MIC 2014 Workshop Finance
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Financial Plan workshop (Feb 13th, 2014) for Microsoft Innovation Center Brussels' boostcamp

Financial Plan workshop (Feb 13th, 2014) for Microsoft Innovation Center Brussels' boostcamp

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MIC 2014 Workshop Finance Presentation Transcript

  • 1. MIC boostcamp - Finance workshop Convert your business model into figures Key parts and logic behind your financial plan Catherine Blondiau Rodolphe d'Udekem d'Acoz Martin van Wunnik 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 1
  • 2. Who are we ? Catherine Blondiau Rodolphe d'Udekem d'Acoz Martin van Wunnik 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 2
  • 3. This presentation is available for free: http://www.slideshare.net/FinanceCoach24 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 3
  • 4. Morning session 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 4
  • 5. Why a Financial Plan ? If you don't think about the future, you cannot have one. John Golsworthy where you want to go You need to know how you are supposed to get there 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 5
  • 6. 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 6
  • 7. 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 7
  • 8. 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 8
  • 9. Financial Plan Content – Assumptions – Profit & Loss – Balance Sheet / Investment – Cash-Flow -> Cash needed – Valuation of the project – Profitability / return of the project 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 9
  • 10. 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 10
  • 11. Accounting: Profit & Loss (P&L) COGS (Cost of Sales) General Expenditures Personnel Costs Revenues (Sales…) Depreciation Taxes EBIT Financial cost Profit 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 11
  • 12. Accounting: Balance Sheet ACTIVE PASSIVE Non Current Assets (Actifs Immobilisés/ Vast Activa) Equity + Reserves (Capital/Kapitaal) LT Debts Current Assets (Actifs circulants/ Vlottend Activa) 17/04/2012 07/02/2012 13 Feb ’14 ST Debts Xavier Corman | Martin van Wunnik 12
  • 13. Required Cash-Flow 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 13
  • 14. How to finance your startup ? Equity LT Debts ST Debts 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 14
  • 15. Sales 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 15
  • 16. Financial assumptions How to estimate your Sales? Catherine Blondiau Rodolphe d’Udekem d’Acoz Business and Finance Advisors @ IMPULSE.Brussels 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 16
  • 17. SALES Market potential = (Average Purchase * How Much * How Often) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 17
  • 18. What ? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 18
  • 19. Price? Pricing of alternative solutions How much is the customer ready/willing to pay? Price: - Not too low - Not too high - Coherent Test it! Evolution of the selling prices? What is the average amount per purchase? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 19
  • 20. How Much? 2 methods to evaluate How Much you will be able to sell Top Down approach starts with market and industry data. 17/04/2012 07/02/2012 Bottom Up approach starts with your customers and your resources Xavier Corman | Martin van Wunnik 20
  • 21. How Much? – Top Down A Top Down analysis is calculated by determining the total market, then estimating your share of that market. It works in 3 steps : 1. Total Available Market (TAM) : How large is the market if all customers buy your product ? 2. Serviceable Available Market (SAM) : Focus on your own technology/services 3. Serviceable Obtainable Market (SOM) : Which realistic market share can be obtained by myself, considering competition, countries, my sales/distribution channels and other market influences? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 21
  • 22. How Much? – Top Down : Example You want to sell internet access in Europe TAM Total population of Europe 500 millions SAM % of the population who want internet access 80% 400 millions SOM Based on your market study, you expect to achieve 1% of that potentiel audience 1% 4 millions Each account will yield €250 per year. Expected revenue : € 1 billion (4 millions ×€250/customer) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 22
  • 23. How Much? – Bottom-Up This approach allow you to estimate the sales considering the client and your resources. The idea is to understand how much you will be able to sell considering the resources of your company : - Time - People - Money 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 23
