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Budgeting & Forecasting - Predicting the Outcome
 

Budgeting & Forecasting - Predicting the Outcome

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This is a presentation on Budgeting & Forecasting. Most entrepreneurs think that a Forecasting is just necessary for the investor. However, they should realize you are making forecasts and budgets for ...

This is a presentation on Budgeting & Forecasting. Most entrepreneurs think that a Forecasting is just necessary for the investor. However, they should realize you are making forecasts and budgets for yourself. To understand and control your own business and organization.

This presentation is supported with simple calculations and examples.

See also Audio & 60-page Notes supporting this presentation. VIP members get Discount!!

Author: Eva Hukshorn, EFactor

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    Budgeting & Forecasting - Predicting the Outcome Budgeting & Forecasting - Predicting the Outcome Presentation Transcript

    • Budge&ng  &  Forecas&ng  Predicng  the  outcome  Author:  Eva  Hukshorn   1  
    • EFactor:  An  introducon  •  Founders  Adrie  Reinders,  Marion  Freijsen,  Roeland  Reinders  •  Started  OHM  Inc.  in  2004:  Business  Development  for  Fortune  2000  •  Serving  (mainly)  technology  companies  around  the  globe  •  Goal:  assist  emerging  technology  companies  in  selling  their  product  to  Corporates  •  In  2007  they  wrote  a  book:  The  N-­‐Factor   -  How  efficient  networking  can  change  the  dynamics  of  your  business   -  Huge  success:  no  theory,  but  hands-­‐on  ps  &  tricks  •  Result:  EFactor  -­‐  a  social  plaUorm  for  entrepreneurs   -  Strategic  business  networking  impacts  the  future  of  your  business   -  Goal:  share  knowledge,  increase  sales,  decrease  costs,  find  capital   -  Mission:  increase  success  of  entrepreneurs  to  start-­‐up  or  accelerate  their  organizaon   -  In  2012  the  new  book  was  launched:  The  E-­‐Factor:  Entrepreneurship  in  the  Social  Media  Age     EFACTOR,          THE  WORLD’S  LARGEST  ONLINE  NETWORK  FOR  ENTREPRENEURS  ON  EARTH       An  online  community  offering  you  a  network,  knowledge,  events,  and  every  business  resources  you  need  to   succeed   2  
    • Eva  Hukshorn:  An  introducon  •  Work  Experience   -  Current:    Partner  EFactor        Board  of  Advisory:  TreFoil  Energy  /  CleanDrinks  /          Global  Thinkers  /  ShowLinq            Coach  Startup:  Bootcamp  Amsterdam  /  New  Venture  McKinsey   -  2009  –  2010:  Dutch  Bouque  –  Marktlink  Mergers  &  Acquisions,  Amsterdam   -  2007  –  2009:    Royal  Bank  of  Scotland  –  Corporate  Finance,  Amsterdam   -  2004  –  2009:    ABN  AMRO  –  Corporate  Finance  New  York,  Amsterdam   -  2003  –  2004:    Accenture  –  Consulng  London,  Amsterdam  •  Educa&on   -  1997  –  2002:  MSc  Economics,  Finance  –  University  of  Groningen,  the  Netherlands   -  2003:      Internaonal  &  Asian  Studies  –  Naonal  Sun  Yat-­‐Sen  University,  Taiwan   -  2009  –  2011:    Cerfied  Management  Accounng  (CMA)  –  Instute  of  Management  Accountants            (IMA),  United  States   -  2009  –  2001:    Colloquium  General  &  Modern  Art  –  Academy  for  History  of  Art,  the  Netherlands   -  2012:    Internaonal  Financial  Report  Standards  (DipIFRS)  –  Associaon  of  Chartered  Cerfied          Accountants  (ACCA),  United  States   3      
