Support presentation to the SPIN-UP Training Programme on Entrepreneurial Skills for University Spin-Offs.
SPIN-UP is a cooperation project supported by the European Commission that aims to create an Entrepreneurship Training and Coaching Programme that contributes to the development of Key Entrepreneurial Skills, both technical and behavioural, essential to enable and leverage University Spin-Offs growth.
Download and have access to other training materials in www.spin-up.eu
2. CONTENTS
1. Training Objectives and Contents
2. Knowing the Basics
3. Identify future financial
4. Decide on the best financing options
5. Conclusions
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3. 1. TRAINING OBJECTIVES AND CONTENTS
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The SPIN-UP training in
Financial Planning for Growth
will help University Spin-Off’s
managers to improve their
abilities to plan for the
financing needs resulting from
a business growth strategy.
Know the basics
about business
finances
Identify future financial
needs for the business
Decide on the
best financing
options to meet
future financial
needs for the
business
4. 1. TRAINING OBJECTIVES AND CONTENTS
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Understand the basic financial terms and principles related to
business financial management
Recognize the importance of financial information
Interpret the main financial reports - balance sheet and income
statement
Analyse the business using financial information
Know the basics about business finances
5. 1. TRAINING OBJECTIVES AND CONTENTS
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Recognize the impact of management decisions, especially those
regarding growth, in the business’s financial situation
Understand some basic mechanisms of business financial
planning
Identify future financial needs for the business
6. 1. TRAINING OBJECTIVES AND CONTENTS
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Know and differentiate the existing funding options to finance
the business growth
Know the advantages and disadvantage of the main funding
options to finance a growth strategy
Decide on the best financing options to meet future financial needs
for the business
7. 1. TRAINING OBJECTIVES AND CONTENTS
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This module is not intended to prepare trainees
to be experts in financial matters.
Instead, it appeals to the trainee common sense
and experience to deliver the basics of financial
planning for growth
8. 1. TRAINING OBJECTIVES AND CONTENTS
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Knowing the Basics
Identifying Future
Financial Needs
Deciding on the
Best Financing
Options
Know the basics
about business
finances
Identify future financial
needs for the business
Decide on the best
financing options
to meet future
financial needs for
the business
Learning Objectives Learning Contents
9. | 9
2. KNOWING THE BASICS
EXPLORATORY EXERCISE
(Section 4.1.1. on the Manual)
10. | 10
2. KNOWING THE BASICS
Financial Basic Principles
Investment
Principle
Financing
Principle
Dividend
Principle
Every business finances the investment in
resources by the means of one or two existing
forms: debt and equity
Every business invests in resources -
assets - to produce goods or services, for
earnings or to reduce costs, which should
generate revenue at a higher rate than
they consume capital
Every business will
eventually need to
return some money
to its investors
11. | 11
2. KNOWING THE BASICS
Financial information fundamentals | Accounting Equation
What a
business owes
to investors,
i.e., owners of
capital
What a business owes to
debt holders - financial
obligation such as
debts, claims, or losses
What the
business
owns
ASSETS = EQUITY + LIABILITIES
12. | 12
2. KNOWING THE BASICS
Financial information fundamentals | Accounting Method
transaction is recorded
only when cash changes
hands
transactions are
recorded when an
economic event
has occurred
ACCRUAL METHOD VS CASH METHOD
13. | 13
2. KNOWING THE BASICS
Financial information fundamentals | Accounting Cycle
Any given transaction is not
immediately registered and thus
the financial reports do not
always reflect all the
transactions occurred till a given
time.
Thus, the data provided by
accounting is only as useful as it
is accurate, relevant and timely.
Initial Transaction
Effect on
Financial Reports
14. | 14
2. KNOWING THE BASICS
Balance Sheet
‘Snapshot’ of the finances of the business at one given time.
The information provided includes what the business owns and
what it owes, and gives an insight over the success of the
company’s cash management practices, its history of
profitability, and the adequacy of its invested capital.
Its organized in 3 main sections: Assets, Liabilities and Equity.
Note that the ways financial reports are presented differ from
country to country, but they provide, in the essence, the same
information.
