BIC Angel Investments

1. HOW TO PREPARE FINANCIAL PLAN

2. INDEX
2/15/2016 2BIC Angels Investments
1. Why do you need to know Financials?
2. Pre-Investment
3. Post-Investment

3. WHYDOYOUNEEDTOKNOWFINANCIALS?
GENERAL VISION OF STARTUPS ON
FINANCE & BUSINESS PLAN
2/15/2016 3BIC Angels Investments
& finance
But, REAL WORLD is:

4. 2/15/2016 4BIC Angels Investments
PRE-INVESTMENT–BUSINESSPLAN&FINANCE

5. PRE-INVESTMENT–FINANCIALPLANNING
WHAT INVESTOR WANTS TO SEE FROM PROJECTIONS?
2/15/2016 5BIC Angels Investments
• 3-4 year forecast
• Neither conservative; nor aggressive
• How investment will be spent
• High returns SOON
• Having idea on how to exit
WHAT WE NEED TO AWARE OF?
• Returns can take longer than estimations
• Cost can be higher than estimations
• Non of entrepreneur thinks of everything

6. BEST REPORT MODEL
2/15/2016 6BIC Angels Investments
• Easy to understand
• Well documented
• Easy to update
• GİVE DECISION IDEA!!
PRE-INVESTMENT–FINANCIALPLANNING

7. Key components of Financial Analysis
2/15/2016 7BIC Angels Investments
• Revenue & Expense forecast
• KPIs
• Cash flow statement
• Break-even analysis
PRE-INVESTMENT–FINANCIALPLANNING

8. PRE-INVESTMENT–FİNANCİALPLANNİNG
Revenues Estimation
2/15/2016 8Entrepreneurship
Revenue Estimation
- Top down
- «Market is known to be 200m USD. The leader has 15%. We can get 5% of it.
- Bottom- up
- We will start with 1 restaurant in the first year. It will have 50 covers. Occupancy will go
from 40% - 80% over a period of 12 months. We’ll make 200USD per cover per day. So we
will generate 50*60%* 200* 365=2,19MUSD. Next year, I will open 2 additional branches.

9. PRE-INVESTMENT–FİNANCİALPLANNİNG
Seasonality and Sales Growth
2/15/2016 9Entrepreneurship
Seasonality
• The monthly profile of sales, profits and cash flow will depend on
the industry, e.g. ice-cream manufacturer (high sales in the
summer)
• Seasonality is important for our work due to
• Understand cash flow profile
• Review of current trading
• Working capital requirements of the business
• Different industries will have different trends
J F M A M J J A S O N DJ F M A M J J A S O N D

10. PRE-INVESTMENT–FİNANCİALPLANNİNG
Cost Estimation
2/15/2016 10Entrepreneurship
• There are a variety of ways we can analyse costs:
• Absolute change year-on-year and monthly
• As a percentage of sales/unit/site, etc
• Fixed vs. variable
• Recurring vs. non-recurring
• We need to understand the cost structure/drivers of the company
Fixed vs. variable costs
• Variable costs are those that vary with business activity (e.g. sales)
• Fixed costs are those that are not variable in the short term
• Variable costs
• e.g. material costs, selling and distribution costs
• Fixed costs
• e.g. personnel, rent, audit fees
• An analysis of fixed vs. variable costs is key for our analysis of projections.

11. PRE-INVESTMENT–FİNANCİALPLANNİNG
Cost Estimation
2/15/2016 11Entrepreneurship

12. PRE-INVESTMENT–FİNANCİALPLANNİNG
Contribution Margin
2/15/2016 12Entrepreneurship
SALES – VARIABLE COSTS = CONTRIBUTION
• Common metrics include contribution per unit or contribution margin %
(contribution/sales)
• Contribution margin is a measure of profit margin that focuses on what proportion of sales
revenue is left over after paying associated variable costs
• This is the amount that is left over to cover fixed costs, or to add to profits
• Businesses often calculate the contribution of an individual product line or department

13. PRE-INVESTMENT–FİNANCİALPLANNİNG
Margins
2/15/2016 13Entrepreneurship
• Typical margins we review are:
• Contribution margin (Contribution / sales)
• Gross margin (Gross profit / sales)
• EBITDA margin (EBITDA / sales)
• We use margins since absolute figures can be misleading
• We can compare margins to prior periods or peer group companies
• Margin analysis helps us gain an understanding of the performance of
the business and identifies areas we want to investigate further
• The understanding we gain here will also be helpful in building a profit
bridge.