    • FUNDING  TUESDAY,  EVERY  TUESDAY  So  what  can  you  expect  from  us  each  Funding  Tuesday?  1.  Webinars  on  EFactor  on  Finance  &  Funding  related  topics  in  the  EVENT   Secon  2.  Blogs  &  interviews  with  informal  investors  and  funded  entrepreneurs   with  ps  &  tricks  in  the  BLOGS  secon  under  NOW  3.  Finance  &  Funding  related  arcles  on  NOW  feed  4.  In  the  Finance  &  Funding  GROUP  on  our  website  you  will  find  Q&As  of  the  webinars  under     NETWORK  5.  In  the  KNOWLEDGE  base  you  will  find  more  and  more  presentaons  on  Finance  &  Funding   related  topics,  including  the  webinar  presentaons  6.  And  if  you  become  a  VIP  MEMBER  you  will  personally  be  supported  on  your  Finance  &  Funding   related  quesons   4    
    • Webinar  Program  Overview  2012  June  19:    Business  Plan  Wring  -­‐  A  Roadmap  to  Success  July  3:      Pitching  &  Presentaon  -­‐  3  Minutes,  1  Impression  July  17:    Strategy  -­‐  A  Vision  for  the  Future,  A  Strategy  for  Geing  There  July  31:    Budge&ng  &  Forecas&ng  -­‐  Predic&ng  the  Outcome  Aug  14:    Working  Capital  -­‐  An  Unknown  Key  to  Success  Aug.  28:    Capital  Management  -­‐  Playing  with  Risk  Sept  11.:    Funding  &  Investments  -­‐  Some  Sources  are  More  Equal  then  Others  Sept.  25:    Valuaon  -­‐  Art  or  Science  Oct  9:      Exit  Strategy  -­‐  Nice  to  Have  or  Need  to  Have?  Oct.  23:    Bootstrapping  -­‐  An  Alternave  Answer  to  Funding  Nov  6:    Crowdfunding  -­‐  The  Power  of  Friends,  Family  and  Fools  Nov.  20:    Networking  -­‐  Nice  You  have  3000  Friends,  I  have  30  Relevant  Connecons  Dec.  4:      Markeng  &  (Social)  Media  -­‐  Noise  or  Value?  Dec.  11:    No  Sales,  No  Glory  Dec.  18:    Most  Common  Mistakes  of  Entrepreneurs   5    
    • The  purpose  of  Financial  Planning   1.  To-­‐do  list   2.  Task  overview   3.  Empowerment   4.  Evalua&on   5.  Control   6.  Communica&on   Financial  Planning  is  a  tool  forcing  you  to  think  about  every  liYle  detail   on  a  period-­‐by-­‐period  basis  and  relate  financial  consequences  to  it   6  
    • Some  terminology   1.  Milestone  Overview   2.  Financial  Planning   3.  Targets   4.  Budget   5.  Master  Budget   6.  Forecasts   7  
    • A  summary  of  your  vision  and  strategy:  Your  Milestone  Overview   2012   2013   2014   2015   2016   M M V Business Product Beta test Going to Get Product Going to Promotion Plan develop market US work development market campaign ment Product space Prod. B Prod. A develop Alpha Break- Expand in EU + ment Customers Promotion Beta test even India campaign Employees 3 5 8 10 12 15 20 25 Revenue / margin 200k / 10% 1mio / 17.3% 4mio / 21% 12mio / 28% Capital need: USD 150k 2nd round: USD 1mio 3rd round: USD 3mio 8  
    • Balance  Sheet  –  simplified   Balance  Sheet  –  31  Dec.  YEAR  1  ASSETS   •      EQUITY  &  LIABILITIES    Fixed  Assets   200   Equity     300     Retained  earnings   200     Account  Receivable   500   Total  equity   500   Inventory   300  Total  current  assets   800   Debt  5%  interest   250   Personal  loan   200  Cash   50   Account  Payable   100   Total  liabili&es   550  Total   1,050   Total   1,050   9  
    • Profit  &  Loss  statement  or  Income  statement  –  simplified   Profit  &  Loss  statement  –  YEAR  1   Revenue    1,000   Cost  of  Goods  Sold  (“COGS”)   minus  400  Gross  Profit   600   Gross  margin                      60%   Selling,  Administrave,  General  Costs  (“SG&A”)   minus  350  Opera&ng  result  /  Earnings  before  Interest  and  Tax  (“EBIT”)   250   EBIT  margin        25%   Interest  (5%  on  250)   minus  12,5   Tax   minus  37.5  Net  profit  /  retained  earnings   200   10  
