Financial projections presentation (Venture Fast Track)
•
3 recomendaciones•1,628 vistas
The document provides an overview of an upcoming presentation on financial projections for startups seeking funding. It introduces the two speakers and their backgrounds in finance and business valuations. The presentation will focus on how to build financial projections and why they are important for investors. It will cover objectives like demonstrating understanding of the business model and forcing due diligence. The document addresses common questions and concerns about projections and provides tips on assumptions, scenario planning, and building projections properly in a spreadsheet.
Recomendados
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Similar a Financial projections presentation (Venture Fast Track)
Similar a Financial projections presentation (Venture Fast Track) (20)
Más de The Capital Network
Más de The Capital Network (20)
Último
Último (20)
Financial projections presentation (Venture Fast Track)
- 1. Financial Projections for Presentations October 24, 2013
- 2. Today’s Speakers Heather Onsto, • Venture Partner, former Director of Small Business with LaunchCapital • Interim CEO of the Nanny Caddy, a LaunchCapital porPolio company • Over 20 years experience in small business finance • BA, Wofford College; MBA, Dartmouth Alicia Amaral • Managing Director, Scalar Analy<cs (Business Valua<ons) • CPA, CVA • TuDs Univ & Clark Univ Professor (Accoun<ng and Business Valua<on) • Prior CFO • BA, Furman, MSA, Bentley
- 3. Financial Projec<ons: WIFM? Today’s presenta<on will focus on the how and why of building and pitching financial projec<ons • How: Crea<ng financial projec<ons using a spreadsheet and some common accoun<ng knowledge shows you where to focus your resources • Why: Crea<ng financial projec<ons shows investors that you have carefully considered all financial implica<ons
- 4. Financial Projec<ons: 3 Objec<ves 1. Force discipline and objec<vity through crea<ng a methodical approach 2. Demonstrate thorough understanding of your company’s business model 3. Provide answers to “what if?”
- 5. Building Projec<ons: Yeah, but… I’ve heard that I don’t really have to build a business plan with financial projec8ons because no one actually reads it… • Business plans with financial projec<ons are necessary… FOR YOU – Bo,oms-‐up vs. Top-‐down – HINT: You're trying to talk yourself out of this! • Financial projec<ons are a key por<on of the due diligence most investors perform Investors are more interested in the assump1ons made when building financial projec1ons, not the exact bo;om line
- 6. Building Projec<ons: Pulp fic<on? Projec8ons are just imaginary anyway, so what does it maCer what I put in? A common mistake is to have illogical numbers in the projec<ons – All numbers should be <ed to your growth assump<ons • 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 <e with a rough cash flow statement • Either a separate tab or at the bo,om of the P&L Projec1ons that have not been planned properly make investors ques1on your understanding of your business model
- 7. Building Projec<ons: 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 trac<on – Gross margins – Incremental headcount Fundraise amount range should encompass most likely scenarios to avoid expensive “Bridge” or “A-‐1” rounds
- 8. More on Scenario Planning… 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 op1ons!
- 9. Building Projec<ons: Common terms • • • • • • • • • • P&L Retained earnings (best source of funding!) EBITDA Gross profit margin (GP or GPM) Working capital CapEx Burn rate Accrual vs. cash basis Cash flow breakeven (CFBE) Capital structure
- 10. Building Projec<ons: How it works • Have an assump8ons page and reference cells (don’t hard code anything) – A separate assump<ons page allows flexibility – change them for different growth scenarios – Assump<ons are the backbone of your projec<ons, so you should know them COLD Excel is your friend, but be careful with cell references – it’s easy to make a mistake!
- 11. Building Projec<ons: Proper start…? Es<mate 1% of $100 million market share
- 12. Building Projec<ons: Proper start…? Es<mate 1% of $100 million market share JUST KIDDING!
- 13. Projec<ons: Start with Revenue Take a “Bo,om Up” approach • 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 acquisi<on cost of $Y, we expect a 20% growth rate as a result of marke<ng efforts Econ 101: revenue = price * volume. Knowing which element is driving your company’s revenue is a key metric.
