Disaster Preparation and Recovery: A Plan for Business Continuity
Business Plan Preparation
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Transcript of Business Plan Preparation
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1Venture Capital Method of Valuation
Business Plan PreparationBusiness Plan Preparation
Frank MoyesFrank MoyesLeeds School of BusinessLeeds School of BusinessUniversity of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado
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2Venture Capital Method of Valuation
Required Return on Required Return on InvestmentInvestment
SeedSeed 80%+ 80%+ Start-UpStart-Up
60%60% Early Stage 50%Early Stage 50% Second Stage 40%Second Stage 40% Third Stage 30%Third Stage 30% BridgeBridge
25%25%
IRR 5 yr.Increase
19x 19x 10x10x 8x8x 5x5x 4x4x 3x3x
Bygraves & Zacharakis
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3Venture Capital Method of Valuation
Venture Capital Method Venture Capital Method Key AssumptionsKey Assumptions
Net ProfitNet Profit Valuation MultipleValuation Multiple
Price/EarningsPrice/Earnings Price/RevenuePrice/Revenue Price/EBITDAPrice/EBITDA Price/Seller’s Discretionary EarningsPrice/Seller’s Discretionary Earnings
Investor IRRInvestor IRR
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4Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million
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5Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value ? ?
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6Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 million
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7Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany ValueCompany Value $30 million$30 millionRequired IRRRequired IRR ? ?Required IncreaseRequired IncreaseRequired $ valueRequired $ value
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8Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase ? ?Required $ valueRequired $ value
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9Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value ? ?
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10Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required ? ?
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11Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation ? ?Post-money valuationPost-money valuation ? ?
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12Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
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13Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x ? ?Company valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
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14Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million $3 million
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15Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million Post-money valuationPost-money valuation $3 million$3 million
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16Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million$10 million% of company required% of company required 33% 33% 25% 25%Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
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17Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million$10 million% of company required% of company required 33% 33% 25% 25%Pre-money valuationPre-money valuation $2 million$2 million $3 million $3 millionPost-money valuationPost-money valuation $3 million$3 million $4 million $4 million
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18Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x ? ?Company valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10x Required $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
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19Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
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20Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
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21Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million $10 million% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
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22Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million $10 million% of company required% of company required 33% 33% 100% 100%Pre-money valuationPre-money valuation $2 million$2 million ?! ?!Post-money valuationPost-money valuation $3 million$3 million ?! ?!
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23Venture Capital Method of Valuation
Venture Capital Method Venture Capital Method Key AssumptionsKey Assumptions
Net ProfitNet Profit P/E MultipleP/E Multiple Investor IRRInvestor IRR