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Cash Flow & Funding
Presented By:
SCORE-CHICAGO

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Your presenter
Mark LiebermanMark Lieberman
mark.lieberman01@gmail.commark.lieberman01@gmail.com

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SCORE
► About SCORE
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counseling
► Mentoring
► Consulting
► We offer, you choose

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If You Have to Leave Now …
•
4 Links You Should Have4 Links You Should Have
Me:Mark.Lieberman01@gmail.comMe:Mark.Lieberman01@gmail.com
MyLinkedin:linkedin.com/in/liebermanmarkMyLinkedin:linkedin.com/in/liebermanmark
SCORE Local:SCORE Local: www.scorechicago.orgwww.scorechicago.org
SCORE National: www.score.orgSCORE National: www.score.org

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Tonight’s Discussion
What Is CF? Why Should you Care?
How Do You Forecast CF?
Need Financing?

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Cash Flow …
►Don’t proceed any further with
out this!
►Project your revenues
 Know your price and volume
 Revenue=Price x Volume
►Compile your start up and
operating costs: this is your cash
flow statement.
►How full is your tank?

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How Else Can You Explain?
• What is total investment required?
• How large of loan is needed?
• Can loan be repaid?
• Is the business likely to succeed?
• Are there future cash problems?
• How to improve business results?

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If You Aren’t Thinking About Cash
Flow…
You’re either very lucky …
or you’re whistling past the graveyard.

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Guess Who Isn’t Going to
Help!
Unless you are very lucky,
you aren’t likely to find an
accountant who wants to
help small business with cash
flow.

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Service Oriented
Sales Plan
Product Oriented
Sales Plan
Balance Sheet
Funds Flow
(Cash Flow)
Maybe
Both
P&L
Where Do I Start?

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The Math is Simple
But You Have To Know Your Business

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Don’t Reinvent the Wheel
•Templates available at
Score.org/resources
•Business Plan for Start-
Up Business
• Finance Templates
• Excel Cash Flow,
P&L, and Balance
Sheet
•Sales Template

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Digging Deeper
• Forecast is only as good as the estimates
GIGO: Garbage In, Garbage Out
• Be reasonable –
– Not too optimistic or pessimistic
• Research, not guesses
Where Do Estimates Originate?

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Cash Flow

Revenue Estimates

Operating expenses

Start up estimates

Non Cash Items
What Are The Pieces?

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Start Up
Estimates
Cash In
Operating
Expenses
EOMCash
Balance
Other Stuff
Special Info
BOM Cash
Balance

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Estimating Revenues
• Difficult; that's life
• Extremely important
• Don’t try to estimate total sales
• Split into major categories
– Major items / minor items
– Products / services
– Retail / wholesale
– Storefront / On Line

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Price Cost Margin
A 1.00 .50 .50
B 2.00 1.25 .75
C 3.00 2.10 .90
D 4.00 3.00 1.00
Product Categories
Product Oriented Step 1

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Product Oriented Step 2
Unit Sales
1 2 3 4 5 6 Total
A 1 3 5 7 9 11 36
B 5 7 9 11 15 17 64
C 20 21 22 23 24 25 135
D 1 3 5 7 9 11 36
18
Number of Periods Varies

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Product Oriented Step 3
Sales Forecast
1 2 3 4 5 6 Total
A 1 3 5 7 9 11 36
B 10 14 18 22 30 34 128
C 60 63 66 69 72 75 405
D 4 12 20 28 36 44 144
Total 75 92 109 126 147 164 713
Units x Price

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Product Oriented Step 4
Gross Margin
1 2 3 4 5 6 Total
A 0.5 1.5 2.5 3.5 4.5 6.5 18
B 3.75 5.25 6.75 8.25 11.25 12.75 48
C 18 18.9 19.8 20.7 21.6 22.5 121.5
D 1 3 5 7 9 11 36
Total 23.5 28.65 34.05 39.45 46.35 51.75 223.5
Units x Margin

