Financial Plan workshop (Feb 13th, 2014) for Microsoft Innovation Center Brussels' boostcamp

1. MIC boostcamp - Finance workshop
Convert your business model into figures
Key parts and logic behind your financial plan
Catherine Blondiau
Rodolphe d'Udekem d'Acoz
Martin van Wunnik
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Xavier Corman | Martin van Wunnik
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2. Who are we ?
Catherine Blondiau
Rodolphe d'Udekem d'Acoz
Martin van Wunnik
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3. This presentation is available for free:
http://www.slideshare.net/FinanceCoach24
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4. Morning session
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5. Why a Financial Plan ?
If you don't think about the future,
you cannot have one.
John Golsworthy
where you want to go
You need to know
how you are supposed to get there
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7. 17/04/2012
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8. 17/04/2012
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9. Financial Plan
Content
– Assumptions
– Profit & Loss
– Balance Sheet / Investment
– Cash-Flow -> Cash needed
– Valuation of the project
– Profitability / return of the project
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10. 17/04/2012
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11. Accounting: Profit & Loss (P&L)
COGS (Cost of Sales)
General Expenditures
Personnel Costs
Revenues (Sales…)
Depreciation
Taxes
EBIT
Financial cost
Profit
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12. Accounting: Balance Sheet
ACTIVE
PASSIVE
Non Current Assets
(Actifs Immobilisés/
Vast Activa)
Equity + Reserves
(Capital/Kapitaal)
LT Debts
Current Assets
(Actifs circulants/
Vlottend Activa)
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ST Debts
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13. Required Cash-Flow
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14. How to finance your startup ?
Equity
LT Debts
ST Debts
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15. Sales
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16. Financial assumptions
How to estimate your Sales?
Catherine Blondiau
Rodolphe d’Udekem d’Acoz
Business and Finance Advisors @ IMPULSE.Brussels
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17. SALES
Market potential = (Average Purchase * How Much * How Often)
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18. What ?
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19. Price?
Pricing of alternative solutions
How much is the customer ready/willing to pay?
Price:
- Not too low
- Not too high
- Coherent
Test it!
Evolution of the selling prices?
What is the average amount per purchase?
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20. How Much?
2 methods to evaluate How Much you will be able to sell
Top Down
approach starts
with market and
industry data.
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Bottom Up
approach starts
with your
customers and
your resources
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21. How Much? – Top Down
A Top Down analysis is calculated by determining the total
market, then estimating your share of that market.
It works in 3 steps :
1.
Total Available Market (TAM) : How large is the market if all
customers buy your product ?
2.
Serviceable Available Market (SAM) : Focus on your own
technology/services
3.
Serviceable Obtainable Market (SOM) : Which realistic market
share can be obtained by myself, considering competition,
countries, my sales/distribution channels and other market
influences?
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22. How Much? – Top Down : Example
You want to sell internet access in Europe
TAM
Total population of Europe
500 millions
SAM
% of the population who want
internet access
80%
400 millions
SOM
Based on your market study, you
expect to achieve 1% of that potentiel
audience
1%
4 millions
Each account will yield €250 per year.
Expected revenue : € 1 billion (4 millions ×€250/customer)
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23. How Much? – Bottom-Up
This approach allow you to estimate the sales considering
the client and your resources.
The idea is to understand how much you will be able to sell
considering the resources of your company :
- Time
- People
- Money
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24. How Much? – Bottom Up: Example
You want to sell internet access in Europe
We can bring on board five salespeople
5 salespeople
Each salesperson can make ten phone sales calls a day
that get through to a prospect.
10 calls/day
There are 240 working days per year.
240 days
5% of the sales calls will convert within six months
5%
Estimated sales
600
Each account will yield €250 per year.
Expected revenue : € 150 000 (600×€250/customer)
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25. How Much?
Combine both approaches
- Use top-down analysis to estimate the market opportunity for your
company—to decide whether you want to try it in the first place
- Use bottom-up analysis to get a realistic and testable estimate of
what you can achieve within the first years of your startup
Challenge both approaches and present a coherent global
perspective of your estimated sales
One-off/recurring/bundled sales?
What are the supporting trends of your market ?
How fast will the market grow?
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26. When & How ?
How and When are you going to sell your products ?
Sales channels: Direct / Indirect – focus may shift over time
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27. When & How ? - COCA
Impact on the cost of customer acquisition (COCA)
€?
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28. When & How ? - COCA
Impact on the cost of customer acquisition (COCA) :
- It costs money to achieve each sales
- How much resources (time, €, HR) does it require (cf
Bottom Up approach)?
- Includes unsuccessful prospects
- To be taken into account in your financial plan
- Choice of channels :
Financially sustainable?
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29. When & How ? - COCA & LTVOAC
COCA & Life time value of an acquired customer
- Cost of Customer Acquisition (COCA)
COCA = Sales & Marketing Costs / Customers
- Life time value of an acquired customer (LTVOAC)
LTVOAC = revenue over life time x gross margin
- Each acquired customer will provide you with revenues
during his life time (as a client of your company)
- Put those revenues in perspective with the COCA
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30. When & How ? - COCA & LTVOAC
Lifetime value of a gym member who spends €20 every
month for 3 years?
- €20 X 12 months X 3 years = €720 in total revenue (or
€240 per year)
How much will it cost you to acquire this client? Allowable
acquisition cost?
How to optimize LTVOAC?
Discount while managing CF
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31. Don’t Forget …
Probably one of the most important parameters … and
certainly the most difficult to estimate !!
