1. AB C Company, Inc.
Es timate d State me nt of Ope rations
For The Years Ended December 31, 2010. 2011, 2012, and 2013
Dollars (000's omitte d) Pe rce nt (%) of Re ve nue
2010 2011 2012 2013 2010 2011 2012 2013
Re ve nue :
Installation Revenue $ 450 $ 3,825 $ 21,038 $ 73,633 77.1% 84.3% 82.3% 80.6%
Non-Installation Revenue
Service Fees $ 89 $ 623 $ 4,361 $ 17,444 15.2% 13.7% 17.1% 19.1%
Other Non-Installation Revenue $ 45 $ 90 $ 158 $ 237 7.7% 2.0% 0.6% 0.3%
Total Revenue: $ 584 $ 4,538 $ 25,557 $ 91,314 100.0% 100.0% 100.0% 100.0%
Dire ct Cos ts:
Installation Costs $ 338 $ 2,678 $ 12,623 $ 36,817 57.9% 59.0% 49.4% 40.3%
Non-Installation Costs $ 38 $ 193 $ 1,175 $ 4,420 6.5% 4.3% 4.6% 4.8%
Direct Costs: $ 376 $ 2,871 $ 13,798 $ 41,237 64.4% 63.3% 54.0% 45.2%
Othe r Cos t of Se rvice s $ 88 $ 567 $ 2,556 $ 6,849 15.1% 12.5% 10.0% 7.5%
Gros s M argin ($) $ 120 $ 1,100 $ 9,203 $ 43,228 20.5% 24.2% 36.0% 47.3%
Gross Margin (%) 20.5% 24.2% 36.0% 47.3%
Ope rating Expe nse s:
Sales $ 292 $ 1,588 $ 6,389 $ 18,263 50.0% 35.0% 25.0% 20.0%
Marketing $ 263 $ 1,361 $ 5,111 $ 13,697 45.0% 30.0% 20.0% 15.0%
Research & Development $ 175 $ 998 $ 2,811 $ 8,218 30.0% 22.0% 11.0% 9.0%
General & Administration $ 44 $ 295 $ 1,533 $ 4,566 7.5% 6.5% 6.0% 5.0%
Total Operating Expenses: $ 774 $ 4,242 $ 15,844 $ 44,744 132.5% 93.5% 62.0% 49.0%
EBITDA $ (654) $ (3,142) $ (6,641) $ (1,516) -112.0% -69.2% -26.0% -1.7%
Othe r (Re ve nue ) & Expe ns e s :
Interest $ 80 $ 156 $ 32 $ 80 13.7% 3.4% 0.1% 0.1%
Taxes $ 8 $ 9 $ 11 $ 15 1.4% 0.2% 0.0% 0.0%
Depreciation & Amortization $ 13 $ 67 $ 268 $ 874 2.2% 1.5% 1.0% 1.0%
Total Other (Revenue) & Expenses
$ 101 $ 232 $ 311 $ 969 17.3% 5.1% 1.2% 1.1%
Ne t Income (Loss ) $ (755) $ (3,374) $ (6,952) $ (2,485) -129.3% -74.3% -27.2% -2.7%
State me nt Note s :
Re ve nue
Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232 7.4% 51.1% 47.8% 50.6%
Market 2 $ 230 $ 1,201 $ 7,652 $ 26,450 39.4% 26.5% 29.9% 29.0%
Market 3 $ 256 $ 932 $ 3,250 $ 12,658 43.8% 20.5% 12.7% 13.9%
Market 4 $ 55 $ 85 $ 2,450 $ 5,974 9.4% 1.9% 9.6% 6.5%
Total Re ve nue $ 584 $ 4,538 $ 25,557 $ 91,314
He adcount
Existing $ 13.00 $ 18.00 $ 61.00 $ 298.00
New Hires $ 5.00 $ 43.00 $ 237.00 $ 830.00
Total Headcount $ 18.00 $ 61.00 $ 298.00 $ 1,128.00
Capital Expe nditure s $ 126.00 $ 424.00 $ 1,584.00 $ 4,474.00
COPYRIGHT © 2010
COPYRIGHT © 2011

2. Rule #1:
If you cannot read the
financial statement from two
feet away the font is
too small
(i.e. there are too many details)
COPYRIGHT © 2011