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Estimating Revenues
• Your market share
– Total market area
– Sales of top 3 competitors
• Research competition
– Why will customers leave them and join you?
– Competitive advantage
• Association data
• Interview similar (non-competing) businesses
– Start up and 2nd
year volumes
– Sales/marketing strategies
• Sufficient staff and operational support?
Reality Checks

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Estimating Expenses
• Sources
– Library (RMA & Subscription Data Bases)
– Realtors
– Sales agents
– Government agencies
– “Competitors”
– Stores
– Advertisements
– Internet
– Trade associations

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Estimate Start Up Expenses
Telephone Expense Computers Collateral Material
Web Site Advertising Licenses
Build Outs Accountants Equipment
Wages Deposits Part Time Help
Vehicles Fees Travel

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Estimating Non Cash Items
It’s a little more complicated
•Depreciation
•Loan Amortization
•Payroll and Income Taxes
•Inventory Buys
•Other Accruals

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• Compare actual results with plan
• Focus on major variances and causal factors
• Identify problems and opportunities
• Define actions to improve results
• Modify future Cash Flow forecast if appropriate.
• Assess impact of changes
Timely information is essential
Monthly Cash Flow Review

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What If You Need Financing?

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Don’t Count on It
“For the current [2013-2014) season, the show’s producers received 35,000
applications. Of those, 157 — that’s 0.4 percent — were selected.”
Abba Bhattaral, The Washington Post, 1/19/2014

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Show me the money!
► How much capital do you need?
 From your cash flow analysis, what
you need
 From your personal financial
statement, what you have
 Calculate the difference

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Where the Money Comes From
Earnings 32%
Credit Cards 30%
Large Bank 19%
Community
Bank
19%
Friends or
Family
17%
Vendor Credit 15%
Leasing 6%
SBA 4%
Debt -PP 2%
Credit Union 2%
Factor AR 2%
Stock - PP 2%
Non Bank Loan 1%
State/Regional
Programs
1%
Crowd Funding 1%
Source:Mullins, How to Start a Business with Very Little Money, WSJ,1/26/2015, R1.

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It’s all about money
• Do you know how much money you want?
• Do you know why you want?
– Can you justify?
– Is it reasonable?
– Do you have adequate collateral?
• Do you know how you would pay it back?
• Do you know when you would pay it back?

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You want a loan?
• You may have to guarantee personally
• You need a personal financial statement
• Do you have one?
• Do you know how to prepare one?
• What does it say?

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Select banks
• Get referrals
• Line up more than one bank
• They know your industry
• They are in your community
• Room for growth
• Banks are eager to do
business too!
• Do your home work

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Meet the banker
• Make contact
• Proper business etiquette
• Have all relevant
documents
• Build a rapport
• Keep them informed
• No surprises
• Ask questions
• Go with an “attitude”

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What bankers may not like…
• Getting outside your area of expertise
• Absentee management/ownership
• Going through divorce proceedings
• Burnout; no enthusiasm!
• Growing beyond your capacity
• Relocation

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Questions banker may ask you…
• Your product/service
• Your experience
• Down payment, 25%-
30%
• Collateral
• Your personal debt
• Your credit history:
– They will check it anyway!
• Your selling plans
• Your business plan
• About your competition
• Your team
– Your banker
– Accountant
– Attorney
– SCORE?
• Your tax returns
• Bankruptcy
• Most importantly:
– How and when
would you pay back
the loans?

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• Lying
• Not forthcoming
• Surprises
• Omission of key info
• Exaggeration
• Ever changing story
• Arguing
• Excessive secrecy
• Asking to sign Non-
disclosure agreement
• Inability to answer direct
questions with direct
answers
• Coming late for meetings
• Investing on unnecessary
items
• Fail to attract top talent
• Not disclosing personal
liabilities
How to
irritate an
investor

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4 Links You Should Have4 Links You Should Have
Me:Mark.Lieberman01@gmail.comMe:Mark.Lieberman01@gmail.com
MyLinkedin:linkedin.com/in/liebermanmarkMyLinkedin:linkedin.com/in/liebermanmark
SCORE Local:SCORE Local: www.scorechicago.orgwww.scorechicago.org
SCORE National: www.score.orgSCORE National: www.score.org

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Q&AQ&A