    • Cash  Flow  statement  –  simplified   Cash  Flow  statement  –  YEAR  1   Cash  sales  received  from  customers            500   Cash  paid  to  suppliers  and  employees   minus  300   Interest  &  tax  payments   minus      50  Cash  flow  generated  from  opera&ng  ac&vi&es   150   Addions  to  equipment   minus  50  Cash  flow  generated  from  inves&ng  ac&vi&es   -­‐50   Payment  debt   minus  75  Cash  flow  generated  from  financing  ac&vi&es   -­‐75  Net  increase  in  cash   25   Beginning  balance  cash  1  Jan.              25  Year-­‐end  cash   50   11  
    • SIMPLE  EXAMPLE  OF  FINANCIAL  STATEMENT  CALCULATIONS       12  
    • Case  assignment  1:  Balance  Sheet  You  are  star&ng  a  hotdog  stand  as  of  January  Year  1    First  thing  to  do  is:   –  Incorporate  a  legal  enty,  put  USD  18,000  in  as  equity  and  arrange  USD  6,000  with  a  bank  Assignment:  what  does  the  Balance  Sheet  look  like  on  1  December  Year  0?    Second  thing  to  do  is:   –  Purchase  inventory  (sausage,  sandwiches,  mustard)  for  1,650  hot  dogs  during  December  Year   0     –  Cost  price  USD  0.50  per  hotdog   –  Take  into  account  that  although  you  have  to  pay  cash  for  your  purchase,  you  will  only  receive   your  order  in  one  month  me  Assignment:  what  does  the  Balance  Sheet  on  1  January  Year  1  look  like  immediately  amer  you  made  your  order  and  paid?   13  
    • Create  star&ng  Balance  Sheet  amer  senng  up  legal  en&ty  Starting Balance Sheet December Year 0Assets USD Liabilities & Equity USDStand 0 Equity 18,000 Retained Earnings 0Inventory 0Account payable 0 Debt 6,000Cash 24,000 Account payable 0Total 24,000 Total 24,000 14  
    • Create  star&ng  Balance  Sheet  amer  making  first  steps  to  start  opera&ons  Balance Sheet – 1st January Year 1Assets USD Liabilities & Equity USDStand 20,000 Equity 18,000 Retained Earnings 0Inventory 0Account payable 825 Debt 6,000Cash 3,175 Account payable 0Total 24,000 Total 24,000 15  
    • Case  assignment  2:  Profit  &  Loss  statement  Assume  the  following  for  the  first  year  of  opera&ons:   Number of hotdogs sold 33,000 Consumer price USD 1,50 Purchased sandwiches, sausages & mustard equivalent of 34,980 hotdogs Cost of Goods Sold (“COGS”): ingredients per hotdog USD 0.50 Selling, General & Administrative Costs (“SG&A”) and other costs USD 17,100 Depreciation USD 2,000 Interest rate over debt USD 6,000 6% Tax rate 25.5%Assignment:  prepare  the  profit  and  loss  statement  of  your  first  year  in  business   16  
    • Case  assignment  2:  Profit  &  Loss  statement   Revenue minus Cost of Goods Sold (“COGS”) Gross Profit minus Selling, General, Administrative Costs (“SG&A”) Operating result / Earning Before Interest & Tax (“EBIT”) minus Interest Profit Before Tax (“PBT”) minus Tax Net ProfitNote:  depreciaAon  is  included  in  the  SG&A  in  this  example   17  
    • Case  assignment  2:  Profit  &  Loss  statement   Profit &Loss statement USD Revenue 33,000 x 1.50 49,500 COGS 33,000 x 0.50 -16,500 Gross profit 33,000 SG&A -19,100 Earnings Before Interest & Tax (“EBIT”) 13,900 Interest 6% of 6,000 -360 Profit Before Tax 13,540 Tax 25,5% of 13,540 -3,453 Net Profit 10,087Note: We assume we pay out 70% of our profit as a dividend, which equals to USD 7,061, i.e. the remainder (USD 3,026) will be transferred toRetained Earnings 18  
    • Case  assignment  3:  Cash  Flow  statement  In  addi&on  to  preparing  an  income  statement,  a  company  must  prepare  a  Cash  Flow  statement   –  The  Cash  Flow  statement  is  like  your  bank  statement.  It  shows  how  cash  came  in  and  went   out   –  A  Cash  Flow  statement  simply  describes  the  flows  of  cash-­‐in    and  -­‐out  to  different  accounts   over  the  course  of  one  year  To  understand  cash  flow,  we  will  start  to  assess  the  cash  account  on  the  Balance  Sheet.  Almost  every  account  on  the  Balance  Sheet  is  linked  to  cash  Assignment:  in  order  to  prepare  the  cash  account,  we  need  to  make  some  closing  statements,  prepare  these   19  
