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The Financial Plan
<ul><li>Financial objectives are both the starting & finishing point of a good business plan. </li></ul><ul><li>The  Finan...
Planning Assumptions <ul><li>Example - SARAVANA BHAVAN </li></ul><ul><ul><li>   Saravana bhavan will set up and operate a...
Profit & Loss Assumptions <ul><li>A) Sales </li></ul><ul><ul><li>Number of outlets in operation will be : </li></ul></ul><...
<ul><li>C) Wages: each outlet will employ seven staff at a cost of  £  42,600 per annum (labour costs = 30 % of sales, whi...
<ul><li>No debtors – all meals paid in cash </li></ul><ul><li>Salaries and wages paid monthly </li></ul><ul><li>Purchases ...
<ul><li>Once the set of assumptions is made one has to take care of the following : </li></ul><ul><ul><li>Key assumptions ...
Income Statement or Profit & Loss Account <ul><li>A  financial statement  for companies that indicates how  Revenue  (mone...
Income Statement or Profit & Loss Account
Cash-Flow Statement <ul><li>A  financial statement  that shows a company's incoming and outgoing  money  (sources and uses...
 
Balance Sheet <ul><li>A summary of a persons or organization's  assets ,  liabilities  and  Ownership equity  on a specifi...
 
Financing a New Venture <ul><li>Financial assistance to entrepreneurs is available from institutions such as Nationalized ...
Industrial Finance in India <ul><li>National Level Industrial Development Banks </li></ul><ul><ul><li>Industrial Developme...
Industrial Finance in India <ul><li>Investment Institutions </li></ul><ul><ul><li>Unit Trust of India (UTI) </li></ul></ul...
Venture Capital <ul><li>Venture Capital  -  Venture capital  is a type of  private equity  capital typically provided by p...
<ul><li>Venture Capitalists Generally : </li></ul><ul><ul><li>Finance new and rapidly growing companies </li></ul></ul><ul...
Venture Capital Financing Process <ul><li>In general the Venture Capital Financing Process is divided into 5 different sta...
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Financial plan

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Transcript of "Financial plan"

  1. 1. The Financial Plan
  2. 2. <ul><li>Financial objectives are both the starting & finishing point of a good business plan. </li></ul><ul><li>The Financial plan seeks to reflect the financial implications of your marketing, people and operational plans in the form of profit-loss accounts, cash flows, and balance sheets. </li></ul>
  3. 3. Planning Assumptions <ul><li>Example - SARAVANA BHAVAN </li></ul><ul><ul><li> Saravana bhavan will set up and operate a small chain of south-indian restaurants in UK. These will provide traditional south-indian food in a relaxed atmosphere offering value-for-money food in the middle priced NRI market. </li></ul></ul><ul><ul><li>The chain of Saravana Bhavan is already a proven concept in parts of Indian subcontinent, serving south-indian food on a quick throughput basis but without the fast-food image. Labour costs are low and with a limited menu, waste is avoided and in turn makes value for money possible. </li></ul></ul><ul><ul><li>One Saravana Bhavan has been in operation for six months in London, so the following assumptions have been drawn partly from experience and partly from market research. </li></ul></ul>
