Swifton CFOs LLC - Boston BizSpark presentation - Financial Projections for Investor Presentations

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Swifton CFOs LLC - Boston BizSpark presentation - Financial Projections for Investor Presentations

  1. 1. AB C Company, Inc.Es timate d State me nt of Ope rationsFor The Years Ended December 31, 2010. 2011, 2012, and 2013 Dollars (000s omitte d) Pe rce nt (%) of Re ve nue 2010 2011 2012 2013 2010 2011 2012 2013Re ve nue : Installation Revenue $ 450 $ 3,825 $ 21,038 $ 73,633 77.1% 84.3% 82.3% 80.6% Non-Installation Revenue Service Fees $ 89 $ 623 $ 4,361 $ 17,444 15.2% 13.7% 17.1% 19.1% Other Non-Installation Revenue $ 45 $ 90 $ 158 $ 237 7.7% 2.0% 0.6% 0.3% Total Revenue: $ 584 $ 4,538 $ 25,557 $ 91,314 100.0% 100.0% 100.0% 100.0%Dire ct Cos ts: Installation Costs $ 338 $ 2,678 $ 12,623 $ 36,817 57.9% 59.0% 49.4% 40.3% Non-Installation Costs $ 38 $ 193 $ 1,175 $ 4,420 6.5% 4.3% 4.6% 4.8% Direct Costs: $ 376 $ 2,871 $ 13,798 $ 41,237 64.4% 63.3% 54.0% 45.2%Othe r Cos t of Se rvice s $ 88 $ 567 $ 2,556 $ 6,849 15.1% 12.5% 10.0% 7.5%Gros s M argin ($) $ 120 $ 1,100 $ 9,203 $ 43,228 20.5% 24.2% 36.0% 47.3%Gross Margin (%) 20.5% 24.2% 36.0% 47.3%Ope rating Expe nse s: Sales $ 292 $ 1,588 $ 6,389 $ 18,263 50.0% 35.0% 25.0% 20.0% Marketing $ 263 $ 1,361 $ 5,111 $ 13,697 45.0% 30.0% 20.0% 15.0% Research & Development $ 175 $ 998 $ 2,811 $ 8,218 30.0% 22.0% 11.0% 9.0% General & Administration $ 44 $ 295 $ 1,533 $ 4,566 7.5% 6.5% 6.0% 5.0% Total Operating Expenses: $ 774 $ 4,242 $ 15,844 $ 44,744 132.5% 93.5% 62.0% 49.0%EBITDA $ (654) $ (3,142) $ (6,641) $ (1,516) -112.0% -69.2% -26.0% -1.7%Othe r (Re ve nue ) & Expe ns e s : Interest $ 80 $ 156 $ 32 $ 80 13.7% 3.4% 0.1% 0.1% Taxes $ 8 $ 9 $ 11 $ 15 1.4% 0.2% 0.0% 0.0% Depreciation & Amortization $ 13 $ 67 $ 268 $ 874 2.2% 1.5% 1.0% 1.0% Total Other (Revenue) & Expenses $ 101 $ 232 $ 311 $ 969 17.3% 5.1% 1.2% 1.1%Ne t Income (Loss ) $ (755) $ (3,374) $ (6,952) $ (2,485) -129.3% -74.3% -27.2% -2.7%State me nt Note s :Re ve nue Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232 7.4% 51.1% 47.8% 50.6% Market 2 $ 230 $ 1,201 $ 7,652 $ 26,450 39.4% 26.5% 29.9% 29.0% Market 3 $ 256 $ 932 $ 3,250 $ 12,658 43.8% 20.5% 12.7% 13.9% Market 4 $ 55 $ 85 $ 2,450 $ 5,974 9.4% 1.9% 9.6% 6.5%Total Re ve nue $ 584 $ 4,538 $ 25,557 $ 91,314He adcountExisting $ 13.00 $ 18.00 $ 61.00 $ 298.00New Hires $ 5.00 $ 43.00 $ 237.00 $ 830.00Total Headcount $ 18.00 $ 61.00 $ 298.00 $ 1,128.00Capital Expe nditure s $ 126.00 $ 424.00 $ 1,584.00 $ 4,474.00 COPYRIGHT © 2010 COPYRIGHT © 2011
  2. 2. Rule #1: If you cannot read thefinancial statement from two feet away the font is too small(i.e. there are too many details) COPYRIGHT © 2011
  3. 3. ABC Company, Inc.Estimate d State ment of OperationsFor The Years Ended December 31, 2010. 2011, 2012, and 2013 Dollars (000s omitte d) 2010 2011 2012 2013Revenue: Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232 Market 2 $ 230 $ 1,201 $ 7,652 $ 26,450 Market 3 $ 256 $ 932 $ 3,250 $ 12,658 Market 4 $ 55 $ 85 $ 2,450 $ 5,974Total Reve nue $ 584 $ 4,538 $ 25,557 $ 91,314Gross Margin ($) $ 120 $ 1,100 $ 9,203 $ 43,228Gross Margin (%) 20.5% 24.2% 36.0% 47.3%Ope rating Expense s: Sales & Marketing $ 555 $ 2,949 $ 11,500 $ 31,960 Research & Development $ 175 $ 998 $ 2,811 $ 8,218 General & Administration $ 44 $ 295 $ 1,533 $ 4,566 Total Operating Expenses: $ 774 $ 4,242 $ 15,844 $ 44,744Other Expense/(Income) $ 101 $ 232 $ 311 $ 969Net Income (Loss) $ (755) $ (3,374) $ (6,952) $ (2,485)Statement Notes:HeadcountExisting $ 13 $ 18 $ 61 $ 298New Hires $ 5 $ 43 $ 237 $ 830Total Headcount $ 18 $ 61 $ 298 $ 1,128Capital Expe nditure s $ 126 $ 424 $ 1,584 $ 4,474 COPYRIGHT © 2011
  4. 4. Rule #2:Use $ (dollar signs) on the first and last row only. Unless, of course, you aremixing rows of $ and %, etc. COPYRIGHT © 2011
  5. 5. FORMAT CREDIBILITYThe presentation format does not interfere with (or create noise for) the reader COPYRIGHT © 2011