    • Case  assignment  3:  Cash  Flow  statement  –  closing  statements  First  we  need  to  calculate  our  ending  inventory:  Ending inventory calculation# hotdogs purchased 34,980# hotdogs sold 33,000Hotdogs in inventory 1,980Purchase price of 1 hotdog USD 0.50 xTotal cost price of inventory USD 990  The  ending  inventory  stands  at  USD  990  per  31  Dec  Year  1   20  
    • Case  assignment  3:  Cash  Flow  statement  –  closing  statements  Sales growth in Year 2 5%Inventory 1st month Year 1 bought in December Year 0 #1,6505% increase #83 +Inventory 1st month Year 2 #1,733Purchase price of1 hotdog USD 0.50 xTo receive – account payable USD 866•  As  you  know,  we  need  to  pay  our  inventory  one  month  in  advance,  i.e.  in  December   we  already  need  to  pay  for  our  stock  in  January  •  Given  the  current  favorable  market  circumstances,  we  assume  a  5%  increase  in  sales   growth  for  Year  2  •  As  a  consequence,  we  assume  a  similar  development  in  our  inventory  on  the  right   21  
    • Case  assignment  3:  Cash  Flow  statement  –  closing  statements  Sales growth in Year 2 5%Inventory 1st month Year 1 bought in December Year 0 #1,6505% increase #83 +Inventory 1st month Year 2 #1,733Purchase price of1 hotdog USD 0.50 xTo receive – account payable USD 866•  As  you  know,  we  need  to  pay  our  inventory  one  month  in  advance,  i.e.  in  December   we  already  need  to  pay  for  our  stock  in  January  •  Given  the  current  favorable  market  circumstances,  we  assume  a  5%  increase  in  sales   growth  for  Year  2  •  As  a  consequence,  we  assume  a  similar  development  in  our  inventory  on  the  right   22  
    • Case  assignment  3:  Cash  Flow  statement  –  cash  count  Below  we  have  portrayed  an  overview  of  all  cash  expenses  since  incorpora&on:  Beginning cash 24,000Revenue 49,500Stand -20,000Cost of Goods Sold (“COGS”) -16,500Selling, General, Administrative Costs (“SG&A”) -17,100Interest -360Tax -3,453Dividend -7,061Maintenance -2,000Pay down of debt -1,000Inventory -990Account payable -866Ending cash 4,170 23  
    • Case  assignment  3:  Cash  Flow  statement  The  crux  of  the  Cash  Flow  statement  is  to  separate  cash  flows  from  opera&ng  ac&vi&es  from  the  other  cash  flows      Moreover,  we  need  to  filter  out  non-­‐cash  items  such  as  deprecia&on    The  Cash  Flow  statement  dis&nguishes  between  three  types  of  cash  flows:   –  Cash  flow  from  operaons   –  Cash  flow  from  invesng  acvies   –  Cash  flow  from  financing  acvies  As  you  can  see  in  this  assignment,  the  financial  statement  are  interconnected.  This  is  high-­‐lighted  by  the  pink  cell     24  
    • Case  assignment  3:  Cash  Flow  statement  The  Cash  Flow  statement  can  have  the  following  structure:     Earnings Before Interest & Tax (“EBIT”)+ Depreciation Operating cash flow before changes in working capital+ Changes in working capital= Cash flows from operating activities (A)+ Cash flows from investing activities (B)+ Cash flows from financing activities (C)= Net increase in cash (A + B + C)+ Cash at 1 January Year 1= Year-end cash 25  
