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Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
Financial Projections
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Financial Projections

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  • 1. FINANCIAL PROJECTIONS  AREA48  July 16, 2013  Sam Buffington, CPA ◦ sambuff@cox.net
  • 2.  Takeaways ◦ Able to do a 3-5 year financial plan – basic version ◦ Years 1 and 2 by month, years 3 thru 5 – quarterly or annually ◦ Keep it simple – just do it – get some help ◦ It makes sense to you
  • 3.  Excel – electronic spreadsheet  Accounting – terms, etc  Review finished product – Excel files ◦ Area48 - example 1.xls ◦ Area48 - example 2.xlsx
  • 4.  Why do we do projections / forecasts? ◦ Need to know where we are headed  Long term – one year  Short term – 6-8 weeks for cash forecast ◦ Need to know how much money we need  “capital required”  “burn rate”  Where are we spending our money (investment)? ◦ It’s important part of business administration – fundamental
  • 5.  Why do we do projections / forecasts? ◦ Must do – startup, early stage, mature businesses ◦ Flows with the record-keeping requirement  Where have we been – historical financial statements  Required to do – no choice  Where are we now – current financial statements  Where will we be in the future ◦ Helpful (necessary) for valuation of your business
  • 6.  Terminology ◦ Budget ◦ Forecast (projections) ◦ Plan (model)
  • 7.  Terminology ◦ Budget  Fixed – doesn’t change  One year period  Measurement tool for management – expected by:  Board  Investors  Bank  Etc.
  • 8.  Terminology ◦ Forecasts  Most current best estimate  Moving periods –  “rolling 12 months”  one year or multi year  Monthly – quarterly – annually  Must have to manage resources, cash, etc.
  • 9.  Terminology ◦ Plans  Business plan  All encompassing  Development, sales and marketing, operations, financial  Financial plan  Part of the “Business Plan”
  • 10.  Accounting Terminology ◦ Accrual basis – use this ◦ Cash basis ◦ Revenues (sales) ◦ Cost of sales ( cost of goods – COG’s) ◦ Gross margin (gross profit) ◦ Operating expenses ◦ Operating income (EBITDA)
  • 11.  Accounting Terminology ◦ Other income and expense  Interest – depreciation - taxes ◦ Net income (bottom line)
  • 12.  Accounting Terminology ◦ Financial statements  Balance sheet - point in time  Income statement – period of time  Statement of cash flows – period of time
  • 13.  Format for forecasting /budgeting ◦ Use “income statement” format ◦ Periods across the top (columns)  Monthly – quarterly - annual ◦ Items down the side (rows) ◦ Use electronic spreadsheet – Excel ◦ This is standard format - do not vary
  • 14. 2013 Revenues: License fees 270,000 Sales 190,000 Total revenue 460,000 Direct costs 75,000 Gross margin 385,000 Operating expenses: Wages and burden 129,790 Travel & lodging 53,000 Trade shows 12,000 Marketing 50,000 Server farms 24,000 Rent 36,000 Other - Misc 30,000 Total operating expenses 334,790 Operating income 50,210 Interest expense 3,500 Depreciation expense 10,000 Net income 36,710
  • 15. Line items to forecast  Revenues ◦ What we sell, when, for how much (to who?)  Cost of revenues ◦ Tied directly to what we sold ◦ “direct costs” – can be goods, services, wages
  • 16. Line items to forecast Operating Expenses  Think through where you are going to spend your money to operate your business  Look at other income statements, forecasts, etc.
  • 17. Line items to forecast Operating Expenses  People costs - salaries and wages – yourself ◦ Remember “payroll burden” – payroll taxes ◦ Benefits? ◦ Commissions?  Rent  Insurance  Professional fees  Marketing
  • 18. Line items to forecast Operating Expenses  T&E  Office supplies  IT costs  Communications

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