  6. 6. Rule #3: Numbers with thousands or millions must have commasThis: 54,556Not this: 54556 COPYRIGHT © 2011
  7. 7. ABC Company, Inc.Projecte d Statement of OperationsFor The Years Ended December 31, 2010 through 2013 Dollars 2010 2011 2012 2013 Revenue: Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232 Market 2 230 1,201 7,652 26,450 Market 3 256 932 3,250 12,658 Market 4 55 85 2,450 5,974 Total Revenue 584 4,538 25,557 91,314 Gross Margin ($) 120 1,100 9,203 43,228 Gross Margin (%) 20.5% 24.2% 36.0% 47.3% Operating Expense s: Sales & Marketing 555 2,949 11,500 31,960 Research & Development 175 998 2,811 8,218 General & Administration 44 295 1,533 4,566 Total Operating Expenses: 774 4,242 15,844 44,744 Other Expense/(Income) 101 232 311 969 Net Income (Loss) $ (755) $ (3,374) $ (6,952) $ (2,485) S t at em ent Not es: Headcount Exis t ing 13 18 61 298 New Hir es 5 43 237 830 Tot al Headc ount 18 61 298 1,128 Capital Expenditure s $ 126 $ 424 $ 1,584 $ 4,474 COPYRIGHT © 2011
  8. 8. Rule #4: Don’t mix fonts Or font size……And do not use a silly font COPYRIGHT © 2011
  9. 9. Rule #5: Text is left justifiedNumbers are right justifiedViolators confuse the reader COPYRIGHT © 2011
  10. 10. Rule #6: Do not overdo color andDo not highlight in Use Spot color! COPYRIGHT © 2011
  11. 11. Rule #7:Round your numbers to the nearest thousand for presentationsThis: $456,000Not this: $456,000,000 COPYRIGHT © 2011
  12. 12. Rule #8: Spelle CheckAnd do not tell me you relied on Microsoft……. COPYRIGHT © 2011
  13. 13. Financial Forecast in your Slide deck is a Marketing Effort! COPYRIGHT © 2011
  14. 14. • Provide cost-effective outsourced (part-time) CFO support• Clients range from pre-revenue startups to later stage privately held companies• Goal = provide strategic financial advice and handle all accounting/ financial matters so the entrepreneurs can focus on driving the business COPYRIGHT © 2011
  15. 15. David Fogel, CPASerial entrepreneurial CFOPrincipal of Swifton CFOs LLCExperience with high tech companies ranging from biotechto telecom services to healthcare IT to social media to…Adjunct Instructor of WPI MBA ProgramJudge & Mentor:Sponsor:Associations: COPYRIGHT © 2011
  16. 16. Ty Danco Member, Mass Medical Angels Member, North Country Angels"Ill never believe your revenue numbersanyway, but I sure want to scrutinize your assumptions and expenses!" COPYRIGHT © 2011
  17. 17. Developing The Financial Forecast1. What about the assumptions?Document the source of each number you produce - Why? - Knowledge of the assumptions proves that the entrepreneur understands the business “Does the story make sense?” “Does the story add up?”Sources of assumptions - Estimated or best guess (really try not to SWAG) - Desired goal to be obtained - Primary market research – surveys, vendor quotes - Second market research – purchased or gov’t information COPYRIGHT © 2011
  18. 18. Set your goals from top down but…..Prepare the model from the bottom up then….start over with your top down goals COPYRIGHT © 2011
  19. 19. Developing The Financial Forecast 1. What about the assumptions? (part 2) Start-up costs (uses of $) Financing (sources of $) Capital expenditures (costs with >1 yr life) Fixed expense (cost of being in business) Variable expense (cost of doing business) Projected sales (anticipated revenue earned) Cash flow (anticipated $ received and spent) COPYRIGHT © 2011
  20. 20. Developing The Financial Forecast 2. Creating the sales forecast BEST - Predict by customer as detailed as possible ….but include customer turnover BETTER – Predict by market COPYRIGHT © 2011
  21. 21. Developing The Financial Forecast 2. Creating the sales forecast (part 2) Predict by client (customer) types • By market • By size Then ID certain characteristics Small Medium Large Client Client Client Average Hours Per 4 Hours 8 Hours 16 Hours Week Average Contract $ $500 $1,250 $2,500 Per Week COPYRIGHT © 2011
