Embed Size (px)
DESCRIPTION
Learn the financial planning basics that will help you build a realistic financial plan for your startup. Get to know the basic tools of financial planning, including income statements, cash-flow forecasts, expense statements and balance sheets. We examine the financial plans of both successful and failed companies and focus on their ability to forecast realistic scenarios for business growth and cash flow.
Citation preview
For the startup CEO!
Presented by: Andrew GrahamMarch 2013!
Memory at Work
Pg 3!
Memory at Work
Pg 4!
Why money ma*ers in a startup
Have to pay the bills
Sign of a sustainable business model
Desirable outcome!!
Memory at Work
¨ Income Statement!
¨ Cash Flow Forecast!
¨ Balance Sheet!
Pg 5!
Memory at Work
¨ Financial performance over a period of time!
¨ Usually for a year, quarter or month!
Pg 6!
Memory at Work
Pg 7!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Revenue!!
Money brought into a company by its business
activities!
Revenue Forecasting!!
Top-down!vs!
Bottom-up!
Memory at Work
Pg 6!
Cost of Sales!!
Costs that go into creating the products and services
that a company sells!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Gross Margin!!
Revenue minus cost of sales!
RIM!!Linkedin!!Toyota!
!36%!!81%!!13%!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Operating Expenses!!
Business costs NOT related to producing goods &
services for sale!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Research & Development!!
Activities with the intention of making a discovery that
can lead to new or improved products!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Selling, General and Administrative Expenses
(SG&A)!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Amortization!!
Deduction of capital expenses over a period of
time!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Investment Income!!
Income from interest payments, dividends, etc!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Taxes!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 6!
Net income!!
Profit!!!
Research in Motion!Income Statement!2012 Fiscal Year!
millions of USD!
Revenue! $ 18,435!Cost of sales! 11,856 !Gross margin! 6,579 !
Operating expenses!Research & development! 1,536 !Selling, general & admin.! 2,476 !Amortization! 571 ! Total operating expenses! 4,583 !
Income from operations! 1,490 !Investment income! 21 !Taxes! 347 !
Net income! 1,164 !
Memory at Work
Pg 7!
Example: Tom’s Solar Power Company, Inc.!
Input Cost: !$50! Sell for: !$100!
Memory at Work
Pg 8!
Units Sold! - !
50 !
150 !
250 !
400 !
550 !
750 !
1,050 !
1,400 !
1,900 !
2,500 !
3,500 !
Unit Price! $100/unit!
Revenue! $ - !
5,000 !
15,000 !
25,000 !
40,000 !
55,000 !
75,000 !
105,000 !
140,000 !
190,000 !
250,000 !
350,000 !
$-‐
$100,000
$200,000
$300,000
$400,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Revenue
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 9!
Memory at Work
Pg 9!
Tom's Solar Power Co, Inc!Monthly Income Statement!
January-June, 2012!$!
Jan! Feb! Mar! Apr! May! Jun!Revenue! $ - ! 5,000 ! 15,000 ! 25,000 ! 40,000 ! 55,000 !Cost of Sales! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !Gross Margin! - ! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 !
SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Net Income! (1,000)! 1,500 ! 6,500 ! 11,500 ! 19,000 ! 26,500 !
Cash Projection!
Starting Cash! $25,000 ! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)!Plus: Revenue (1 month delayed)! - ! 5,000 ! 15,000 ! 25,000 ! 40,000 !Minus: Cost of sales (1 month ahead)! 2,500 ! 7,500 ! 12,500 ! 20,000 ! 27,500 ! 37,500 !Minus: SG&A! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 ! 1,000 !Cash gain/(loss)! (3,500)! (8,500)! (8,500)! (6,000)! (3,500)! 1,500 !
Ending Cash! 21,500 ! 13,000 ! 4,500 ! (1,500)! (5,000)! (3,500)!
Memory at Work
Pg 10!
Memory at Work
Pg 10!
If you don’t forecast cash flows, you’re flying blind!!
Memory at Work
¨ Earnings Before Interest, Taxes, Depreciation and Amortization!
¨ A measure of a company’s cash flow from operations!
Pg 11!
Memory at Work
¨ Snapshot of assets and liabilities at a point in time!
Pg 12!
Memory at Work
Pg 13!
Tom's Solar Power Co, Inc!Balance Sheet!
February 29, 2012!
$!Assets!Cash! $ 13,000 !Accounts Receivable! 5,000 !Inventory (prepaid)! 7,500 !Building and Equipment! 50,000 !Land! ! 100,000 !Total Assets! 175,500 !
Liabilities!Accounts Payable! - !Loan! ! 25,000 !Total Liabilities! 25,000 !
Owner's Equity! ! 150,500 !Total Liabilities and Owner's Eq.! ! 175,500 !
Tom's Solar Power Co, Inc!Monthly Income Statement!
February 2012!$!
Feb!Revenue! 5,000 !Cost of Sales! 2,500 !Gross Margin! 2,500 !
SG&A! 1,000 !Net Income! 1,500 !
Cash Projection!
Starting Cash! 21,500 !Plus: Revenue (1 month delayed)! - !Minus: Cost of sales (1 month ahead)! 7,500 !Minus: SG&A! 1,000 !Cash gain/(loss)! (8,500)!
Ending Cash! 13,000 !
Memory at Work
¨ It’s all about cash!!
¨ Forecast from the bottom!
¨ Create multiple scenarios: how sensitive is your business to changes:!– In revenue!– In expenses!
¨ Get expert advice when you need it!
Pg 14!
Andrew [email protected]!
