1) The document provides an overview of creating a financial plan for an innovative project. It discusses inputs like expenditures, income, and outputs like profit/loss statements, cash flow statements, and balance sheets. 2) Key aspects of the financial plan include determining financing needs, sustainability, and identifying business drivers. The presenter has a PhD in economics and experience in technology transfer and business planning. 3) The agenda covers topics like determining a project's stage of development, distinguishing between operating and capital expenditures, measuring customer acquisition costs, estimating sales and gross margin, and calculating the lifetime value of acquired customers.

1. Financial Plan
Building a financial plan for an
innovative project step by step
(I will make you love finance )
Azèle Mathieu, Ph.D.

2. Business background:
• Manager cluster lifetech.brussels
• Financial Advisor @ impulse.brussels
• Coach @ MIC Boostcamp, BSE Academy
• Business Development Manager @ Bone Therapeutics
• Business Development Manager @ ULB Technology Transfer
Office
Academic background:
• PhD in Economics and Management
• Professor Technology Transfer & Business Planning @ SBS-
EM
2
Azèle Mathieu

3. - Is your project financially
sustainable?
- What are your financing needs
“How much money do I need to
develop this new project?”
- To show how the money of third
parties will be used
- To mitigate your risk
- To identify drivers of your
business
3
Why making a financial a plan?

4. - Is the project financially
sustainable?
- What are your financing needs “How
much money do I need to develop
this new project?”
- To show how the money of third
parties will be used
- To mitigate your risk
- To identify drivers of your business
4
Why making a financial a plan?
Profit & Loss
statement (P&L)
Balance sheet (BS)
Cash-flow
statements (CFS)
OUTPUTS:
=
FINANCIAL PLAN

5. 5
By what do we start?
?
? ?
??
?

6. 6

7. 7
Financial modelling:
Profit & Loss
statement (P&L)
Balance sheet (BS)
Cash-flow
statements (CFS)
OUTPUTS:
=
FINANCIAL PLAN
INPUTS:
Sales / Revenues
Operating expenses
(opex)
Capital expenditures
(capex)
Paymentconditions+stocks
(WCR)
COS or COGS
Cost of Customer
Acquisition (COCA)
INTERMEDIARY
OUTPUTS:
Earning Before
Interest & Taxes
(EBIT)
Operational Cash
Flow
Working Capital
Requirement
Gross Margin

8. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
8
Today’s agenda

9. 2014 2015 2016 2017
Research -
Development -
Production - -
Marketing - -
Commercialisation +
9
How far your project is from the
market?
Importance of taking into account:
- Milestones of the project
- Timing of each phase
- Risks and factors of success for each phase

10. 10
What is the difference between
these types of expenditures?

11. 11
What is the difference between
these types of expenditures?
Operating expenses
Capital expenditures

12. For each phase:
• Operating expenditures (OPEX) – per category
‒ Human resources: gross salary + social security + benefits in kind
‒ Cars: all-in
‒ Experts fees: accounting, payroll, legal,…
‒ Overhead: rent, services, communication, IT
‒ …
• Capital expenditures (CAPEX)
For each item:
• unitary cost
• number
• timing
12
Start with your expenditures

13. • CAPEX: funds used by a company to acquire physical long-term assets,
generating positive value for the company, still existing after their first
use.
• It generates differences between:
– P&L: Depreciation as a cost
– CFS: Acquisition cost as an outflow
– BS: Net value of the asset (= acquisition cost – cumulated
depreciation)
13
Capital expenditures
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Year 1 Year 2 Year 3
Amount 80
Date (quarter number) 3
Depreciation period (in years) 2
Investment CFS 0 0 80 0 0 0 0 0 0 0 0 0 80 0 0
Depreciation P&L 0 0 10 10 10 10 10 10 10 10 0 0 20 40 20
Net asset value BS 0 0 70 60 50 40 30 20 10 0 0 0 60 20 0

14. - You are hired as a financing advisor by a family business that wants to diversify its
line of textile products for old persons by developing a new intelligent textile.
- They know they will need 4 persons to work on the project, lasting 8 months,
starting in October 2015. 2 persons already work in the company and one of them
is an independent. They both want to be paid 2.000€ (gross revenue), the
independent will attribute 25% of his time on the project, the other 50%.
- The 2 remaining persons are experts: an innovation expert, cost per day: 500€ and
a conception expert, 700€/day. They will both be needed for only 50% of the
period.
- They will need to buy a textile machine at 50.000€, lifespan: 5 years, the machine
will be used at 50%.
- Overheads are estimated at 10% of the material costs and human resources costs.
- They also need to buy material: textiles (5k€), cables (3k€), tools (2k€), box (5k€),
electricity (5k€).
• => Do you have any questions?
14
How would you organize the
following information?

15. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
15
Today’s agenda

16. Target: 1000
Calls: 800
Interested: 500
Meetings: 100
First sale: 30 (3%)
16
The sales funnel - Cost of Customer
Acquisition (COCA)
€?

