    • Operating Expenses
      • Reflect business model: Marketing/Sales, GA
      • Subdivide important categories; lump together unimportant ones
    • Other Expenses
    • + Net Revenues
    • - Cost of Goods Sold
    • = Gross Profit
    • - Operating Expenses
    • = Operating Profit
    • +/- Other Income/Expenses
    • = Profit before tax
    • - Tax
    • = Profit after tax
    Account categories exercise
    • Planning: What categories should matter?
    • Analysis: What categories has management chosen – and what do they tell you?
  • Projections from the bottom up
    • Revenues
      • Unit X net price
      • Line by line, distribution channel by distribution channel
      • Month by month, quarter by quarter, year by year
      • Support with evidence and commitments
      • Compare: interviews, Morris, S&P, market size
    • Expenses
      • Get prices
      • Month by month, quarter by quarter, year by year
      • Support with evidence and contracts and price lists
      • Compare: interviews , Morris, S&P, source book
  • Cash flow projections
    • + Revenues
    • Cost of Goods
    • Operating Expenses (excluding depreciation)
    • = Cash flow from operations
    • + Investment income
    • - Acquisition of space, r&d, equipment, etc
    • = Cash flow from investment
    • + Equity investment
    • + Loans
    • - Repayments
    • - Dividends / owner withdrawals
    • = Cash flow from financing
    • Cash on Hand – End of Period
    • Cash Flow Statement
      • Definition: Tracks the inflows & outflows of cash
      • Use: Project & monitor the cash available for operations & growth
  • Building the cash flow statement
    • Inflows
      • Operating: Adjust revenues for bad debt and timing
      • Financing: Capital inflows? Loans?
    • Outflows
      • Operating: Inventory purchases
      • Operating: Operating expenses (without depreciation), adjusted for timing
      • Investment: Capital purchases
      • Financing: Principal repayment, investor repayment, owner withdrawals
    • Current Assets
    • Long-term Assets
    • = Total Assets
    • Current Liabilities
    • Long-term Liabilities
    • = Total Liabilities
    • Capital Investment
    • Retained Earnings
    • = Total Equity
    Balance sheet
    • Balance Sheet
      • Definition: Snapshot of a firm’s wealth – and how it has funded that wealth
      • Use: Project & monitor the growth or decline of a firm’s value/ capital - and so potential
  • A = L + E
    • Assets = Wealth = Use of Funds
      • Cash, loans to customers (A/R), buildings, equipment, inventory, partnerships
      • Platform for growth
    • Liabilities = Leveraged Source of Funds
      • Nervous claims on wealth secured by contracts & collateral such as loans from vendors, banks, other sources, bonds
      • Expand possibilities while increasing risk
    • Equity = Capital = Invested Source of Funds
      • More patient claim on wealth secured by control, especially owners’ capital plus retained profits