    • Earning Before Interest & Tax (“EBIT”) 13,900+ Depreciation 2,000= Operating cash flow before changes in WC 15,900 Change in inventory -990 Change in account receivables -41 Change in account payables 0 Income tax expense -3,453 Cash from operating activities 11,416 Acquisition of PPE -2,000 Cash from investing activities -2,000 Pay down of debt -1,000 Interest expense -360 Dividend paid (notes) -7,061 Cash from financing activities -8,421= Net increase in cash (A + B + C) 995+ Cash at 1 January Year 1 3,175= Year-end cash 4,170 26  
    • Case  assignment  4:  Closing  Balance  Sheet  Now  that  we  have  prepared  the  cash  statement  we  can  also  finalize  the  closing  Balance  Sheet.  Prepare  the  closing  Balance  Sheet  for  Year  1   Balance Sheet – 31st December Year 1 Assets USD Liabilities & Equity USD Stand 20,000 Equity 18,000 Retained earnings 3,026 Inventory 990 Account payable 866 Debt 5,000 Cash 4,170 Account payable 0 Total 26,026 Total 26,026 27  
    • END  EXAMPLE  OF  FINANCIAL  STATEMENT  CALCULATIONS       28  
    • Example  of  a  non-­‐realisc  forecast   REALISTIC  AT  FIRST  SIDE?   YES!   Housing   Posive   Low  cost   Days  per  year   365  BASIC  ASSUMPTIONS   Meals  per  day   c.  50  Amsterdam  populaon   800,000   Meals  per  person   yearly   4x  Target  group:  10%   80,000  YUPPIES  Sales  of  meals  year  1   20,000   REALISTIC  AFTER  ANALYSIS?   NO!  Housing  -­‐  Suburban  area   Low  cost   Housing   Negave   No  target   Days  per  year   47wks/5d   235   Meals  per  day   Implied    c.  85   Brand  exposure   11%   85,000   29  
    • Revenue  Forecasng  –  starng  point  of  everything   1.  Split  your  revenue  in  units   2.  Use  historical  data   3.  Describe  driving  factors   4.  Look  for  paYerns   5.  Include  new  products   6.  do  not  forget  prices   7.  Upside  &  downside  scenario’s   8.  Compare  with  industry  standards   Your  Revenue  Forecast  is  a  star&ng  point.  Each  cost  item  can  be  derived   from  revenue  or  build-­‐up  like  the  way  revenue  is  build-­‐up     30  
    • Overview  of  forecasng  parameters  Financial statement item Standard model ConsiderRevenue % growth GDP, market growth, inflation, volume vs. price, price pressure, product mix, acquisitions/disposals, regionsCost of Goods Sold Directly related units sold price pressure, efficiency, product mix, raw material costs, inflationGross margin % of revenues price pressure, efficiency, product mix, raw material costs, inflationSelling, General & % of revenues price pressure, efficiency, product mixAdministrative costsOperating costs growth % growth sales growth, variable vs. fixed costs, inflation, wage costs, efficiencyDepreciation % of opening tangible fixed accounting policy change, large assets investments (current & historic) 31  
    • Overview  of  forecasng  parameters  –  cont’d  Financial statement item Standard model ConsiderAmortisation % of opening intangible fixed goodwill: linear write-off and no assets additionsInventory (days) days of increased revenues efficiency of working capital, seasonalityAccount receivable (days) days of increased revenues efficiency of working capital, country mix, seasonality, annual averageOther receivables % of increased revenues timing, annual average, constituents(Operating) cash % of increased revenues idem inventory days, industry averageAccount payable (days) days of total increased . costs idem account receivableOther payables % of increased revenues idem other receivablesNote:  inventory  days,  account  receivable  days  and  account  payable  days  will  be  explained  in  more  detail  in  the  next  webinar,  Aug.  14   32  