15. | 15
2. KNOWING THE BASICS
Balance Sheet
ASSETS
EQUITYLIABILITIES
Fixed assets
Intangible assets
Tangible assets
Financial assets
Current assets
Inventories
Debtors
Trade debtors
Other debtors
Investments
Cash and cash equivalents
Prepayments and accrued income
Subscribed capital
Share premium account
Revaluation reserves
Reserves
Profit or loss brought forward
Profit or loss for the year
Non-current liabilities
Provisions
Long term borrowings and loans
Deferred tax liability
Other creditors
Other non-current liabilities
Current liabilities
Short term borrowing and loans
Creditors
Trade creditors
Other creditors
Current tax liability
Other current liabilities
Accruals and deferred income
NOTE: The layout
presented conforms to the
International Financial
Reporting Standards (IFRS)
dispositions.
16. | 16
2. KNOWING THE BASICS
Balance Sheet | Assets
Fixed Assets
Intangible Assets (e.g. patents, trademarks, goodwill, etc.)
Tangible Assets (e.g. equipment, furniture, vehicles, real estate, biological
assets, etc.)
Financial Assets (e.g. stocks, bonds, bank deposits, etc.)
Current Assets
Inventories (or Stock) (e.g. raw materials, work in progress and finished
goods)
Debtors (or Accounts Receivable) (e.g. amounts due by clients and others)
17. | 17
2. KNOWING THE BASICS
Balance Sheet | Assets
Current Assets (cont.)
Investments (e.g. certificates of deposit, company stocks, bonds, etc., as
long as the investment period does not exceed one year)
Cash and cash equivalents (e.g. cash, current bank accounts, similar cash-
like assets)
Prepayments and Accrued Income
18. | 18
2. KNOWING THE BASICS
Balance Sheet | Equity
Subscribed capital (amount paid into the company by investors to
purchase stock)
Share premium account (amount paid by shareholders for
shares/quota in excess of their nominal value)
Revaluation reserves (revaluation value when current or future
value of an asset is higher than its recorded historic cost)
Reserves (e.g. legal reserve, remuneration reserves, investment
reserve)
19. | 19
2. KNOWING THE BASICS
Balance Sheet | Equity
Profit or loss brought forward (profit or loss from previous
economical exercises not allocated to reserves)
Profit or loss for the year (measure net resources staying in the
company at the conclusion of the exercise: profit or loss)
20. | 20
2. KNOWING THE BASICS
Balance Sheet | Liabilities
Non-Current Liabilities
Provisions (e.g. dividends due to be paid to shareholders, estimates of
potential costs which the business might incur in relation to known disputes
or other issues)
Long term borrowings and loans (e.g. bank loans)
Deferred tax liability (e.g. tax liabilities that the company is going to pay
later)
Other creditors (e.g. long-term debts to an equipment supplier)
Other non-current liabilities (everything else that doesn’t fit into the other
accounts)
21. | 21
2. KNOWING THE BASICS
Balance Sheet | Liabilities
Current Liabilities
Short term borrowing and loans (e.g. short-term bank loan)
Creditors (e.g. money owed to suppliers or to an employee)
Current tax liability (e.g. corporation tax, income tax and VAT that still has to
be paid)
Other current liabilities (everything else that doesn’t fit into the other
accounts)
22. | 22
2. KNOWING THE BASICS
Balance Sheet | Conclusions
Balance Sheet tell us
What is the financial position at the end of a specified date
What is the current ability to pay for current debts, thus if a business has or
not a balanced financial situation
What claim the owners have against the business’ assets
How the organization is positioned to keep going with the day to day business
operations. For example, the assets listed give you some idea of what you have
available right now to keep trying to generate new assets (new revenue)
How is the business capital structured
23. | 23
2. KNOWING THE BASICS
Balance Sheet | Conclusions
Balance Sheet does not tell us
How any profits were made
Which assets creditors have claims against. For example, if you are financing
equipment, your creditor has a claim against that equipment until it is paid
What kind of capital investment was made. You might assume that we’re
talking about cash, but instead, the owner or owners might have purchased a
building that is not necessarily convertible back to cash (at least not
immediately)
What is the market value of the business. This especially true for knowledge-
based businesses, such as University Spin-Offs, as it does not capture
intellectual capital, the critical driver of value creation according to the
knowledge management literature (Edvinsson & Malone, 1997; Sveiby, 1997;
Lev, 2001)
24. | 24
2. KNOWING THE BASICS
Income Statement
Records incoming revenue and outgoing expenses over a period
of time, showing whether a business is generating a profit or
operating at a loss. Is the most familiar measure of a company’s
performance over a period of time.
