Contenu connexe


9.14 TCN Calculate Financial Projections

  1. The Capital Network is a non-profit (501c3) organization that provides practical, hands-on education and personalized mentoring to help early stage entrepreneurs master the entire funding process and successfully raise seed capital & beyond. We know fundraising is hard so we provide entrepreneurs with: Want to know more? Follow us on @TCNUpdate The Right Network We work with Angel Groups, VC Firms, Accelerators, Community Organizations, Service Providers and Seasoned Entrepreneurs to help you succeed and grow by increasing your chances of getting the right kind of investment and connections. The Right Programming In collaboration with the investors who fund our area’s startups, we create 40+ events a year - workshops, roundtables, 1 on 1 mentoring and bootcamps - that reflect the latest trends and insights in the fundraising and startup community.
  2. - @TCNUpdate Calculate Financial Projections for Investment Presentations Riley Rodgers Principal- Valia Investments Jim Antes Partner- Venture Advisors
  3. Today’s presentation will focus on the how and why of building and pitching financial projections ●How: Creating financial projections using a spreadsheet and some common accounting knowledge shows you where to focus your resources ●Why: Creating financial projections demonstrates to investors that you have thoroughly considered every aspect of your business model. Financial Projections: WIFM?
  4. 1. Force discipline and objectivity through creating a methodical approach 1. Demonstrate thorough understanding of your company’s business model 1. Provide answers to “what if?” Financial Projections: 3 Objectives
  5. • I’ve heard that I don’t really have to build a business plan with financial projections because no one actually reads it… • Business plans with financial projections are necessary… FOR YOU - Bottoms-up vs. Top-down - HINT: You're trying to talk yourself out of this! • Financial projections are a key portion of the due diligence most investors perform Investors are more interested in the assumptions made when building financial projections, not the exact bottom line Building Projections: Yeah, but…
  6. Projections are just imaginary anyway, so what does it matter what I put in? • A common mistake is to have illogical numbers in the projections – All numbers should be tied to your growth assumptions • Ex 1: If sales cycle is 6 weeks, should there be sales in month 1? • Ex 2: If business is seasonal, should growth be smooth in every month? – All numbers should tie with a rough cash flow statement • Either a separate tab or at the bottom of the P&L Projections that have not been planned properly make investors question your understanding of your business model Building Projections: Pulp Fiction?
  7. Building Projections: What if… Scenario planning is just worst-case (out of business), expected (what I really think will happen), and best-case (Google buys us for a bazillion dollars), right? • Focus on YOUR key success metrics to drive scenario planning – Sales traction – Gross margins – Incremental headcount Fundraise amount range should encompass most likely scenarios to avoid expensive “Bridge” or “A-1” rounds
  8. Worst-case scenarios should answer “What happens if there is no outside capital?” – if the answer isn't 'grow slower', is this a pipe dream? Best-case scenarios should answer “What does this business look like if everything goes right?” – if the answer isn’t a huge financial win for your investor, is this a pipe dream? Most-likely scenarios should answer “What does this business look like following comparable companies’ growth paths?” – if the answer isn’t able to be funded with the current “ask”, is this a pipe dream? Goldilocks got it right: examine all options! More on Scenario Planning…
  9. Common Terms • Revenue/Sales • COGS • Gross Profit/Margin • Operating expenses • EBITDA • Cash flow breakeven • Working capital • Burn rate Important KPI’s • Total cost of acquisition • MRR/TCV • Churn • Month over month increase in revenue/expenses and other key metrics (%) Building Projections: Common Terms