  4. 4. Profit & Loss Assumptions <ul><li>A) Sales </li></ul><ul><ul><li>Number of outlets in operation will be : </li></ul></ul><ul><ul><ul><li>Year 1 2 </li></ul></ul></ul><ul><ul><ul><li>Year 2 4 </li></ul></ul></ul><ul><ul><ul><li>Year 3 7 </li></ul></ul></ul><ul><ul><ul><li>Year 5 onwards 10 </li></ul></ul></ul><ul><ul><li>Operating six days a week, meals sales will be : </li></ul></ul><ul><ul><ul><li>Year 1 40 per day </li></ul></ul></ul><ul><ul><ul><li>Year 2 50 per day </li></ul></ul></ul><ul><ul><ul><li>Year 3 onwards 60 per day </li></ul></ul></ul><ul><ul><li>Sales value per meal will be : </li></ul></ul><ul><ul><ul><li>Food £ 6.50 </li></ul></ul></ul><ul><ul><ul><li>Drink £ 2.50 </li></ul></ul></ul><ul><li>B) Cost of sales per meal </li></ul><ul><ul><li>Food £ 1.75 </li></ul></ul><ul><ul><li>Drink £ 1.00 </li></ul></ul><ul><ul><li>Labour £ 2.70 </li></ul></ul><ul><ul><li>Total £ 5.45 </li></ul></ul><ul><ul><li>This equals 61 % of sales. </li></ul></ul>
  5. 5. <ul><li>C) Wages: each outlet will employ seven staff at a cost of £ 42,600 per annum (labour costs = 30 % of sales, which compares favorably with a general restaurant ’ s 40 percent). </li></ul><ul><li>D) Directors: paid £ 15,000 per year, rising to £ 20,000 from year 3. </li></ul><ul><li>E) Administrative staff: needed mainly from year 2. Costs will rise from £ 5,000 to £ 40,000 over seven years. </li></ul><ul><li>F) Rent and services : £ 30,000 per outlet per annum </li></ul><ul><li>G) Alterations, equipment and decoration : £ 40,000 per outlet. </li></ul><ul><li>H) Advertising : £ 2.000 per outlet per annum </li></ul><ul><li>I) Inflation: all income and expenditure is stated at current prices. </li></ul>Profit & Loss Assumptions
  6. 6. <ul><li>No debtors – all meals paid in cash </li></ul><ul><li>Salaries and wages paid monthly </li></ul><ul><li>Purchases paid monthly </li></ul><ul><li>Rent paid half-yearly </li></ul><ul><li>Rates paid monthly </li></ul><ul><li>Loan interest paid quarterly from month 1 </li></ul><ul><li>Overdraft interest paid quarterly from month 3 </li></ul><ul><li>Sales spread evenly over each month of year </li></ul>Cash-Flow assumptions Balance sheet assumptions <ul><li>Closing stock : building up to six weeks’ sales </li></ul><ul><li>Depreciation of fixed assets: improvements and office, 20 percent per annum; fixtures and fittings, 25 percent per annum </li></ul><ul><li>Creditors: Equivalent to one month’s cost of sales </li></ul>
  7. 7. <ul><li>Once the set of assumptions is made one has to take care of the following : </li></ul><ul><ul><li>Key assumptions </li></ul></ul><ul><ul><li>Basis of each Assumption </li></ul></ul><ul><ul><li>Confidence in each assumption </li></ul></ul><ul><ul><li>What will happen if the assumption proves incorrect </li></ul></ul><ul><ul><li>When contingency action can be taken, when it should actually be taken </li></ul></ul>
  8. 8. Income Statement or Profit & Loss Account <ul><li>A financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the &quot;top line&quot;) is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the &quot;bottom line&quot;). </li></ul><ul><li>The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. </li></ul>
  9. 9. Income Statement or Profit & Loss Account
  10. 10. Cash-Flow Statement <ul><li>A financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). </li></ul><ul><li>The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents , and breaks the analysis down according to operating , investing , and financing activities. </li></ul>
  11. 12. Balance Sheet <ul><li>A summary of a persons or organization's assets , liabilities and Ownership equity on a specific date, such as the end of its financial year . </li></ul><ul><li> A balance sheet is often described as a snapshot of a company's financial condition. </li></ul>
  12. 14. Financing a New Venture <ul><li>Financial assistance to entrepreneurs is available from institutions such as Nationalized banks, Small Industries Development Bank of India, Regional Rural Banks,etc…. depending upon the project requirement and promoters background. </li></ul><ul><li>Financial assistance has two components : </li></ul><ul><ul><li>Loan for Fixed Capital </li></ul></ul><ul><ul><li>Loan for Working Capital </li></ul></ul>
