BIC Angel Investments

1. HOW TO PREPARE FINANCIAL PLAN

2. INDE
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1.Why do you need to know Financials?
2.Pre-Investment
3.Post-Investment

3. WHY
GENERAL VISION OF
STARTUPS ON FINANCE
& BUSINESS PLAN
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& finance
But, REAL WORLD is:

4. 11/18/16 4BIC Angels Investments
Financial tools help you manage your day-to-day
What has
happened in your
company?
What currently
happening in
your company?
What do you
expect in your
company?
Early warning to see what
will happen in your company
before it happens!
WHY
OR
What did we
think would
happen?
What actually
happened?
Why the
difference?

5. 11/18/16 5BIC Angels Investments
WHY

6. 11/18/16 6BIC Angels Investments
Some samples for Business Model
questions:
Value proposition:
-What benefit you offer for target
customers.
Competitive advantage
-Key to success of your business
- What we have to pay to keep
competitive advantage.
- What we have to keep investment
in our technology, people,etc to
sustain competetive advantage.
Cost structure
-What cost of service, sell, support the
product.
Revenue/Growing Structure
-What price model would be.
Marketing& Sales stragy
-How much you will spend for marketing
strategy.
-What return will be.
-What you spend for sales.
-How much cost for acquire customer.
- etc.
FinancialTranslate
to
WHY

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Sell
Thanks to competitive
advantage
Sell
- Channels?
- Prices?
- # of unit?
- Etc.
Profitable
- Lower cost?
- Personnel?
- Licences?
- Warehouse?
- Etc.
WHY

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INCOME
STATEMENT
CASH FLOW
STATEMENT
BALANCE
SHEET

9. 11/18/16 9BIC Angels Investments
INCOME STATEMENT
Revenue - R
Cost of good sold- C
GROSS PROFIT – GP=R-C
Operating expenses– E
-R&D
-Marketing
-Admin
OPERATING PROFIT (EBIT) – GP-E
Finance income / expenses (+/-)
Extraordinary icome exp (+/-)
Tax provisions (+/-)
NET INCOME – NI

10. PRE-INCOME
STATE
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Statutory Income Statements - Summary
TL k
Budget Actual PY Actual CY
Dıfference
BU-CY
Dıfference
PY-CY Budget Actual PY Actual CY
Dıfference
BU-CY
Dıfference
PY-CY
Sales, net
Direct COS
Contribution Margin I
Indirect COS
Gross profit (CM II)
Other operating income
Other operating expenses
EBIT (CM III)
Finance income
Finance expense
Contribution Margin IV (CM IV)
Extraordinary income
Extraordinary expense
Profit before tax (CM V)
Provision for tax
Net profit
Depr. & Amor.
EBITDA
Contribution margin I (CM I) %
Gross profit margin (CM II) %
EBIT margin (CM III) %
EBITDA margin %
PBT margin %
OPEX / net sales %
YTDPrevıous Month Current year

11. PRE-
PLANWHAT INVESTOR WANTS TO SEE FROM PROJECTIONS?
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• 3-4 year forecast
• Neither conservative; nor aggressive
• How investment will be spent
• High returns SOON
• Having idea on how to exit
WHAT WE NEED TO AWARE OF?
• Returns can take longer than estimations
• Cost can be higher than estimations
• Non of entrepreneur thinks of everything

12. BEST REPORT MODEL
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• Easy to understand
• Well documented
• Easy to update
• GİVE DECISION IDEA!!
PRE-
PLAN

13. Key components of Financial Analysis
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• Revenue & Expense forecast
• KPIs
• Cash flow statement
• Break-even analysis
PRE
PLAN

14. PREFINANCIAL
PLARevenues Estimation
11/18/16 14Entrepreneurship
- Top down
- Market is known to be 200m USD. The leader has 15%. We can get 5% of
it.
- Bottom- up
- We will start with 1 restaurant in the first year. It will have 50 covers.
Occupancy will go from 40% - 80% over a period of 12 months. We’ll
make 200USD per cover per day.
50
table
60%
occupacy
200 USD
per cover
365
days
2,19m USD

15. PREFINANCIAL
PLASeasonality and Sales Growth
11/18/16 15Entrepreneurship
• The monthly profile of sales, profits and cash flow will depend on
the industry, e.g. ice-cream manufacturer (high sales in the
summer)
• Seasonality is important for our work due to
• Understand cash flow profile
• Review of current trading
• Working capital requirements of the business
• Different industries will have different trends
J F M A M J J A S O N DJ F M A M J J A S O N D

16. PREFINANCIAL
PLACost Estimation
11/18/16 16Entrepreneurship
• There are a variety of ways we can analyse costs:
• Absolute change year-on-year and monthly
• As a percentage of sales/unit/site, etc
• Fixed vs. variable
• Recurring vs. non-recurring
• We need to understand the cost structure/drivers of the company
Fixed vs. variable costs
• Variable costs are those that vary with business activity (e.g. sales)
• Fixed costs are those that are not variable in the short term
• Variable costs
• e.g. material costs, selling and distribution costs
• Fixed costs
• e.g. personnel, rent, audit fees
• An analysis of fixed vs. variable costs is key for our analysis of
projections.