It recaps all of the activities of a company intended to produce a
profit. It shows the amount of incomes, all the costs incurred to
produce those incomes and all the overhead costs incurred in
running the operations to be able to deliver on its promises to
customers.
Note, once more, that the ways financial reports are presented
differ from country to country, but they provide, in the essence,
the same information.
25. | 25
2. KNOWING THE BASICS
Income Statement Net turnover
Sales
Services
Variation in stocks of finished goods and work in progress
Capitalized production
Other operating income
Raw materials and consumables used
Other External charges
Staff Costs
Value adjustments of current assets
Other operating charges
Value adjustments of formation expenses, tangible and intangible assets
Gain/(loss) from changes in fair value non depreciative asstes
EBITDA
Depreciation and amortisation
Gain/(loss) from changes in fair value of depreciative assets
Operating Profit
Financial income
Financial costs
Financial Profit
Extraordinary income
Extraordinary costs
Extraordinary Profit
Profit before income tax
Income tax expense
Profit or loss for the year (net income)
NOTE: The layout
presented conforms to the
International Financial
Reporting Standards (IFRS)
dispositions.
26. | 26
2. KNOWING THE BASICS
Income Statement | Conclusions
Income Statement tell us
What are the main sources of income earnings
What items have no value left for the company because they are expenses -
they will not generate any new income for the organization
Whether or not the organization is operating with a loss or if they are
operating with balanced revenues and expenses
27. | 27
2. KNOWING THE BASICS
Income Statement | Conclusions
Income Statement does not tell us
What net income can be expected in the future, as it is an historical document
What is the exact amount of Net Income that was generated during the period
covered by the Income Statement. Even if the statement is very well prepared
by the best accountants, it is impossible to accurately account for everything
and in a timely fashion also because not all costs have an immediate impact on
sales, for instance
What is the actual profit, since revenues are not able to be fully, accurately
reported in the accounting period, neither can profit be calculated to 100
percent accuracy
What is the amount of cash on hand as Net Income only means the excess
revenue over expenses in a specific period
28. | 28
2. KNOWING THE BASICS
Financial Report Analysis | Types of Analysis
Common size analysis
Ratio analysis
(liquidity, turnover, prof
itability, etc.)
Trend analysis
Industry comparative
analysis
29. | 29
2. KNOWING THE BASICS
Financial Report Analysis | An Approach
An integrated approach to the analysis of financial
reports, making a simultaneous use of size, ratio, trend and
comparative analysis is often the more indicated.
30. | 30
2. KNOWING THE BASICS
Financial Report Analysis | An Approach
It can be done by defining a set of indicators, including specific
Balance Sheet and Income Statement accounts, size indicators
and ratios, to be compared overtime, internally and with the
industry, regarding different business’s dimensions:
Liquidity - measure business’s ability to meet current (short-term and
immediate) obligations
Financial Leverage - measure the extent to which the firm has been
financed by debt the business’s ability to meet financial obligations
Activity - measure the effectiveness of a firm in employing resources
Profitability - measure management's over-all effectiveness as shown by
the returns generated on sales and investment
31. | 31
2. KNOWING THE BASICS
Financial Report Analysis | Examples of Indicators
1. Liquidity
• Current ratio (current assets/current liabilities)
• Quick ratio ((current assets-Inventories)/current
liabilities)
2. Activity
• Inventory turnover in days (Inventories/(Cost of
materials/365))
• Accounts receivables period (trade debtors/(net
turnover/365))
• Accounts payables period (accounts
payable/(purchases/365))
• Net turnover growth
3. Financial leverage
• Financial autonomy (total equity/total assets)
• Debt ratio (Total Liabilities/Total Assets)
• Debt to equity ratio (long term debt/total equity)
4. Profitability
• EBITDA
• Net income
• Gross profit margin (Net Turnover-Raw materials and
consum. / Net turnover)
• Operating profit margin (operating income/net turmover)
• Net margin income (net income/net turnover)
• Return on assets (ROA = Net income/Total Assets)
• Return on equity (ROE = Net Income/Equity)
• Operating profit growth
• Net income growth
32. | 32
2. KNOWING THE BASICS
PRACTICAL EXERCISE
(Section 4.1.2. on the Manual)
33. | 33
3. IDENTIFYING FUTURE FINANCIAL NEEDS
EXPLORATORY EXERCISE
(Section 4.2.1. on the Manual)
34. | 34
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Impact of growth strategy on business finances
Growth can be attained basically by approaching new
geographic markets, by offering new products or services in the
same market or by a combination of the two.