    • Overview  of  forecasng  parameters  –  cont’d  Financial statement item Standard model ConsiderCapital expenditure % of increased or total revenues large investments, maintenance(expansion and sustaining) versus expenditureDividend (pay-out ratio) % of net earnings before extra- % of earnings or stable Dividend per ordinaries Share (“DPS”) growthPreferred interim dividends % of preferred share capital outstandingPreferred interim dividend % of preferred dividendsInterest on debt interest rate maturity of debt, default spreadInterest on cash interest rate current market rate 33  
    • EXAMPLE  OF  FORECASTING       34  
    • Case  assignment  5:  Forecas&ng  Profit  &  Loss  statement  As  you  have  just  no&ced,  forecas&ng  is  an  exercise  that  requires  us  to  make  certain  assump&ons  on  the  development  of  our  company:   –  We  assume  revenue  growth  with  5%  in  the  first  two  years  and  thereater  with  3%   –  Moreover,  we  assume  that  COGS  and  SG&A  as  a  percentage  of  revenues  remain  constant   (i.e.  Year  1  levels)    Assignment:  Prepare  the  P&L  for  Year  2  to  Year  5   35  
    • P&L 2007 2008F 2009F 2010F 2011F Year 1 Year 2 Year 3 Year 4 Year 5 Forecas&ng  P&L   Profit & Loss Statement Revenues 49,500 51,975 54,574 56,211 57,897 Growth 5.0% 5.0% 3.0% 3.0%•  Revenues  growth  by  more  than   COGS As a % of revenues -16,500 33.3% -17,325 33.3% -18,191 33.3% -18,737 33.3% -19,299 33.3% USD  8,000  to  almost  USD  58,000   Gross Profit 33,000 34,650 36,383 37,474 38,598 in  Year  5  (=2011)   Gross margin 66.7% 66.7% 66.7% 66.7% 66.7%•  What  can  you  say  about  the   SG&A -17,100 -17,955 -18,853 -19,418 -20,001 As a % of revenues 34.5% 34.5% 34.5% 34.5% 34.5% profitability  of  the  company  going   EBITDA 15,900 16,695 17,530 18,056 18,597 EBITDA margin 32.1% 32.1% 32.1% 32.1% 32.1% forward?   Depreciation -2,000 -2,000 -2,000 -2,000 -2,000 As a % of revenues 4.0% 3.8% 3.7% 3.6% 3.5% EBIT 13,900 14,695 15,530 16,056 16,597 EBIT margin 28.1% 28.3% 28.5% 28.6% 28.7% Interest (@ 6%) -360 -300 -240 -180 -120 PBT 13,540 14,395 15,290 15,876 16,477 27.4% 27.7% 28.0% 28.2% 28.5% Tax -3,453 -3,671 -3,899 -4,048 -4,202 Tax rate 25.5% 25.5% 25.5% 25.5% 25.5% Net Profit 10,087 10,724 11,391 11,827 12,276 Profit margin 20.4% 20.6% 20.9% 21.0% 21.2% Dividend (i.e. bonus for employee) -7,061 -7,507 -7,974 -8,279 -8,593 Dividend ratio 70.0% 70.0% 70.0% 70.0% 70.0% Retained earnings 3,026 3,217 3,417 3,548 3,683
    • Case  assignment  6:  Forecas&ng  Balance  Sheet  In  our  case,  forecas&ng  of  the  Balance  Sheet  requires  liYle  assump&ons   –  We  assume  that  Inventory  and  Receivables  both  remain  at  a  constant  percentage  of   revenues  All  other  BS  items  are  a  consequence  of  other  decisions  we  have  made  at  an  earlier  stage  in  our  case:   –  Depreciaon  equals  the  maintenance  investment  in  our  stand,  i.e.  fixed  assets  remain   constant   –  Equity  is  adapted  automacally:  the  retained  earnings  from  the  Profit  &  Loss  statement  flow   into  Equity   –  Debt  is  paid  down  yearly  in  six  years  and  subsequently  decreases  with  USD  1,000  per  year   Cash  =  last  year’s  cash  +  the  net  increase  in  cash  (from  CF)   37  
    • Balance SheetBalance sheetBalance Sheet 2007 Year 1 2008F Year 2 2009F Year 3 2010F Year 4 2011F Year 5AssetsKraamStand   20,000 20,000 20,000 20,000 20,000As %  % of revenuesAs   a of  revenues   40.4% 38.5% 36.6% 35.6% 34.5%Inventory 990 1,040 1,091 1,124 1,158As a % of revenues 2.0% 2.0% 2.0% 2.0% 2.0%Receivables 866 910 955 984 1,013As a % of revenues 1.8% 1.8% 1.8% 1.8% 1.8%Cash 4,170 6,294 8,614 11,101 13,720As a % of revenues 8.4% 12.1% 15.8% 19.7% 23.7%Total assets 26,026 28,243 30,661 33,209 35,892Liabilities & EquityEquity 21,026 24,243 27,661 31,209 34,892Debt 5,000 4,000 3,000 2,000 1,000Payables 0 0 0 0 0As a % of revenues 0.0% 0.0% 0.0% 0.0% 0.0%Total liabilities & Equity 26,026 28,243 30,661 33,209 35,892 38  