3. ABC Company, Inc.
Estimate d State ment of Operations
For The Years Ended December 31, 2010. 2011, 2012, and 2013
Dollars (000's omitte d)
2010 2011 2012 2013
Revenue:
Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232
Market 2 $ 230 $ 1,201 $ 7,652 $ 26,450
Market 3 $ 256 $ 932 $ 3,250 $ 12,658
Market 4 $ 55 $ 85 $ 2,450 $ 5,974
Total Reve nue $ 584 $ 4,538 $ 25,557 $ 91,314
Gross Margin ($) $ 120 $ 1,100 $ 9,203 $ 43,228
Gross Margin (%) 20.5% 24.2% 36.0% 47.3%
Ope rating Expense s:
Sales & Marketing $ 555 $ 2,949 $ 11,500 $ 31,960
Research & Development $ 175 $ 998 $ 2,811 $ 8,218
General & Administration $ 44 $ 295 $ 1,533 $ 4,566
Total Operating Expenses: $ 774 $ 4,242 $ 15,844 $ 44,744
Other Expense/(Income) $ 101 $ 232 $ 311 $ 969
Net Income (Loss) $ (755) $ (3,374) $ (6,952) $ (2,485)
Statement Notes:
Headcount
Existing $ 13 $ 18 $ 61 $ 298
New Hires $ 5 $ 43 $ 237 $ 830
Total Headcount $ 18 $ 61 $ 298 $ 1,128
Capital Expe nditure s $ 126 $ 424 $ 1,584 $ 4,474
COPYRIGHT © 2011

4. Rule #2:
Use $ (dollar signs) on the
first and last row only.
Unless, of course, you are
mixing rows of $ and %, etc.
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5. FORMAT CREDIBILITY
The presentation format does
not interfere with
(or create noise for)
the reader
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6. Rule #3:
Numbers with thousands or
millions must have commas
This: 54,556
Not this: 54556
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7. ABC Company, Inc.
Projecte d Statement of Operations
For The Years Ended December 31, 2010 through 2013
Dollars
2010 2011 2012 2013
Revenue:
Market 1 $ 43 $ 2,320 $ 12,205 $ 46,232
Market 2 230 1,201 7,652 26,450
Market 3 256 932 3,250 12,658
Market 4 55 85 2,450 5,974
Total Revenue 584 4,538 25,557 91,314
Gross Margin ($) 120 1,100 9,203 43,228
Gross Margin (%) 20.5% 24.2% 36.0% 47.3%
Operating Expense s:
Sales & Marketing 555 2,949 11,500 31,960
Research & Development 175 998 2,811 8,218
General & Administration 44 295 1,533 4,566
Total Operating Expenses: 774 4,242 15,844 44,744
Other Expense/(Income) 101 232 311 969
Net Income (Loss) $ (755) $ (3,374) $ (6,952) $ (2,485)
S t at em ent Not es:
Headcount
Exis t ing 13 18 61 298
New Hir es 5 43 237 830
Tot al Headc ount 18 61 298 1,128
Capital Expenditure s $ 126 $ 424 $ 1,584 $ 4,474
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8. Rule #4:
Don’t mix fonts
Or font size……
And do not use a silly font
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9. Rule #5:
Text is left justified
Numbers are right justified
Violators confuse the reader
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10. Rule #6:
Do not overdo color
and
Do not highlight in
Use Spot color!
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11. Rule #7:
Round your numbers to the
nearest thousand for
presentations
This: $456,000
Not this: $456,000,000
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12. Rule #8:
Spelle Check
And do not tell me you relied
on Microsoft…….
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13. Financial Forecast in
your Slide deck is a
Marketing Effort!
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14. • Provide cost-effective outsourced (part-time)
CFO support
• Clients range from pre-revenue startups to later
stage privately held companies
• Goal = provide strategic financial advice and
handle all accounting/ financial matters so the
entrepreneurs can focus on driving the business
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15. David Fogel, CPA
Serial entrepreneurial CFO
Principal of Swifton CFOs LLC
Experience with high tech companies ranging from biotech
to telecom services to healthcare IT to social media to…
Adjunct Instructor of WPI MBA Program
Judge & Mentor:
Sponsor:
Associations:
COPYRIGHT © 2011

16. Ty Danco
Member, Mass Medical Angels
Member, North Country Angels
"I'll never believe your revenue numbers
anyway, but I sure want to scrutinize your
assumptions and expenses!"
COPYRIGHT © 2011

17. Developing The Financial Forecast
1. What about the assumptions?
Document the source of each number you produce - Why?
- Knowledge of the assumptions proves that the
entrepreneur understands the business
“Does the story make sense?”
“Does the story add up?”
Sources of assumptions
- Estimated or best guess (really try not to SWAG)
- Desired goal to be obtained
- Primary market research – surveys, vendor quotes
- Second market research – purchased or gov’t information
COPYRIGHT © 2011

18. Set your goals from top down
but…..
Prepare the model from the bottom up
then….start over
with your top down goals
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19. Developing The Financial Forecast
1. What about the assumptions? (part 2)
Start-up costs (uses of $)
Financing (sources of $)
Capital expenditures (costs with >1 yr life)
Fixed expense (cost of being in business)
Variable expense (cost of doing business)
Projected sales (anticipated revenue earned)
Cash flow (anticipated $ received and spent)
COPYRIGHT © 2011