A growth strategy implies, in most cases, that businesses invest,
i.e. have additional money spending in new assets, in the hiring
of new personnel, in the subcontracting of new services,
developing new products, among others, in order to reach
higher levels of activity.
Every management decision, including investment, has an
impact on the financial situation of a business.
35. | 35
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Growth challenge in technology-based Spin-Offs | The Valley of Death
36. | 36
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms (assessing impact on business finances)
One of the better known and perhaps more simplistic is the
Percentage of Sales Method.
This financial forecasting approach is based on the premise that
most Balance Sheet and Income Statement Accounts vary with
sales.
Therefore, the key driver of this method is the Sales Forecast
and based upon this, Pro-Forma Financial Statements
(i.e., forecasted) can be constructed and the firms needs for
external financing can be identified.
38. | 38
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms | A Proposed Mechanism
Step 1. Preparing the process
Step 2. Estimate sales
Step 3. Estimate costs
Step 4. Estimate Balance Sheet
accounts
Step 5. Prepare Partial Pro-forma
Financial Reports
Get the most recent Balance Sheet and Income
Statement and list all the main management
decisions enclosed in the growth strategy – strategic
objectives and operational objectives for the business
– starting with Sales objectives or estimates, as they
will have impact on the business’s accounts (financial
status).
Decide on the forecasting period, i.e., the numbers of
years the projection should cover, typically the same
time frame for the strategy set for the company. The
decision regarding the number of years to consider in
the estimates will depend on several factors: time
needed to recover investment, type of activity
developed by the company, the purpose of the
forecasting, etc.
39. | 39
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms | A Proposed Mechanism
Step 1. Preparing the process
Step 2. Estimate sales
Step 3. Estimate costs
Step 4. Estimate Balance Sheet
accounts
Step 5. Prepare Partial Pro-forma
Financial Reports
The Sales estimate sets the activity level for the future,
from which many of the business dimensions depend on –
e.g. cost with production or even marketing cost that may
arise to meet the expected increase of sales.
This estimate should already be clearly stated in the growth
strategy for the business, but if not, some forecasting
procedure must be undertaken.
There are several ways to set up an estimate or Sales
objectives. One can commission a market research study to
estimate future sales, define a market quota to achieve or
determine a level of sales that falls within the company’s
current capability. In most cases, however, is a guessing
exercise where the manager uses his/hers (or the sales
person’s) best judgement.
40. | 40
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms | A Proposed Mechanism
Step 1. Preparing the process
Step 2. Estimate sales
Step 3. Estimate costs
Step 4. Estimate Balance Sheet
accounts
Step 5. Prepare Partial Pro-forma
Financial Reports
Estimate costs accordingly to Sales projections and then
proceed with an adjustment to accommodate the impact of
other management decisions enclosed in the growth
strategy or taken in the past.
Costs like Raw Materials and Consumables Used, Staff
Costs, Other External Charges and Other Operating Charges
are expected to change with Sales. These costs can be
made to vary in the same percentage as the expected
growth in Sales. So, if Sales should grow by 10% in a given
year, these cost accounts can also be expected to increase
by 10%.
Although most costs variations can relate to changes in the
Sales level, others can be influence by other management
decisions and need to be adjusted accordingly.