Consider different (sub)categories of products and/or
services
Consider the volume of units (products/services) sold and the
respective selling prices
Outputs
– Per product (category)
– Per client / market / segment
– Per channel
– Combine ?
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32. Don’t Forget …
Gross sales or Net sales (e.g. after commission, bad debts…)
Consider the initial volumes and the growth rates for each
line of products/services without forgetting the market’s
dynamic (seasonality, evolution of the selling prices,
growth…)
Be aware of potential delays and lower (initial) volumes &
growth rates than expected.
Consider the sales without VAT (unless you do not
recuperate it !)
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33. Don’t Forget …
The sales data should be based on tangible elements and
hypothesis directly linked to the business plan
In no circumstances should the volume of sales be based on
the costs … : “ spontaneous sales creation ” in order to
achieve break even or benefit on paper does not help and
could possibly endanger your credibility in the eyes of third
parties
To keep in mind:
- User friendliness, avoid too much items
- Internal logic : price, discount, cost of sales, payment
conditions… & cycle
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34. Impulse template
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35. Afternoon session
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36. Accounting: Profit & Loss (P&L)
COGS (Cost of Sales)
General Expenditures
Personnel Costs
Revenues (Sales…)
Depreciation
Taxes
EBIT
Financial cost
Profit
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37. Costs
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38. Costs assumptions
Catherine Blondiau
Rodolphe d’Udekem d’Acoz
Business and Finance Advisors @ IMPULSE.Brussels
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39. • Sales
• Costs of goods/services sold
• (Other) Operating Costs
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40. COGS : Cost of Goods / Services sold
•
= Cost of Sales
•
Variable costs directly linked to the goods / services
sold and highly or totally proportional to the sales
•
Can be close to zero for some kind of activities
•
Much easier to predict than the volume of sales itself
(should logically be based on tangible elements)
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41. COGS : Cost of Goods / Services sold
•
Two main categories:
a) goods purchased and/or manufactured
NB: attention point: means a potential inventory
and an additional financial need
b) other costs, linked to sales, with no impact on
inventory
NB: eg. Transport, paiment or packaging costs
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42. COGS : Cost of Goods / Services sold
•
Deducted from the sales, it will give the gross
margin or gross revenues
NB: often an important parameter, notably to
monitor the evolution of profitability & to make
comparison with company in similar business
•
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In some cases, there is a grey zone whether
some costs « should » be integrated in the COGS
or the general expenses, with some freedom to
choose
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43. COGS : Cost of Goods / Services sold
• Do not forget that the cost per unit sold can
change following different parameters such as
inflation or the evolution in the volume of sales
(bargaining power with suppliers)
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44. Margin : relative notion
• A margin is a relative concept ! Be aware that it’s all
about points of view. Otherwise, it could lead to
misinterpretation.
for example, for the gross margin, it could be expressed
in terms of:
- an amount in currency
- a percentage of the sales (without VAT), which is the
most commonly used approach
- but also sometimes as a percentage of the costs
(quite unusual for gross margin but stil …)
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45. Margin : relative notion
Cost of goods / services sold:
100 €
Sales:
150 €
- Margin expressed in €:
50 €
- Margin expressed as % of costs: 50%
- Margin expressed as % of sales: 30%
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46. • Sales
• Costs of goods/services sold
• (Other) Operating Costs
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47. General Expenses or « Fixed » costs
•
•
•
General Expenses
Or « fixed » costs
Or selling, general & administrative exp. (SGA)
•
•
•
•
Rent & Maintenance expenses
Utilities, Telephone, Internet & Licences, etc
Insurance & Bank fees (not the financial interests !)
Third parties / subcontracters, notably : Accountants,
Lawyer fees, External sales, etc
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48. General Expenses or « Fixed » costs
• Marketing & Communication expenses
NB: not to be underestimated !
• Travel & representation expenses
• HR costs other than salary and related costs
• Taxes (not the taxes on profit)
• … Unexpected expenses !
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49. General Expenses or « Fixed » costs
• R&D (if not integrated in the investments)
• Use of tangible assets (if not integrated in investments)
• Expenses versus Investments
• Profit & Loss account versus Treasury
• Consider what could/should be considered as pure
costs, to be opposed to costs than can or have to be
« activated » (on the balance sheet) & amortized
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50. General Expenses : HR costs
• Employees versus Workers
• Director (self-employed) versus staff under contract
NB: social costs linked to the shareholder of a
company working for it under a self-employed status
is not to be included in the FP of the company,
unless specifically foreseen
The differences in the fiscal status and in the
costs berd by the company for both
categories are quite significant
(eg multiplication effect x 1.34 x 13.92 !)
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51. Costs with no impact on treasury
Amortization, Depreciation & Provisions :
(= costs not implying a direct cash out)
Amortization is automatically calculated in the
template based on the investments (and the
amortization tenor)
Depreciation & Provisions are not included at this
stage (not relevant for a starter)
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52. Pictures © by Sheila Batiz
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53. IMPULSE
Too many things to list them all here! We inform you, we guide you and we
accompany you in a whole range of areas such as creating an
enterprise, financing, innovation, town planning, environmental
permits, partnerships … by means of newsletters, websites, seminars or
tailored coaching.
Briefly, we create a complete ecosystem in which you can grow as an
entrepreneur!
More info on our websites : www.impulse.irisnet.be - www.entreprendreabruxelles.be
www.ecosubsibru.be – www.monstarterkit.be – www.brutrade.be
info@1819.be - info@impulse.irisnet.be
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54. Martin van Wunnik
0475 / 96.95.91
Martin@FinanceCoach24.com
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