  10. Building Projections: How it works • Fundamental components of model: • Profit & Loss • Balance Sheet • Cash Flow • These three schedules flow together and are essential to understanding your business • Above schedules should be presented by month • Have an assumptions page: this allows flexibility – change assumptions for different growth scenarios • Assumptions are the backbone of your projections, so you should know them COLD Excel is your friend, but be careful with cell references – it’s easy to make a mistake!
  11. Projections: Getting started… What is your business model like? • Look at other businesses/competitors/comparables • Link for SEC website • Analyst reports • Market surveys • Don’t recreate the wheel
  12. Projections: Getting started… Start with Revenue • Ex: We have tracked X unique visitors to our website and with an industry averages 2% conversion rate, sales will be Y. • Ex: Survey revealed customers are willing to pay $X for a product with Y features. • Ex: Q4 sales were $X. With a customer acquisition cost of $Y, we expect a 20% growth rate as a result of marketing efforts • All revenue projections must be backed up with a sales plan Econ 101: revenue = price * volume. Knowing which element is driving your company’s revenue is a key metric.
  13. Projections: Expenses Group expenses according to function: ▪ COGS/COS ▪ Selling ▪ Marketing ▪ Engineering & Development ▪ General & Administrative Determine headcount first then build expenses around that ▪ Who are your key hires? ▪ What function and timing and cost?
  14. Projections: Expenses ● Payroll expenses – Salaries and payroll taxes – Other compensation (bonuses, commission) – Fringe benefits (medical/dental insurance, etc) – Founders can work for free – but no one else! • Rent • Legal and Accounting • Insurance • Variable expenses (T&E’s)
  15. Projections: Final Checks ● Take a step back and determine if your assumptions are reasonable and realistic ● Check financial integrity of your model ● Consider timing of major financial milestones: cash flow breakeven, profitability, etc.
  16. Pitching projections: What’s the “ask”? ● Put yourself in the investor’s seat – what are they getting for their money? ● Does your ask for cash get you to a value creation point? ● Cash gives you options ● Plan on 12-18 months of cash burn ● The secret to life is “t” - “t” is the variable for “time” in mathematical equations… and time in projections is everything
  17. Pitching projections: Rookie Moves – CTRL+C+P entire excel model into a slide – Using anything less than 18-point font – Littering clipart from 1995… or 2013 – Stating projections to the $.01 – Failing to summarize projections – Using ANY of the following phrases: • “conservatively estimated…” • “at only X% of the market…” • “with no competition…” – Forgetting to explain what the amount you raise achieves – Relying on a short-term exit at a high multiple
  18. Bad Example Revenue Custom runners $ 480,000 624,000 811,200 1,054,560 1,370,928 Standard runners 60,000 78,000 101,400 131,820 171,366 Total Revenue $ 540,000 $ 702,000 $ 912,600 $ 1,186,380 $ 1,542,294 COGS Custom runners $ 120,000 $ 156,000 $ 202,800 $ 263,640 $ 342,732 Standard runners 39,000 50,700 65,910 85,683 111,388 Total COGS $ 159,000 $ 206,700 $ 268,710 $ 349,323 $ 454,120 GROSS PROFIT $ 381,000 $ 495,300 $ 643,890 $ 837,057 $ 1,088,174 Expenses Selling Expenses Commission $ 36,000 $ 46,800 $ 60,840 $ 79,092 $ 102,820 Marketing/Advertising 50,000 50,000 100,000 150,000 200,000 Research and Development 40,000 50,000 62,500 78,125 97,656 General and Administrative Expenses Office Rent 30,000 30,000 30,000 30,000 30,000 Insurance 9,600 9,600 9,600 9,600 9,600 Office Utilities 4,800 4,800 4,800 4,800 4,800 Supplies 18,000 18,000 18,000 18,000 18,000 Salaries 120,000 120,000 120,000 120,000 120,000 Benefits 30,000 30,000 30,000 30,000 30,000 Miscellaneous 21,600 21,600 21,600 21,600 21,600 Total Expenses $ 360,000 $ 380,800 $ 457,340 $ 541,217 $ 634,476 EBITDA $ 21,000 $ 114,500 $ 186,550 $ 295,840 $ 453,698
  19. Good Example- For Presentation Purposes
  20. Good Example - Graphs

Notes de l'éditeur

  1. Key success metrics: what must go right for this to succeed? Measure that.
  2. Comparable companies are those with similar revenue and cost sensitivities
  3. revenue, COGS, GPM, SG&A broken out development and marketing + OH, NOP
  4. $ on Y-axis, "T" on x-axis, # on Z-axis; "0" is somewhere up the Y-axis to show negative CF