41. | 41
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms | A Proposed Mechanism
Step 1. Preparing the process
Step 2. Estimate sales
Step 3. Estimate costs
Step 4. Estimate Balance Sheet
accounts
Step 5. Prepare Partial Pro-forma
Financial Reports
The estimation for the Balance Sheet accounts should
basically follow the same approach adopted for
costs, i.e., using the impact of Sales estimates as a starting
point and then make adjustments.
Variations in Sales generally have an impact on several
Balance Sheet accounts, namely Cash and Cash
Equivalents, Debtors, Inventories and Creditors. Fixed
Assets are also often tied closely to Sales, unless there is
excess capacity. For these accounts it may be considered
that they vary at the same rate as do the Sales estimates.
These and other accounts should then be adjusted to other
management decisions.
The remaining accounts that are not expected to suffer
significant changes over time or for which no anticipation in
behaviour can be made, should be maintained at the same
level.
42. | 42
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Forecast mechanisms | A Proposed Mechanism
Step 1. Preparing the process
Step 2. Estimate sales
Step 3. Estimate costs
Step 4. Estimate Balance Sheet
accounts
Step 5. Prepare Partial Pro-forma
Financial Reports
Prepare a pro-forma Income Statement. With the revenues
and the costs estimates, the Net Income can be forecasted
just by adding the different accounts.
The pro-forma Balance Sheet can then be set. The Net
Income for the forecast year, calculated in the Income
Statement, should then be inscribed into the pro-forma
Balance Sheet. The summary accounts, such as Total
Current Assets and Total Current Liabilities, are determined
by adding their constituent accounts.
As a result, is expected that the Balance Sheet presents a
difference between partial pro-Forma Total Assets and
partial pro-Forma Total Liabilities and Equity, which
corresponds to the need for external financing. This
external financing can be translated into debt or equity, or
even a mixture of both.
43. | 43
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Building and comparing scenarios - Deciding on investment plans
When planning for growth is advisable to test different
scenarios for the impact of investments and other management
decisions in the future financial needs of the business.
Scenarios approach facilitates the decision-making process and
helps to reduce uncertainty.
To generate the scenarios, the forecasting method presented
earlier can be used. Thus, for each scenario it will be generated
a Balance Sheet and an Income Statement, enabling
comparisons that help with the decision-making process and
that reduce uncertainty regarding the estimates for future
financing needs.
44. | 44
3. IDENTIFYING FUTURE FINANCIAL NEEDS
Building and comparing scenarios - Deciding on investment plans
The various scenarios can be compared from different
perspectives:
Net Present Value
(NPV)
•NPV is used in capital
budgeting to analyze
the profitability of an
investment or
project. NPV is the
difference between
the present value of
cash inflows and the
present value of cash
outflows.
Internal Rate Of
Return (IRR)
•IRR is the discount
rate often used in
capital budgeting
that makes the net
present value of all
cash flows from a
particular project
equal to zero.
Return on Investment
(ROI)
•ROI is a performance
measure used to
evaluate the
efficiency of an
investment. To
calculate ROI, the
benefit (return) of an
investment is divided
by the cost of the
investment.
Payback period (PP)
•PP is the length of
time, usually
expressed in
years, required to
recover the cost of an
investment.
45. | 45
3. IDENTIFYING FUTURE FINANCIAL NEEDS
https://www.khanacademy.org/finance-economics/core-finance/v/introduction-to-present-value
Building and comparing scenarios | Net Present Value
46. | 46
3. IDENTIFYING FUTURE FINANCIAL NEEDS
PRACTICAL EXERCISE
(Section 4.2.2. on the Manual)
47. | 47
4. DECIDING ON THE BEST FINANCING OPTIONS
EXPLORATORY EXERCISE
(Section 4.3.1. on the Manual)
48. | 48
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options
EQUITY VS DEBT
• Usually requires a less demanding process of
raising financial resources. Of course that in
particularly stressful economic situations the
process of guaranteeing Debt can be made quite
hard.
• Does not implying a yielding control over the
business, i.e., the business retains its
independence from the financing source.
• Demands a cost (interest) to be paid for the money
that is placed at the business’s disposal;
thus, regardless of how the business evolves, the
financed amount plus interests have to be repaid
within a negotiated period.