20. Developing The Financial Forecast
2. Creating the sales forecast
BEST - Predict by customer as detailed as
possible
….but include customer turnover
BETTER – Predict by market
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21. Developing The Financial Forecast
2. Creating the sales forecast (part 2)
Predict by client (customer) types
• By market
• By size
Then ID certain characteristics
Small Medium Large
Client Client Client
Average Hours Per 4 Hours 8 Hours 16 Hours
Week
Average Contract $ $500 $1,250 $2,500
Per Week
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22. Forecast Trap:
Why they call them “Gross Sales”
• Returns
• Discounts
• Rebates
• Chargebacks
• Markdowns
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23. Forecast Trap:
Do not over-estimate
first year revenue
(what, we can’t sell millions in first month?)
COPYRIGHT © 2011

24. Developing The Financial Forecast
3. Spreading the Numbers
• Yes, you need to do it monthly -- for the entire period
• No flat numbers – consider the meaning – use %
increases or $ per some indice
• Think: As headcount increases rent increases (just
not variably)
• Start with revenue, then cost of services
COPYRIGHT © 2011

25. Forecast Trap:
Multiple Models
But…why not?
Make changes to the base model but forget
to change the other models
One investor model, Multiple options
(with triggers)
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26. Tip:
Integration
Must use an integrated model
Headcount added
Payroll and benefits calculation
Summarized employee costs
Income Statement
Cash Flow
COPYRIGHT © 2011

27. Tip:
Use Rounding
Use the MS Excel “rounding
function” --- otherwise your
numbers may not add up
COPYRIGHT © 2011

28. Tip:
Project payroll & benefits
• Employee compensation is often the most costly
expense yet they are often neglected.
• Sales commissions – Direct connect with sales
• Bonuses – If you are lucky enough……
• Recruiting expenses – Peg to new employees
• Project monthly to handle start dates correctly
• Match additions of people with milestones
COPYRIGHT © 2011

29. Tip:
Projection Numbers are not separate from
the Company Plans
Company Plans
Milestone Projects Responsible Revenue/ Dates
Cost
COPYRIGHT © 2011

30. Ben Littauer
Member, Boston Harbor Angels
"I like to see a business model spreadsheet with
the assumptions clearly called out as variables.
Then I can twiddle the knobs and see how
sensitive profits are to the assumptions."
COPYRIGHT © 2011

31. ABC Co.
($ 000's omitted)
2010 2011 2012 2013 2014 Income
Pro Forma Financial Statement
Revenue $ - $ 1,875 $ 44,953 $ 108,238 $ 180,161
Statement
Cost of Service - 1,162 12,739 5,369 -
Gross Margin - 712 32,214 102,868 180,161
38% 72% 95% 100%
Operating Expenses
Employee Costs 1,303 2,972 3,587 4,198 4,379
Professional Fees 253 637 1,780 1,230 1,135
Marketing & Travel 61 525 2,340 293 658
Administrative Expenses 60 55 232 41 47
Development & Pilot Manufacturing 409 819 262 965 1,733
Facility & Other 195 801 1,206 1,612 2,023
Total Expenses 2,282 5,807 9,407 8,340 9,976
Depreciation & Amortization 42 98 301 590 791
EBIT (2,324) (5,193) 22,507 93,939 169,394
Cash Flow
Net Income (2,639) (5,411) 16,893 55,530 100,603
0% -289% 38% 51% 56% Statement
Pro Forma Cash Flow
Cash from Operations (2,597) (5,313) 17,193 56,120 101,393
Cash from Working Capital (31) (936) (2,879) (2,754) (3,437)
Cash from Investments (57) (297) (1,052) (607) (600)
Cash from Financing 7,000 - 42,000 - -
Net Cash Flow 4,315 (6,545) 55,262 52,759 97,357
Ending Cash $ 6,644 $ 99 $ 55,360 $ 108,119 $ 205,476
COPYRIGHT © 2011

32. ABC Company – Financials by Year
($ 000’s omitted)
$225,000 Seeking $250k Investment
Milestone #1
Prototype
$175,000
Milestone #2
Pilots
Milestone #3
$125,000 Commercialization
Revenue
Income
Cash
$75,000
$25,000
2010 2011 2012 2013 2014
($25,000)
COPYRIGHT © 2011

33. Universal Truths:
1. Project monthly, Present annually
2. Projections constantly change,
let them. Not an annual exercise.
Develop as a monthly exercise.
3. Financials must be consistent with rest
of presentation
4. Do not need to be hung up with GAAP,
but….don’t go rogue
COPYRIGHT © 2011

34. Even More Universal Truths:
5. Be consistent – Don’t portray
expenses in different categories
differently by year
6. Have “Checks”
7. P&L Income ≠ Cash Flow
(we know this right?)
COPYRIGHT © 2011

35. Developing The Financial Forecast

36. Contact Information:
Email:
Website:
Twitter:
Phone:
Cell:
COPYRIGHT © 2010

37. COPYRIGHT © 2010