The document provides an overview of financial planning, including why it is needed, what it entails, and how to build financial models and projections. Financial planning involves setting goals and strategies, developing assumptions and projections for revenue, expenses, cash flow, and financial statements. It requires building a financial model typically using Excel to integrate projections and assess feasibility and timing of plans. The presentation recommends starting with a 2-year monthly financial plan plus 3 years of annual projections and considering engaging a part-time CFO initially to help with the process.

1. Financial Planning
April 2014

2. • Why we need financial planning?
• What is financial planning?
• Revenue Model
• Assumptions
• Financial Statements / Projections
• Building a financial model
• The Wonders of Excel
Agenda

3. Why Financial Planning
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4. What is Financial Planning
Objective
/ Goals
• Set measurable goals
• Sales & Profit
• Timeline
Strategy
• Branding,
• Target Audience, Sales Channels
• Product development
Tactics
• Cost of implementation
• Need vs. Want
• Terms of business
Building numbers into marketing & operations
 Goals & strategy feasibility
 Guidance on changes needed
 Strategic partnering & contract negotiations

5.  Projections
• Revenue model
• Costs & Expenses
 Monthly Financials
• Follow-up / Comparison
• Cash Position
• Timeline of Cash
 Project Feasibility
• New products
• New markets
• Etc.
What is Financial Planning
• Income statement
• Balance Sheet
• Cash Flow
• Strategy
• Operations
• Partnerships

6.  Goal setting … then work backwards
• How do you get there?
• How much cash will it take
• What is your timing
 Target Market / Target list
• Consumer
• B2B
• Partners
 Segments
• Keep it simple & FOCUS
• Prioritize
 Assumptions
Revenue Model

7. Ass…U…Me
Assumptions
 Everybody Must Make Assumptions
• Revenue
• Costs / Expenses
• Timing
 Research
• Google, friends, surveys, other professionals
 Eventually, “Just do it”
• Put it on paper
• Change if needed
 Projections are never perfect
• Over or Below

8. Income Statement
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Revenue 3000 3300 3630 3993 4392 4832 5315 5846 6431 7074 7781 8559 64153
Cost of Goods 1500 1650 1815 1997 2196 2416 2657 2923 3215 3537 3891 4280 32076
Gross Profit 1500 1650 1815 1997 2196 2416 2657 2923 3215 3537 3891 4280 32076
Gross Margin 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
Expenses:
Rent 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Salaries 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Selling & Marketing 50 50 50 50 50 50 50 50 50 50 50 50 600
G&A / Depreciation 20 20 20 20 20 20 20 20 20 20 20 20 240
Total Expenses 2,570 2,570 2,570 2,570 2,570 2,570 2,570 2,570 2,570 2,570 2,570 2,570 30,840
Operating Profit / (Loss) (1,070) (920) (755) (573) (374) (154) 87 353 645 967 1,321 1,710 1,236
Other Expenses:
Loan Interest 10 10 10 10 10 10 10 10 10 10 10 10 120
Other 5 7 9 21
Total Other Expenses 15 10 10 17 10 10 10 10 10 10 19 10 141
Net Profit (1,085) (930) (765) (590) (384) (164) 77 343 635 957 1,302 1,700 1,095
EBITDA (Earnings before interest, tax, depreciation & amortization)

9. Balance Sheet
(Dollars) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
ASSETS
Current Assets
Cash 14,395 60,375 486,556 179,970 124,248 77,696 31,389 98,413 206,376 180,923 309,395 378,803
Accounts Receivable 226 83,737 107,704 165,699 211,562 260,384 386,433 414,247 386,877 400,932 318,674 263,342
Total Other Current Assets 4,063 4,063 4,063 4,063 4,063 4,063 4,063 4,063 4,063 4,063 4,063 4,063
Total Current Assets 18,683 148,175 598,323 349,731 339,873 342,142 421,884 516,723 597,316 585,917 632,132 646,209
Fixed Assets
Net Fixed Assets 81,434 81,434 81,434 281,434 281,434 281,434 281,434 281,434 281,434 381,434 381,434 381,434
Other Assets
Security Deposit 6,760 6,760 6,760 6,760 6,760 6,760 6,760 6,760 6,760 6,760 6,760 6,760
TOTAL ASSETS $106,877 $236,369 $686,517 $637,925 $628,067 $630,336 $710,078 $804,917 $885,510 $974,111 $1,020,326 $1,034,403
LIABILITIES & EQUITY
Current Liabilities
Total Current Liabilities 60,568 177,669 109,026 80,314 63,007 50,917 57,441 65,221 71,688 79,523 83,836 86,960
Long Term Liabilities
CNB - Loan Payble & term loan 38,055 38,798 37,678 36,553 35,423 34,287 33,146 32,000 30,848 29,691 28,528 27,360
38,800 38,798 37,678 36,553 35,423 34,287 33,146 32,000 30,848 29,691 28,528 27,360
Equity
Paid-In-Capital 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Equity Injection 0 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Retained Earnings (6,315) (7,491) 4,902 24,813 36,059 44,637 60,133 134,492 222,696 297,974 379,898 422,961
Net Income (1,176) 12,393 19,912 11,245 8,578 15,495 74,360 88,204 75,278 81,924 43,064 12,122
Total Equity 7,509 19,902 539,813 521,059 529,637 545,133 619,492 707,696 782,974 864,898 907,961 920,083
TOTAL LIABILITIES & EQUITY $106,877 $236,369 $686,518 $637,926 $628,067 $630,337 $710,079 $804,917 $885,510 $974,112 $1,020,326 $1,034,403

