3. Business Plan Financials
Process, proof
Mindset
Structure
Presentation
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4. Process
Strategy is words – start here
Financials are dollarized words
They prove it’s fundable
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5. Process
Top Down: Good idea or Not?
Product/Service = Competitive Painkiller
Sales Research
Market size, growth
Competition
Pricing ($), erosion
Cost of Goods Sold
Gross margin
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6. Process
Bottom Up – Make Money?
Operating Expenses:
Getting customers = marketing, sales
Ads: online click-thru rates, etc.
Tradeshows
Personal selling
Keeping them = Product development
Running the business = G&A
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7. Process
The bottom lines:
Operating Profit
Income Taxes/Credits (40%)
Net Income
Then: How fast can you break even?
Project 5 years, monthly. Scale up.
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8. Process
Can you sustain it? Cash flow:
Net Income plus:
-Capital expenditures
+Depreciation
+Prepaid Sales
-Delay in collecting sales
Can you shorten your cash cycle?
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9. Process
Can you interest the investor?
Aggressive numbers, tempered by realism
Speed to market/earnings on cash invested
Return: 5-10x investment in 4-7 years
Exit: probably acquisition
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10. Proof
Typical High Tech Investment Stages, 1-3
yrs.
Source Stage Pre-$ Val Funding
Family Concept $0.5-1M $50-250K
Angel 1 Prototype, Patent $1-3M $50-500K
Angel 2 Beta site/launch $2-3M $.05-1.5M
Venture A Volume mfg $6-10M $3-5M+
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11. Proof
Typical Biotech Investment Stages, 1-3 yrs.
Source Stage Pre-$ Val Funding
Grants Target identified or lead Negl. $100-500K
identified
Private Target Validated or $1.5M $250k-$1M
Equity Prelim animal efficacy
Venture A Animal efficacy/safety $5-10M $5-30M
For IND, studies for IND
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12. Proof
Investor return = % ownership x exit valuation
Valuation = multiple of sales/earnings or
stage level
Multiples: Industry-specific, need research
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14. Mindset
Fire in the belly + frugality
It’s not about the money – for you
Funding dilutes your ownership
Ask for as little as possible, stage it
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15. Structure
Workbook:
Summary tabs at left, details at right
1. PPT slides on tabs, linked to detail
2. Input variables on tab(s), linked to detail
3. Income Statement linked to:
Revenue and COGS detail tab
Operating Expense detail tab
sub tabs: Mktg, Devel, G&A, Staffing
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16. Structure
Cash Flow may be added below I/S if:
Sales collections prompt
Sale earned upfront, not over time
Capital expenditures minimal
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17. Structure Backup of I/S + Cash Flow
Revenue & Funding Forecast
(US$ in thousands)
% % % %
2002 2003 of rev 2004 of rev 2005 of rev 2006 of rev
REVENUE - 1,000 9,814 45,538 91,564
COGS - 250 2,889 9,108 13,735
Gross Margin - 750 75% 6,925 71% 36,431 80% 77,830 85%
RD&E 2,012 5,091 509% 9,762 99% 6,831 15% 10,988 12%
SG&A 2,528 5,368 537% 8,706 89% 9,108 20% 16,482 18%
Other (Income) or Expense
Pretax (4,540) (9,710) (11,543) 20,492 50,360
Tax - - - - 15,084
NET INCOME (4,540) (9,710) (11,543) 20,492 35,276
Cash Flow Summary, sources (uses):
Net Income (loss) (4,540) (9,710) (11,543) 20,492 35,276
Depreciation 183 826 1,617 5,250 7,500
Working Capital & Other 175 (1,552) 155% 4,438 -45% (13,661) 30% (22,891) 25%
Capex (373) (2,479) 248% (4,852) 49% (7,000) 15% (10,000) 11%
Cash Burn before Financing (4,556) (12,914) (10,340) 5,081 9,885
Equity Financing 14,000
Equipment Lease Financing (85) 1,322 2,587 5,600 8,000
Cash Burn 9,359 (11,592) (7,753) 10,681 17,885
Headcount 27 69 111 156 188
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18. Structure Additional elements
Cash Flow, if separate from I/S
Balance Sheet, if needed
Detail tabs, above, spaced to right
Capital expenditure detail
Need solid basis for summary numbers
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19. Presentation: Exec. Summary/PPT
Summary financials in one box/page:
$M.1, if possible Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Sales
Gross Margin
Net Income
Funding Needed
Cap. Expend., if any
Cash Balance
Technology Phase
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20. Presentation: Exec. Summary/PP
Revenue detail in one box/page
Streams, $M.1, if possible
Input drivers: clicks, sales calls, etc.
Graphs, if helpful to show growth and how
funding will be used
For all slides: Few lines, big type
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21. Presentation: The Pitch
You tell the story, slides back it up
Be in front of the audience, to side of
screen
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