• Raising equity funding is demanding, costly and
time consuming, and may take management focus
away from the core business activities
• Benefits from more flexibility
• Higher level of commitment and contribution to
business development from investors
• New funding through equity usually means losing
some of the control over the business and having
to share future earnings with the new equity
owners
• Economic theory (and common sense) states that
equity investors expect a higher return on their
investment than the rate of interest on the debt.
49. | 49
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options
Bank Loans
Personal
Savings
Venture
Capital
Business
Angels
Initial Public
Offering
(IPO)
Crowd
funding
50. | 50
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Bank Loans
Bank loans are the most common sources of Debt.
Loans have to be paid back to the financial institution over an
agreed period and with interests.
It’s possible to guarantee a large amount of borrowed money if
the business is able to demonstrate its ability to repay it within
a negotiated period of time and with a negotiated interest.
51. | 51
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Personal Savings
Personal savings is frequently a source of Equity to finance
growth strategies for a business. It’s the money that is
personally invested by the current equity owners, which in the
case of University Spin-Offs, is more likely be the members of
the founding team and their families.
The main advantage of this sources is that current equity
owners keep full control of the business, no interest is required
upfront, although, naturally, a compensation is expected in the
future in the way of dividends or cash-outs. The possible
downside is that personal savings can be in short supply.
52. | 52
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Venture Capital
Venture Capital is a common source of Equity funding. Venture
Capital can be described as professionally managed funds that
invest large sums of money in return for Equity.
Venture capitalists also provide assistance in guiding the growth
and subsequent funding of their portfolio companies until they
are either sold to other companies or sold to the public in a
public offering of shares.
It is common that the arrangement between the company and
venture capitalists sets a period and a price for the equity
owners to re-buy their share in the company from the venture
capitalists.
53. | 53
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Business Angel
Business angels are free to make decisions whether to finance a
business or not, very quickly, they don´t require collaterals for
the money injected into the business and they can lend their
management experience and skills to the business
development.
In turn, it can take time to find a suitable business angel and
current equity owners will eventually lose some control over
the company.
As in Venture Capital, it is frequent that the initial agreement to
sell a share of the company to the business angel foresees a
period and a price for the equity owners to re-buy their share in
the company.
54. | 54
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Initial Public Offering (IPO)
IPO is the first sale of equity of a company to the
public, generally in the form of shares of common
stock, through an investment banking firm.
It allows raising large amounts of money and can create a high
profile for the company. It also provides liquidity in stock which
then allows stock to be used for future acquisitions and
attracting and motivating employees.
Of all of the type of financing sources presented, this can be the
most demanding, time consuming and expensive; there are
extensive disclosure requirements and other legal requisites to
comply with. Also the success of this operation is always subject
to the whims of the public markets.
55. | 55
4. DECIDING ON THE BEST FINANCING OPTIONS
Financing options | Crowd Funding
Usually conducted online, it allows a number of investors to
individually invest smaller amounts of money into a business.
The individual investments are then pooled collectively to help
a business reach its funding target.
Unlike other forms of funding, crowd funding exposes the
business’s project to vast hoards of potential investors and
funders.
From the type and dispersion of investors it attracts, this
funding source doesn’t bring with it the benefit of experienced
and skilled new equity owners that can help to develop the
business. Also it can expose excessively the business, and its
business plan or strategy.
56. | 56
4. DECIDING ON THE BEST FINANCING OPTIONS
Choosing between available options
Matching between
Financing
Requirements,
Financing Options
and Current Equity
Owners preferences
Amount of
financing
Urgency in
financing
Length of
financing
(repay or
compensati-
on time)
Risk of
financing
options
Cost of
financing
options
Control
issues of
financing
options
Current
equity
owners’
profile
57. | 57
4. DECIDING ON THE BEST FINANCING OPTIONS
Choosing between available options
DEBT EQUITY
COST Low High
RISK High Low
CONTROL/DILUTION Low High
Financing options characteristics (business’s perspective)
58. | 58
4. DECIDING ON THE BEST FINANCING OPTIONS
PRACTICAL EXERCISE
(Section 4.3.2. on the Manual)