10. Cash Flow Statement
(Dollars) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Net Income ($1,176) $12,393 $19,912 $11,245 $8,578 $15,495 $74,360 $88,204 $75,278 $81,924 $43,064 $12,122
Depreciation & Amortization $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Change in OP assets & liabilities:
A/R $0 ($83,511) ($23,967) ($57,995) ($45,863) ($48,822) ($126,049) ($27,814) $27,370 ($14,055) $82,258 $55,332
Other Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
A/P $0 $117,101 ($27,357) ($28,712) ($17,307) ($12,090) $6,524 $7,781 $6,467 $7,834 $4,313 $3,123
Other accrued expenses $2,199 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Change in OP A&L $2,200 $33,589 ($51,324) ($86,707) ($63,170) ($60,912) ($119,526) ($20,033) $33,837 ($6,220) $86,571 $58,455
Net Cash from Operations $1,024 $45,982 ($31,413) ($75,461) ($54,591) ($45,417) ($45,166) $68,171 $109,114 $75,703 $129,635 $70,577
CAPEX ($4,101) ($0) $0 ($200,000) $0 $0 $0 $0 $0 ($100,000) $0 $0
Net Cash from Investment Activity ($4,101) ($0) $0 ($200,000) $0 $0 $0 $0 $0 ($100,000) $0 $0
Paid-in-Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Equity Injection $0 $0 $500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Tax Distribution $0 $0 $0 ($30,000) $0 $0 $0 $0 $0 $0 $0 $0
Credit Card $10,642 $0 ($41,286) $0 $0 $0 $0 $0 $0 $0 $0 $0
Term Debt #1 $745 ($745) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Term Debt #2 ($2,967) $743 ($1,120) ($1,125) ($1,130) ($1,136) ($1,141) ($1,146) ($1,152) ($1,157) ($1,163) ($1,168)
Net Cash from Financing $8,420 ($2) $457,594 ($31,125) ($1,130) ($1,136) ($1,141) ($1,146) ($1,152) ($1,157) ($1,163) ($1,168)
Net Cash Provided 5,343 45,980 426,181 (306,586) (55,722) (46,553) (46,307) 67,025 107,963 (25,454) 128,472 69,409
Beginning Cash 9,052 14,395 60,375 486,556 179,970 124,248 77,696 31,389 98,413 206,376 180,923 309,395
Change in Cash 5,343 45,980 426,181 (306,586) (55,722) (46,553) (46,307) 67,025 107,963 (25,454) 128,472 69,409
Ending Cash 14,395 60,375 486,556 179,970 124,248 77,696 31,389 98,413 206,376 180,923 309,395 378,803

11. The Financial Reporting Link
Income
Statement
Balance
Sheet
Cash Flow
− Revenue Numbers
− Costs & Expenses
− Match to timing of sales
− Leads to Net Income / Loss
− Net Income goes on the Balance Sheet
− Snap shot in time that shows assets & liabilities
− Assumptions of timing for collecting cash from
sales and paying expenses
− Change in assets and liabilities effects cash flow
− Starts with Net Income
− Changes in assets and liabilities
− Additions and pay back of equity and debt
− Ending cash goes back on the balance sheet

12. The Financial Reporting Link Cont’d
Income
Statement
Balance
Sheet
Cash Flow
− Sales, Costs, Expense
assumptions feed into IS
− Usually from other sheets
− Account Receivable/Payable days
− Inventory Days
− Debt & Equity
− Equipment purchases
− Income Statement &
Balance sheet are
brought together

13. • Complex vs. Simple
• Use Excel for flexibility and ease
– Calculations/Formulas, Drag
• Build assumptions that can be easily changed
• Think through revenue, costs, expenses
• All sheets should be integrated
Building a financial model
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Revenue 50 55 61 67 73 81 89 97 107 118 130 143 1069
Cost 25 28 30 33 37 40 44 49 54 59 65 71 535
Expenses 10 11 11 12 12 13 13 14 15 16 16 17 159
Net Profit 15 17 19 22 24 27 31 35 39 43 49 54 375
Growth 10%
Cost 50%
Expense Inflation 5%
Lori:
Drag months
and dates
Lori:
Assumptions
in yellow &
blue

14. Excel Wonders Cont’d
Growth Formulas
Growth of 10%
= previous month or year
multiplied by 1 + 10% growth
C4 = January Revenue
C9 = Growth Rate
The dollar sign (“$”) in front of a
column letter and or row number
grounds the column and row,
respectively.

15. Excel Wonders Cont’d
• AutoSum button
• Fill or Drag
• Formatting
• Inserting

16. Excel Wonders Cont’d
• Formulas
• Review
• View

17. • 5-Year financial plan:
– 2 years of monthly & following 3 annual
• Need Initial Data
– Can figure it out with CFO
– Still need CEO engagement
• Part-time or full-time CFO
– Full time not needed in the beginning
– Typical salary is from $120k - $200k, depending on factors
– Part-time CFO typical hourly rate is $170-$250
– Bookkeeping and senior accountant rates are lower
Data & Costs

18. Thank You
Lori Murphree
Lori.murphree@gmail.com
Cell: 917-969-9593