  13. 15. Industrial Finance in India <ul><li>National Level Industrial Development Banks </li></ul><ul><ul><li>Industrial Development Bank of India (IDBI) </li></ul></ul><ul><ul><li>Industrial Finance Corporation of India (IFCI) </li></ul></ul><ul><ul><li>Small Industries Development Bank of India (SIDBI) </li></ul></ul><ul><ul><li>Industrial Reconstruction Bank of India (IRBI) </li></ul></ul><ul><ul><li>Shipping Credit and Investment Company of India (SCICI) </li></ul></ul><ul><li>Specialized Financial Institutions </li></ul><ul><ul><li>Technology Development & Information Company of India Limited (TDICI) </li></ul></ul><ul><ul><li>Risk Capital & Technology Finance Corporation Limited (RCTC) </li></ul></ul><ul><ul><li>Tourism Finance Corporation of India (TFCI) </li></ul></ul>
  14. 16. Industrial Finance in India <ul><li>Investment Institutions </li></ul><ul><ul><li>Unit Trust of India (UTI) </li></ul></ul><ul><ul><li>General Insurance Corporation of India (GIC) </li></ul></ul><ul><ul><li>Life Insurance Corporation of India (LIC) </li></ul></ul><ul><li>Other Banks Offering Financial Assistance </li></ul><ul><ul><li>Small Industries Development Bank of India (SIDBI) </li></ul></ul><ul><ul><li>Industrial Development Bank of India </li></ul></ul><ul><ul><li>Industrial Finance Corporation of India </li></ul></ul><ul><ul><li>ICICI Bank </li></ul></ul><ul><ul><li>National Bank for Agriculture and Rural Development (NABARD) </li></ul></ul><ul><ul><li>State Bank of India </li></ul></ul>
  15. 17. Venture Capital <ul><li>Venture Capital - Venture capital is a type of private equity capital typically provided by professional, outside investors to new, growth businesses. </li></ul><ul><li>Venture capital investments are generally made as cash in exchange for shares in the invested company. </li></ul>
  16. 18. <ul><li>Venture Capitalists Generally : </li></ul><ul><ul><li>Finance new and rapidly growing companies </li></ul></ul><ul><ul><li>Purchase equity securities </li></ul></ul><ul><ul><li>Assist in the development of new products or services </li></ul></ul><ul><ul><li>Add value to the company through active participation </li></ul></ul><ul><ul><li>Take higher risks with the expectation of higher rewards </li></ul></ul><ul><ul><li>Have a long-term orientation </li></ul></ul><ul><li>Some Venture Capital Organizations </li></ul><ul><ul><li>ICICI Venture Funds Management Company Limited </li></ul></ul><ul><ul><li>SIDBI Venture Capital Limited (SVCL) </li></ul></ul><ul><ul><li>IFCI Venture Capital Funds Ltd. (IVCF) </li></ul></ul><ul><ul><li>Gujarat Venture Finance Limited (GVFL) </li></ul></ul><ul><ul><li>IL & FS Group Businesses </li></ul></ul>
  17. 19. Venture Capital Financing Process <ul><li>In general the Venture Capital Financing Process is divided into 5 different stages: </li></ul><ul><ul><li>The SEED Stage – In this stage relatively small amounts of capital is used to prove concepts & finance feasibility studies. </li></ul></ul><ul><ul><li>The START-UP Stage – In this stage funding is done for product development and initial marketing, but with no commercial sales yet (basically to get operations started). </li></ul></ul><ul><ul><li>The SECOND Stage – In this stage working capital is used for initial growth phase, but no clear profitability or cash flow yet. </li></ul></ul><ul><ul><li>The THIRD Stage – In this stage financing is done for major expansion for company with rapid sales growth, at break even or positive profit levels but still private company. </li></ul></ul><ul><ul><li>The BRIDGE/PRE-PUBLIC Stage – In this stage Bridge financing is done so as to prepare the company for public offering. </li></ul></ul>EARLY- STAGE FINANCING EXPANSION or DEVELOP-MENT FINANCING
  18. 20. Thank You !!
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