- 14. Projec<ons: Add in expenses This also has a “Bo,om-‐up” approach • Include details of all categories – Ex. Inventory = raw materials, WIP, and finished goods – Ex. Headcount is a step-‐func<on (hard to find .25 person) – Ex. Income taxes, no; Sales tax, use tax, payroll tax… yes! • COGS (gross profit margin) – Inventory, shipping, packaging, direct labor • SG&A – Business Development/Sales – Marke<ng – Overhead
- 15. Projec<ons: Understand EBITDA piPalls • EBITDA excludes expenses that are not core to a company’s opera<ons; allows for comparisons without regard to capital structure • Be careful about using EBITDA as proxy for cash flow even though most investors expect it • EBITDA excludes deprecia<on because it’s noncash but CapEx requires cash “References to EBITDA make us shudder – does management think the tooth fairy pays for capital expenditures?” – Warren Buffet
- 16. Projec<ons: final checks • Map out cash inflows and ouPlows to determine funding needs – do this by month! • Revenue collec<on – <ming impacts cash projec<ons. 30 or 60 days? 2/10, n30? • Inventory turn – becomes COGS when you sell it but need cash up front • Deprecia<on = noncash expense (include?) • Don’t forget to include CapEx in cash flow (tooth fairy doesn’t visit adults)
- 17. Projec<ons: MORE final checks "The GOAL” is to make money – Social jus<ce, triple net bo,om line, etc, come AFTER profitability • "You can't give away what you don't have" – You'll need space one day that isn't free – It is illegal to hire someone and not pay them – Equity + cash = total compensa<on • As equity values increase, cash compensa<on should increase as the less expensive long-‐run pay op<on (this means you are WINNING!) – Research financial statements to get an idea of expenses you may have missed – Research how much things cost – don’t guess! • Call your iden<fied suppliers for costs, terms of materials and development costs
- 18. Pitching projec<ons: What’s the “ask”? Fin projec<ons need to <e to the amount of the raise – Fundraising takes <me, so 12-‐18 months of cash per raise – Iden<fy milestones to be hit and cost of each one – The sum of those milestone costs is the raise amount – The "cushion" in the raise is not X%, it's the cost difference in the most likely scenarios The secret to life is “t” – “t” is the variable for “<me” in mathema<cal equa<ons… and <me in projec<ons is everything
- 19. Pitching Projec<ons: Rookie moves – CTRL+C+P en<re excel model into a slide – Using anything less than 18-‐point font – Li,ering clipart from 1995… or 2013 – Sta<ng projec<ons to the $.01 – Failing to summarize projec<ons – Using ANY of the following phrases: • “conserva<vely es<mated…” • “at only X% of the market…” • “with no compe<<on…” – Forgeyng to explain what the amount you raise achieves – Expec<ng a short-‐term exit at a high mul<ple
- 20. BAD EXAMPLE Revenue Custom runners Standard runners Total Revenue 120000.00 52500.00 172500.00 360000.00 157500.00 517500.00 1080000.00 472500.00 1552500.00 2160000.00 945000.00 3105000.00 4320000.00 1890000.00 6210000.00 30000.00 23625.00 53625.00 90000.00 70875.00 160875.00 270000.00 212625.00 482625.00 540000.00 425250.00 965250.00 1080000.00 850500.00 1930500.00 118875.00 356625.00 1069875.00 2139750.00 4279500.00 10500.00 50000.00 40000.00 31500.00 50000.00 50000.00 94500.00 100000.00 62500.00 189000.00 150000.00 78125.00 378000.00 200000.00 97656.25 30000.00 9600.00 4800.00 18000.00 120000.00 30000.00 21600.00 334500.00 30000.00 9600.00 4800.00 18000.00 120000.00 30000.00 21600.00 365500.00 30000.00 9600.00 4800.00 18000.00 120000.00 30000.00 21600.00 491000.00 30000.00 9600.00 4800.00 18000.00 120000.00 30000.00 21600.00 651125.00 30000.00 9600.00 4800.00 18000.00 120000.00 30000.00 21600.00 909656.25 -215625.00 -8875.00 578875.00 1488625.00 3369843.75 -4500.00 -24761.90 -3600.00 -31904.76 -2700.00 -31904.76 -1800.00 -28571.43 -900.00 -28571.43 -244886.90 -44379.76 544270.24 1458253.57 3340372.32 0.00 0.00 217708.10 583301.43 1336148.93 -244886.90 -44379.76 326562.14 874952.14 2004223.39 COGS Custom runners Standard runners Total COGS GROSS PROFIT Expenses Selling Expenses Commission Marketing/Advertising Research and Development General and Administrative Expenses Office Rent Insurance Office Utilities Supplies Salaries Benefits Miscellaneous Total Expenses EBITDA Interest Expense Depreciation Expense Pretax Income Income Tax Expense NET INCOME
- 21. Pitching Projec<ons: Expert moves • Know your audience – The earlier you are, the more interested in your assump<ons the investors are – so know you’ll be discussing them in detail. Painstaking detail. • Be rich, not king – Does a new hire cut costs or increase revenue? This will drive the <ming of a new hire. • Don’t forget that headcount is a step-‐func<on • What is B/E expecta<on for a new hire? – Good metric for HC is sales/employee – these numbers are benchmarked and available with some research.
- 22. Good Example -‐ Financial Projec<ons INCOME STATEMENT 2013 2014 2015 2016 2017 Sales Net Sales $110 $220 $330 $440 $550 COGS $75 $120 $175 $220 $275 Gross Margin $35 $100 $155 $220 $275 32% 45% 47% 50% 50% Sales $80 $70 $70 $80 $100 Marketing $50 $75 $50 $75 $100 R&D Product Development $25 $35 $25 $15 $15 General & Administrative $20 $30 $40 $45 $50 $175 $210 $185 $215 $265 ($140) ($110) ($30) $5 $10 $300 $0 $0 $0 $0 $160 $50 $20 $25 $35 Gross margin % Expenses Total Expenses Net Income (Loss) Outside Capital Annual Cash Balance