17. - Using about 2 hours of our time, evaluated at 54€/hour, i.e. 108€
- We reached a total of ~1.500 people in our target customer population
- Of these, we consider that 49 are likely buyers
 COCA in this case amounts to….?
• “Assuming that each of our customers would buy 5 products Z, our
forecasts plan for ~120.000 products Z in total over 4 years, hence
~24.000 customers. Put in relation with a total of 186.000€ of
marketing costs planned over these 4 years, we reach a COCA of
….?”
17
Measure the Cost of Customer
Acquisition (COCA)

18. • How much resources (time, €, HR) does it require?
• Includes unsuccessful prospects
• To be taken into account in your P&L, CF
• Essential step for your sales assumptions
• Choice of channel financially sustainable?
18
COCA

19. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
19
Today’s agenda

20. • Revenues (REV) – Cost of Services (COS) or Cost of Goods Sold
(CoGS) = Gross Margin (GM)
• COS & COGS =
– ALWAYS: Direct variable costs (proportional to revenues)
e.g. cost of material, subcontractors, packaging & delivery costs
– SOMETIMES: Indirect semi-variable costs
e.g. full cost of the factory (rent, depreciation, services…), full
cost of the consultants (salary + overhead)
20
COS & COGS & Gross Margin

21. 21
Disappear or adapt?
+
=

22. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
22
Today’s agenda

23. Sales?
What? When? How much? Price? How?
23
Sales (1/4)

24. • Total Addressable Market (TAM)
– Bottom-up from primary market research
– Validate top down: Economy > Industry > Market > Segment > …
> Your business
• Market share?
– Top-down : TAM x market share
– Bottom-up : Resources x ‘Usage’ (preferred approach)
 Combine both approaches
• Growth rate?
• One-off/recurring/bundled sales?
24
Sales – How much?

25. 26
Sales – How much?
Top down approach
Tupperware market in Belgium
(a) Population 10.000.000
(b) # Tupperware sold annually 250.000 2,5% x (a)
(c) Average price/Tupperware 10€
(d) TAM 2.500.000€ (b) x (c)
(e) Targeted market share 10%
(f) Potential market size 250.000€ (d) x (e)
(g)
Targeted # Tupperware to
be sold/month
2.083 ((f)/(c))/12
Can you really
make it?

26. 27
Sales – How much?
Bottom up approach
2013 2014 2015
Sales Volume
Number of sales
representatives
1 2 3
Number of Tupperware
sessions/month
20 20 20
Number of sold
Tupperware/session
5 5 5
Total monthly sales 100 200 300
Will they
achieve it?
Still
profitable?

27. Patent expirations may be one of the factors impacting growth
rate/selling price…
… disastrous for some companies
28
Sales – How much?
Growth rate?

28. • Pricing of alternative solutions
• How much is the customer ready/willing to pay?
Quantified value proposition (ex.: Railnova)
• Price:
– Not too low
– Not too high
– Coherent
• Evolution of the selling prices?
29
Sales – Price?

29. 30
Sales – Price?
Quantified value proposition
Alpha Technology

30. • Sales map process
– Sales channels:
• Direct?
• Indirect?
– Impact on the cost of customer acquisition (COCA)
31
Sales – How?

31. 32
Sales – How?
Alpha C

32. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
36
Today’s agenda

33. • Cost of Customer Acquisition (COCA)
• Life time value of an acquired customer (LTVOAC)
 Compute
 Monitor over time
 Impact on:
‒ Business model (VP, distribution channel,…)
‒ Cost structure
‒ Pricing decisions
37
Life Time Value Of an Acquired
Customer
COCA = Sales & Marketing Costs / Customers
LTVOAC = revenue over life time x gross margin

34. • Lifetime value of a gym member who spends €20 every month for 3
years?
• €20 X 12 months X 3 years = €720 in total revenue (or €240 per
year)
 Allowable acquisition cost?
 How to optimize LTVOAC?
 Discount while managing CF
38
LTVOAC: example
Source: www.entrepreneur.com

35. • Rule of thumb*
• Depending on the industry and the period
39
Link between LTVOAC & COCA
LTVOAC > 2 COCA
(a) order average 25 €
(b) margin 12%
(c) targeted orders / month / restaurant 75
(d) Restaurant Acquisition Cost € 500
(e) Restaurant Lifetime value (5 years) ?

36. • Rule of thumb*
• Depending on the industry and the period
40
Link between LTVOAC & COCA
LTVOAC > 2 COCA
(a) order average 25 €
(b) margin 12%
(c) targeted orders / month / restaurant 75
(d) Restaurant Acquisition Cost € 500
(e) Restaurant Lifetime value (5 years) € 13.500 (a) x (b) x (c) x 12 x 5

37. 1) Inputs
- Expenditures:
• Operating Expenditures (-)
• Capital Expenditures (-)
• Cost of Customer Acquisition (-)
• Cost of sales (-)
- Income
• Sales (+)
• Life-time value of customer acquisition (+)
2) Outputs => See Part 2
- Profit & Loss statement
- Cash flow statement
- Asset & Liabilities
41
Today’s agenda