  • 24. How Much? – Bottom Up: Example You want to sell internet access in Europe We can bring on board five salespeople 5 salespeople Each salesperson can make ten phone sales calls a day that get through to a prospect. 10 calls/day There are 240 working days per year. 240 days 5% of the sales calls will convert within six months 5% Estimated sales 600 Each account will yield €250 per year. Expected revenue : € 150 000 (600×€250/customer) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 24
  • 25. How Much? Combine both approaches - Use top-down analysis to estimate the market opportunity for your company—to decide whether you want to try it in the first place - Use bottom-up analysis to get a realistic and testable estimate of what you can achieve within the first years of your startup Challenge both approaches and present a coherent global perspective of your estimated sales One-off/recurring/bundled sales? What are the supporting trends of your market ? How fast will the market grow? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 25
  • 26. When & How ? How and When are you going to sell your products ? Sales channels: Direct / Indirect – focus may shift over time 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 26
  • 27. When & How ? - COCA Impact on the cost of customer acquisition (COCA) €? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 27
  • 28. When & How ? - COCA Impact on the cost of customer acquisition (COCA) : - It costs money to achieve each sales - How much resources (time, €, HR) does it require (cf Bottom Up approach)? - Includes unsuccessful prospects - To be taken into account in your financial plan - Choice of channels : Financially sustainable? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 28
  • 29. When & How ? - COCA & LTVOAC COCA & Life time value of an acquired customer - Cost of Customer Acquisition (COCA) COCA = Sales & Marketing Costs / Customers - Life time value of an acquired customer (LTVOAC) LTVOAC = revenue over life time x gross margin - Each acquired customer will provide you with revenues during his life time (as a client of your company) - Put those revenues in perspective with the COCA 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 29
  • 30. When & How ? - COCA & LTVOAC Lifetime value of a gym member who spends €20 every month for 3 years? - €20 X 12 months X 3 years = €720 in total revenue (or €240 per year) How much will it cost you to acquire this client? Allowable acquisition cost? How to optimize LTVOAC? Discount while managing CF 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 30
  • 31. Don’t Forget … Probably one of the most important parameters … and certainly the most difficult to estimate !! Consider different (sub)categories of products and/or services Consider the volume of units (products/services) sold and the respective selling prices Outputs – Per product (category) – Per client / market / segment – Per channel – Combine ? 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 31
  • 32. Don’t Forget … Gross sales or Net sales (e.g. after commission, bad debts…) Consider the initial volumes and the growth rates for each line of products/services without forgetting the market’s dynamic (seasonality, evolution of the selling prices, growth…) Be aware of potential delays and lower (initial) volumes & growth rates than expected. Consider the sales without VAT (unless you do not recuperate it !) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 32
  • 33. Don’t Forget … The sales data should be based on tangible elements and hypothesis directly linked to the business plan In no circumstances should the volume of sales be based on the costs … : “ spontaneous sales creation ” in order to achieve break even or benefit on paper does not help and could possibly endanger your credibility in the eyes of third parties To keep in mind: - User friendliness, avoid too much items - Internal logic : price, discount, cost of sales, payment conditions… & cycle 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 33
  • 34. Impulse template 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 34
  • 35. Afternoon session 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 35
  • 36. Accounting: Profit & Loss (P&L) COGS (Cost of Sales) General Expenditures Personnel Costs Revenues (Sales…) Depreciation Taxes EBIT Financial cost Profit 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 36
  • 37. Costs 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 37
  • 38. Costs assumptions Catherine Blondiau Rodolphe d’Udekem d’Acoz Business and Finance Advisors @ IMPULSE.Brussels 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 38
  • 39. • Sales • Costs of goods/services sold • (Other) Operating Costs 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 39
  • 40. COGS : Cost of Goods / Services sold • = Cost of Sales • Variable costs directly linked to the goods / services sold and highly or totally proportional to the sales • Can be close to zero for some kind of activities • Much easier to predict than the volume of sales itself (should logically be based on tangible elements) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 40