    • Case  assignment  7:  Forecas&ng  Cash  Flow  statement   Cash Flow Cash Flow Statement 2007 Year 1 2008F Year 2 2009F Year 3 2010F Year 4 2011F Year 5With  the   EBIT 13,900 14,695 15,530 16,056 16,597informa&on   Depreciation 2,000 2,000 2,000 2,000 2,000presented  (profit  &   Operating cashflow before changes in WC 15,900 16,695 17,530 18,056 18,597loss  and  Balance   Change in inventory -990 -50 -52 -33 -34 Change in receivables -41 -43 -45 -29 -30Sheet)  at  hand  now   Change in payables 0 0 0 0 0prepare  the  Cash   Income tax expense -3,453 -3,671 -3,899 -4,048 -4,202 Cash from operating activities 11,416 12,931 13,533 13,946 14,332Flow  statement  for   Acquisition of PPE -2,000 -2,000 -2,000 -2,000 -2,000Year  1  –  Year  5   Cash from investing activities -2,000 -2,000 -2,000 -2,000 -2,000   Paydown of debt -1,000 -1,000 -1,000 -1,000 -1,000   Interest expense -360 -300 -240 -180 -120 Dividend paid -7,061 -7,507 -7,974 -8,279 -8,593   Cash from financing activities -8,421 -8,807 -9,214 -9,459 -9,713 Net increase in cash 995 2,124 2,320 2,487 2,619 Cash at 1 January 3,175 4,170 6,294 8,614 11,101 YE cash 4,170 6,294 8,614 11,101 13,720
    • END  OF  EXAMPLE  OF  FORECASTING       40  
    • BALANCE SHEETxUSD ths 2012 2013 2014 2015 2016ASSETS Cash 0 0 0 0 0 Account receivables 0 0 0 0 0 Inventories 0 0 0 0 0 Prepaid expenses 0 0 0 0 0 Other current assets 0 0 0 0 0Total current Assets 0 0 0 0 0 Property, Plants, Equipement 0 0 0 0 0 Leasehold improvements 0 0 0 0 0 Vehicles 0 0 0 0 0 Other fixed assets 0 0 0 0 0Total fixed Assets 0 0 0 0 0TOTAL ASSETS 0 0 0 0 0EQUITY & LIABILITIES Accounts payables 0 0 0 0 0 Short-term interest bearing debt 0 0 0 0 0 Accrued expenses 0 0 0 0 0 Other current liabilities 0 0 0 0 0Total current Liabilities 0 0 0 0 0Long term interest bearing debt 0 0 0 0 0 Paid-in capital 0 0 0 0 0 Retained earnings 0 0 0 0 0Total Equity 0 0 0 0 0TOTAL EQUITY & LIABILITIES 0 0 0 0 0 error check = 0 0.0 0.0 0.0 0.0 0.0
    • PROFIT & LOSS STATEMENTxUSD ths 2012F 2013F 2014F 2015F 2016FSales Sales prod. A 0 0 0 0 0 Sales prod. B 0 0 0 0 0 Other Income 0 0 0 0 0Total Sales 0 0 0 0 0 growth rate #DIV/0! #DIV/0! #DIV/0! #DIV/0!Cost of Goods Sold COGS prod. A 0 0 0 0 0 COGS prod. B 0 0 0 0 0Gross Profit 0 0 0 0 0 gross margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Selling, General & Administrative Expenses Housing 0 0 0 0 0 Utilities 0 0 0 0 0 Management Fees 0 0 0 0 0 Personnel 0 0 0 0 0 Office expenses 0 0 0 0 0 Telephone costs 0 0 0 0 0 Subscriptions 0 0 0 0 0 Internet/website 0 0 0 0 0 Maintenance 0 0 0 0 0 Marketing 0 0 0 0 0 Travel & entertainment 0 0 0 0 0 Accounting 0 0 0 0 0 Legal 0 0 0 0 0 Other 0 0 0 0 0Total SG&A 0 0 0 0 0 SG&A margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!EBITDA 0 0 0 0 0 EBITDA margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Depreciation 5 0 0 0 0 Amortization 0 0 0 0 0EBIT -5 0 0 0 0 EBIT margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Interest 0 0 0 0 0Net Profit Before Taxes -5 0 0 0 0 Profit margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