14. PRE-INVESTMENT–FİNANCİALPLANNİNG
Margins (continued)
2/15/2016 14Entrepreneurship

15. PRE-INVESTMENT–FİNANCİALPLANNİNG
Margins (continued)
2/15/2016 15Entrepreneurship
• Falling gross margin, possible reasons:
• Pressure on prices / price war
• Discounts offered
• Rise in costs (e.g. raw materials)
• Change in product mix
• Inefficiency in production
• Rising gross margin, possible reasons:
• Economies of scale
• Price increase
• Cost cuttings / savings
• Increase in sales with certain element of costs fixed
• Change in product mix
• Efficiency improvements

16. PRE-INVESTMENT–FİNANCİALPLANNİNG
Completion of Pro-Forma Income Statements
2/15/2016 16Entrepreneurship
• Other Operating Expenses
• Other Operating Income
• Gross margin – operating expenses + other operating income = EBIT
• EBITDA = EBIT + depreciation / amortization
• Calculation of financial result
• EBIT +/- financial result = EBT (earnings before taxes)
• Calculation of taxes on income
• Net Profit / Loss = EBT ./. Taxes on income

17. PRE-INVESTMENT–INCOMESTATEMENTS
2/15/2016 17BIC Angels Investments
Statutory Income Statements - Summary
TL k
Budget Actual PY Actual CY
Dıfference
BU-CY
Dıfference
PY-CY Budget Actual PY Actual CY
Dıfference
BU-CY
Dıfference
PY-CY
Sales, net
Direct COS
Contribution Margin I
Indirect COS
Gross profit (CM II)
Other operating income
Other operating expenses
EBIT (CM III)
Finance income
Finance expense
Contribution Margin IV (CM IV)
Extraordinary income
Extraordinary expense
Profit before tax (CM V)
Provision for tax
Net profit
Depr. & Amor.
EBITDA
Contribution margin I (CM I) %
Gross profit margin (CM II) %
EBIT margin (CM III) %
EBITDA margin %
PBT margin %
OPEX / net sales %
YTDPrevıous Month Current year

18. PRE-INVESTMENT–BALANCESHEET
2/15/2016 18BIC Angels Investments
Summary Balance Sheet
TL k 31-Dec-13 Month
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Total current assets
Tangible fixed assets
Intangible fixed asset
Non-current assets
Total non-current assets
Total assets
Borrowings short terms
Trade payables
Other current liabilities
Total current liabilities
Borrowings Long terms
Total non-current liabilities
Capital
Total liabilities and equity
Assets: What you got
Liabilities: What you owe
Equity: What’s left over

19. PRE-INVESTMENT–CASHFLOWSTATEMENT
2/15/2016 19BIC Angels Investments
Cash flow analysis
TL 31- Dec-13 31-Jan-2014 28-Feb-2014
EBITDA
Non-cash items
Cash EBITDA
Change in Net Working Capital
- Change in trade receivables
- Change in inventories
- Change in trade payables
- Change in other current assets
-Change in other current liabilities
Operational Cash Flow
Investing activities
Capex
Gain on sales fixed assets
Other
Investing activities
Cash Flow after Investing activities
Financing activities
Change short term bank loans
Change in long term bank loans
Changes in equity
Change in other financial activities
Financing activities
Free cash flow
Cash and cash equivalents- Previous month
Cash and cash equivalents - end of period
Where cash comes
from;
Where cash goes to

20. PRE-INVESTMENT–FİNANCİALPLANNİNG
Working capital
2/15/2016 20Entrepreneurship
• What is working capital ?
• Comprises items relating to normal trading activity that will
crystallise into cash inflows and outflows in the short-term
• Working capital = current assets - current liabilities

21. PRE-INVESTMENT–LASTBUTNOTLIMITED
2/15/2016 21BIC Angels Investments
(600,0)
(400,0)
(200,0)
0,0
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0 1M
2M
3M
4M
5M
6M
7M
8M
9M
10M
11M
12M
13M
14M
15M
16M
17M
18M
19M
20M
21M
22M
23M
24M
25M
26M
27M
28M
29M
30M
31M
32M
33M
34M
35M
36M
Cumative CF
340,9 TL
Cash requirement

22. General problem on Financial reports
2/15/2016 22BIC Angels Investments
POSTINVESTMENT–FINANCIALREPORTS
-
- Not meaningful financial results and KPIs.
- Not able to take reaction when stg goes wrong.
- High cashburns / miss higher opportunities
- Underestimate accounting records
- Underestimate tax issues
- Underestimate measurement

23. Main points for KPIs
2/15/2016 23BIC Angels Investments
- There should not be too many KPIs
- KPIs can be built around 3-5 KRAs
- KPI should change according to their goals.
- KPIs should be linked to strategy
- KPIs have to provide answer to most important
questions.
- KPIs should be designed to empower Founders and
provide them with relevant information to learn
POSTINVESTMENT–KPIS

24. 2/15/2016 24BIC Angels Investments
POSTINVESTMENT–KPIS

25. 2/15/2016 25BIC Angels Investments
POSTINVESTMENT–KPIS
For startups, it is not
generally about numbers;
qualitative KPIs should be
evaluated as well.

26. References
• Tomasz Tunguz – Venture capital at readpoint
• Cayenne Consulting – Budgeting for startups
• Martin Zwilling, Startup proffessional musings
• KPMG- Utopia – Key analysis of companies
• Joachim Behrendt – Entrepreneurship presentation
• BIC Angels templates
• Bygrave, W.D. / Zacharakis, A., The Portable MBA in Entrepreneurship
2/15/2016 26BIC Angels Investments

27. +90 (212) 328 19 39
www.bicangels.com
www.facebook.com/BICAngelInvestments
@bicangels
bic@bicangels.com