  • 41. COGS : Cost of Goods / Services sold • Two main categories: a) goods purchased and/or manufactured NB: attention point: means a potential inventory and an additional financial need b) other costs, linked to sales, with no impact on inventory NB: eg. Transport, paiment or packaging costs 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 41
  • 42. COGS : Cost of Goods / Services sold • Deducted from the sales, it will give the gross margin or gross revenues NB: often an important parameter, notably to monitor the evolution of profitability & to make comparison with company in similar business • 17/04/2012 07/02/2012 In some cases, there is a grey zone whether some costs « should » be integrated in the COGS or the general expenses, with some freedom to choose Xavier Corman | Martin van Wunnik 42
  • 43. COGS : Cost of Goods / Services sold • Do not forget that the cost per unit sold can change following different parameters such as inflation or the evolution in the volume of sales (bargaining power with suppliers) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 43
  • 44. Margin : relative notion • A margin is a relative concept ! Be aware that it’s all about points of view. Otherwise, it could lead to misinterpretation. for example, for the gross margin, it could be expressed in terms of: - an amount in currency - a percentage of the sales (without VAT), which is the most commonly used approach - but also sometimes as a percentage of the costs (quite unusual for gross margin but stil …) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 44
  • 45. Margin : relative notion Cost of goods / services sold: 100 € Sales: 150 € - Margin expressed in €: 50 € - Margin expressed as % of costs: 50% - Margin expressed as % of sales: 30% 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 45
  • 46. • Sales • Costs of goods/services sold • (Other) Operating Costs 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 46
  • 47. General Expenses or « Fixed » costs • • • General Expenses Or « fixed » costs Or selling, general & administrative exp. (SGA) • • • • Rent & Maintenance expenses Utilities, Telephone, Internet & Licences, etc Insurance & Bank fees (not the financial interests !) Third parties / subcontracters, notably : Accountants, Lawyer fees, External sales, etc 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 47
  • 48. General Expenses or « Fixed » costs • Marketing & Communication expenses NB: not to be underestimated ! • Travel & representation expenses • HR costs other than salary and related costs • Taxes (not the taxes on profit) • … Unexpected expenses ! 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 48
  • 49. General Expenses or « Fixed » costs • R&D (if not integrated in the investments) • Use of tangible assets (if not integrated in investments) • Expenses versus Investments • Profit & Loss account versus Treasury • Consider what could/should be considered as pure costs, to be opposed to costs than can or have to be « activated » (on the balance sheet) & amortized 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 49
  • 50. General Expenses : HR costs • Employees versus Workers • Director (self-employed) versus staff under contract NB: social costs linked to the shareholder of a company working for it under a self-employed status is not to be included in the FP of the company, unless specifically foreseen The differences in the fiscal status and in the costs berd by the company for both categories are quite significant (eg multiplication effect x 1.34 x 13.92 !) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 50
  • 51. Costs with no impact on treasury Amortization, Depreciation & Provisions : (= costs not implying a direct cash out) Amortization is automatically calculated in the template based on the investments (and the amortization tenor) Depreciation & Provisions are not included at this stage (not relevant for a starter) 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 51
  • 52. Pictures © by Sheila Batiz 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 52
  • 53. IMPULSE Too many things to list them all here! We inform you, we guide you and we accompany you in a whole range of areas such as creating an enterprise, financing, innovation, town planning, environmental permits, partnerships … by means of newsletters, websites, seminars or tailored coaching. Briefly, we create a complete ecosystem in which you can grow as an entrepreneur! More info on our websites : www.impulse.irisnet.be - www.entreprendreabruxelles.be www.ecosubsibru.be – www.monstarterkit.be – www.brutrade.be info@1819.be - info@impulse.irisnet.be 17/04/2012 07/02/2012 Xavier Corman | Martin van Wunnik 53
  • 54. Martin van Wunnik 0475 / 96.95.91 Martin@FinanceCoach24.com 17/04/2012 07/02/2012 13 Feb ’14 Xavier Corman | Martin van Wunnik 54