17. PREFINANCIAL
PLACost Estimation
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18. PREFINANCIAL
PLAContribution Margin
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SALES – VARIABLE COSTS = CONTRIBUTION
• Common metrics include contribution per unit or contribution margin %
(contribution/sales)
• Contribution margin is a measure of profit margin that focuses on what
proportion of sales revenue is left over after paying associated variable
costs
• This is the amount that is left over to cover fixed costs, or to add to
profits
• Businesses often calculate the contribution of an individual product line
or department

19. PREFINANCIAL
PLAMargins
11/18/16 19Entrepreneurship
• Typical margins we review are:
• Contribution margin (Contribution / sales)
• Gross margin (Gross profit / sales)
• EBITDA margin (EBITDA / sales)
• We use margins since absolute figures can be misleading
• We can compare margins to prior periods or peer group companies
• Margin analysis helps us gain an understanding of the performance of
the business and identifies areas we want to investigate further
• The understanding we gain here will also be helpful in building a profit
bridge.

20. PREFINANCIAL
PLAMargins (continued)
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21. PREFINANCIAL
PLAMargins (continued)
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• Falling gross margin, possible reasons:
• Pressure on prices / price war
• Discounts offered
• Rise in costs (e.g. raw materials)
• Change in product mix
• Inefficiency in production
• Rising gross margin, possible reasons:
• Economies of scale
• Price increase
• Cost cuttings / savings
• Increase in sales with certain element of costs fixed
• Change in product mix
• Efficiency improvements

22. PREFINANCIAL
PLACompletion of Pro-Forma Income Statements
11/18/16 22Entrepreneurship
• Other Operating Expenses
• Other Operating Income
• Gross margin – operating expenses + other operating income = EBIT
• EBITDA = EBIT + depreciation / amortization
• Calculation of financial result
• EBIT +/- financial result = EBT (earnings before taxes)
• Calculation of taxes on income
• Net Profit / Loss = EBT ./. Taxes on income

23. PRE-
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Assets
Liabilities +
Shareholder
equity
BALANCE SHEET
Current Assets
-Cash
-Accounts receivable
-Inventory
Long Term Assets
-Fixed assets
-Long term receivables
Current Liabilities
-Payables
-Accrued Liabilities
Long Term Liabilities
-Debt
Shareholder Equity

24. PREFINANCIAL
PLA
11/18/16 24Entrepreneurship
• What is working capital ?
• Comprises items relating to normal trading activity that will crystallise
into cash inflows and outflows in the short-term
• Working capital = current assets - current liabilities

25. PRE-
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Summary Balance Sheet
TL k 31-Dec-13 Month
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Total current assets
Tangible fixed assets
Intangible fixed asset
Non-current assets
Total non-current assets
Total assets
Borrowings short terms
Trade payables
Other current liabilities
Total current liabilities
Borrowings Long terms
Total non-current liabilities
Capital
Total liabilities and equity
Assets: What you got
Liabilities: What you owe
Equity: What’s left over

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CASH FLOW
Net Income NI
-Change in Account Receivables +/- AR
-Change in Account Payables +/- AP
-Change in Inventories +/- Inv.
Cash Flow from Operations OP
- Capital Expenditures +/- Capex
-Financing Activities +/- FN
Free Cash Flow FCF
Cash at hand – Previous month +
Cash at hand – End of month

27. PRE-IN
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Cash flow analysis
TL 31- Dec-13 31-Jan-2014 28-Feb-2014
EBITDA
Non-cash items
Cash EBITDA
Change in Net Working Capital
- Change in trade receivables
- Change in inventories
- Change in trade payables
- Change in other current assets
-Change in other current liabilities
Operational Cash Flow
Investing activities
Capex
Gain on sales fixed assets
Other
Investing activities
Cash Flow after Investing activities
Financing activities
Change short term bank loans
Change in long term bank loans
Changes in equity
Change in other financial activities
Financing activities
Free cash flow
Cash and cash equivalents- Previous month
Cash and cash equivalents - end of period
Where cash comes
from;
Where cash goes to

28. PRE-IN
11/18/16 28BIC Angels Investments
(600,0)
(400,0)
(200,0)
0,0
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0 1M
2M
3M
4M
5M
6M
7M
8M
9M
10M
11M
12M
13M
14M
15M
16M
17M
18M
19M
20M
21M
22M
23M
24M
25M
26M
27M
28M
29M
30M
31M
32M
33M
34M
35M
36M
Cumative CF
340,9 TL
Cash requirement

29. General problem on Financial reports
11/18/16 29BIC Angels Investments
POST
REPO
-
- Not meaningful financial results and KPIs.
-Not able to take reaction when stg goes wrong.
-High cashburns / miss higher opportunities
- Underestimate accounting records
- Underestimate tax issues
- Underestimate measurement

30. 11/18/16 30BIC Angels Investments
Management Dashboard
Cash
Product
development
Marketing Sales Operations Finance
POST
REPO
• Daily basis
• Weekly basis
• Monhly basis

31. Main points for KPIs
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- There should not be too many KPIs
- KPIs can be built around 3-5 KRAs
- KPI should change according to their goals.
- KPIs should be linked to strategy
- KPIs have to provide answer to most important questions.
- KPIs should be designed to empower Founders and provide them
with relevant information to learn
POS

32. 11/18/16 32BIC Angels Investments
POS

33. 11/18/16 33BIC Angels Investments
POS
For startups, it is not
generally about numbers;
qualitative KPIs should be
evaluated as well.

34. References
• Tomasz Tunguz – Venture capital at readpoint
• Cayenne Consulting – Budgeting for startups
• Martin Zwilling, Startup proffessional musings
• KPMG- Utopia – Key analysis of companies
• Joachim Behrendt – Entrepreneurship presentation
• BIC Angels templates
• Bygrave, W.D. / Zacharakis, A., The Portable MBA in Entrepreneurship
• Bill Reichert– Kauffman Founders Schools
11/18/16 34BIC Angels Investments

35. +90 (212) 328 19 39
www.bicangels.com
www.facebook.com/BICAngelInvestments
@bicangels
bic@bicangels.com