    • CASH FLOW STATEMENTxUSD ths Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012FCASH INFLOWS Cash Sales prod. A 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash Sales prod. B 0 0 0 0 0 0 0 0 0 0 0 0 0 Payment of receivables 0 0 0 0 0 0 0 0 0 0 0 0 0 Other Income 0 0 0 0 0 0 0 0 0 0 0 0 0TOTAL CASH IN 0 0 0 0 0 0 0 0 0 0 0 0 0CASH OUTFLOWS Cost of Goods Sold 0 0 0 0 0 0 0 0 0 0 0 0 0 Housing 0 0 0 0 0 0 0 0 0 0 0 0 0 Utilities 0 0 0 0 0 0 0 0 0 0 0 0 0 Management Fees 0 0 0 0 0 0 0 0 0 0 0 0 0 Personnel 0 0 0 0 0 0 0 0 0 0 0 0 0 Office expenses 0 0 0 0 0 0 0 0 0 0 0 0 0 Telephone costs 0 0 0 0 0 0 0 0 0 0 0 0 0 Subscriptions 0 0 0 0 0 0 0 0 0 0 0 0 0 Internet/website 0 0 0 0 0 0 0 0 0 0 0 0 0 Maintenance 0 0 0 0 0 0 0 0 0 0 0 0 0 Marketing 0 0 0 0 0 0 0 0 0 0 0 0 0 Travel & entertainment 0 0 0 0 0 0 0 0 0 0 0 0 0 Professional advisors 0 0 0 0 0 0 0 0 0 0 0 0 0 Tax 0 0 0 0 0 0 0 0 0 0 0 0 0 Payment payables 0 0 0 0 0 0 0 0 0 0 0 0 0 Loan Payments 0 0 0 0 0 0 0 0 0 0 0 0 0 Bank charges 0 0 0 0 0 0 0 0 0 0 0 0 0 Other 0 0 0 0 0 0 0 0 0 0 0 0 0TOTAL CASH OUT 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash in minus out per period 0 0 0 0 0 0 0 0 0 0 0 0 0 Funding (needed)/excess 0 0 0 0 0 0 0 0 0 0 0BEGINNING BALANCE 0 0 0 0 0 0 0 0 0 0 0 0 0ENDING BALANCE 0 0 0 0 0 0 0 0 0 0 0 0 0
    • Tips  for  financial  modeling  –  planning  in  excel   1.  Inputs  in  blue,  formula’s  in  black   2.  Separate  input  sheet   3.  Transparency   4.  Break-­‐down  formula’s   5.  do  not  consolidate  SG&A   6.  Actual  versus  forecasted   7.  Build  your  own  model   44  
    • Conclusion  &  final  remarks  Several  purposes  Financial  Planning:   Next  webinar  =  •  To-­‐do,  task  overview,  empowerment,  evaluaon,  control  and   Aug  14:   communicaon   Working  Capital   –  An  unknown   key  to  success  Dynamics  of  the  3  statements  –  a  circle    Think  through,  keep  it  simple  and  break-­‐down   Financial  Planning  is  a  tool  forcing  you  to  think  about  every  liYle  detail   on  a  period-­‐by-­‐period  basis  and  relate  financial  consequences  to  it   45  
    • Webinar  Program  Overview  2012  June  19:    Business  Plan  Wring  -­‐  A  Roadmap  to  Success  July  3:      Pitching  &  Presentaon  -­‐  3  Minutes,  1  Impression  July  17:    Strategy  -­‐  A  Vision  for  the  Future,  A  Strategy  for  Geing  There  July  31:    Budgeng  &  Forecasng  -­‐  Predicng  the  Outcome  Aug  14:    Working  Capital  -­‐  An  Unknown  Key  to  Success  Aug.  28:    Capital  Management  -­‐  Playing  with  Risk  Sept  11.:    Funding  &  Investments  -­‐  Some  Sources  are  More  Equal  then  Others  Sept.  25:    Valuaon  -­‐  Art  or  Science  Oct  9:      Exit  Strategy  -­‐  Nice  to  Have  or  Need  to  Have?  Oct.  23:    Bootstrapping  -­‐  An  Alternave  Answer  to  Funding  Nov  6:    Crowdfunding  -­‐  The  Power  of  Friends,  Family  and  Fools  Nov.  20:    Networking  -­‐  Nice  You  have  3000  Friends,  I  have  30  Relevant  Connecons  Dec.  4:      Markeng  &  (Social)  Media  -­‐  Noise  or  Value?  Dec.  11:    No  Sales,  No  Glory  Dec.  18:    Most  Common  Mistakes  of  Entrepreneurs   46    
    • BECOME  A  VIP  MEMBER  WITHIN  1  WEEK  AND  GET  YOUR  PLAN  CHECKED!  1.  Increased  Business  Exposure  and  Social  Media  Integra&on  2.  Jay  Abrahams  Business  Maximizer  Manual  3.  Access  To  Exclusive  Expert  Events  Twice  A  Month  4.  "Special  Solu&on"  Ac&on-­‐Based  Reports,  at  least  twice  a  month    5.  VIP  Only  Discounts  6.  VIP  Weekly  NewsleYer  7.  VIP  Inner  Circle  8.  eProducts  from  the  worlds  largest  library  9.  IN  ADDITION:  If  you  aYended  this  workshop  AND  become  a  VIP  Member  of  EFactor  within   ONE  WEEK,  you  can  send  me  you  ques&ons  on  working  capital  and  I  will  provide  you  with   assistance:  www.efactor.com/hukshorn         HTTP://WWW.EFACTOR.COM/VIP     47  
    • Thank  you!    This  document  was  prepared  by  Eva  Hukshorn.  Several  people  and  organiza&ons  have  inspired  her  to  write  this  presenta&on,  amongst  which  are,  but  not  limited  to  the  Founders  of  EFactor,   ABN  AMRO/RBS,  University  of  Groningen,  Ins&tute  for  Management  Accountants