  22. 22. Forecast Trap:Why they call them “Gross Sales” • Returns • Discounts • Rebates • Chargebacks • Markdowns COPYRIGHT © 2011
  23. 23. Forecast Trap: Do not over-estimate first year revenue(what, we can’t sell millions in first month?) COPYRIGHT © 2011
  24. 24. Developing The Financial Forecast 3. Spreading the Numbers• Yes, you need to do it monthly -- for the entire period• No flat numbers – consider the meaning – use % increases or $ per some indice• Think: As headcount increases rent increases (just not variably)• Start with revenue, then cost of services COPYRIGHT © 2011
  25. 25. Forecast Trap: Multiple ModelsBut…why not?Make changes to the base model but forgetto change the other modelsOne investor model, Multiple options(with triggers) COPYRIGHT © 2011
  26. 26. Tip: IntegrationMust use an integrated modelHeadcount addedPayroll and benefits calculationSummarized employee costsIncome StatementCash Flow COPYRIGHT © 2011
  27. 27. Tip: Use RoundingUse the MS Excel “roundingfunction” --- otherwise your numbers may not add up COPYRIGHT © 2011
  28. 28. Tip: Project payroll & benefits• Employee compensation is often the most costly expense yet they are often neglected. • Sales commissions – Direct connect with sales • Bonuses – If you are lucky enough…… • Recruiting expenses – Peg to new employees• Project monthly to handle start dates correctly• Match additions of people with milestones COPYRIGHT © 2011
  29. 29. Tip: Projection Numbers are not separate from the Company PlansCompany Plans Milestone Projects Responsible Revenue/ Dates Cost COPYRIGHT © 2011
  30. 30. Ben Littauer Member, Boston Harbor Angels"I like to see a business model spreadsheet with the assumptions clearly called out as variables. Then I can twiddle the knobs and see how sensitive profits are to the assumptions." COPYRIGHT © 2011
  31. 31. ABC Co.($ 000s omitted) 2010 2011 2012 2013 2014 IncomePro Forma Financial StatementRevenue $ - $ 1,875 $ 44,953 $ 108,238 $ 180,161 StatementCost of Service - 1,162 12,739 5,369 -Gross Margin - 712 32,214 102,868 180,161 38% 72% 95% 100%Operating ExpensesEmployee Costs 1,303 2,972 3,587 4,198 4,379Professional Fees 253 637 1,780 1,230 1,135Marketing & Travel 61 525 2,340 293 658Administrative Expenses 60 55 232 41 47Development & Pilot Manufacturing 409 819 262 965 1,733Facility & Other 195 801 1,206 1,612 2,023Total Expenses 2,282 5,807 9,407 8,340 9,976Depreciation & Amortization 42 98 301 590 791EBIT (2,324) (5,193) 22,507 93,939 169,394 Cash FlowNet Income (2,639) (5,411) 16,893 55,530 100,603 0% -289% 38% 51% 56% StatementPro Forma Cash FlowCash from Operations (2,597) (5,313) 17,193 56,120 101,393Cash from Working Capital (31) (936) (2,879) (2,754) (3,437)Cash from Investments (57) (297) (1,052) (607) (600)Cash from Financing 7,000 - 42,000 - -Net Cash Flow 4,315 (6,545) 55,262 52,759 97,357Ending Cash $ 6,644 $ 99 $ 55,360 $ 108,119 $ 205,476 COPYRIGHT © 2011
  32. 32. ABC Company – Financials by Year ($ 000’s omitted)$225,000 Seeking $250k Investment Milestone #1 Prototype$175,000 Milestone #2 Pilots Milestone #3$125,000 Commercialization Revenue Income Cash $75,000 $25,000 2010 2011 2012 2013 2014($25,000) COPYRIGHT © 2011
  33. 33. Universal Truths:1. Project monthly, Present annually2. Projections constantly change, let them. Not an annual exercise. Develop as a monthly exercise.3. Financials must be consistent with rest of presentation4. Do not need to be hung up with GAAP, but….don’t go rogue COPYRIGHT © 2011
  34. 34. Even More Universal Truths:5. Be consistent – Don’t portray expenses in different categories differently by year6. Have “Checks”7. P&L Income ≠ Cash Flow (we know this right?) COPYRIGHT © 2011
  35. 35. Developing The Financial Forecast
  36. 36. Contact Information:Email:Website:Twitter:Phone:Cell: COPYRIGHT © 2010
  37. 37. COPYRIGHT © 2010

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