Startnowhow - Financial Planning for Startups

FINANCIAL PLANNING FOR STARTUPS Ebru Gürses / Dr. Joachim Behrendt

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StartNowHow

• Open seminar series for active and prospective entrepreneurs

• 10 sessions on monthly basis until summer 2016

• Covers relevant theoretical and practical aspects of entrepreneurship

• Based on lecture „entrepreneurship“ @Bogazici University

• Based on experiences of entrepreneurs, investors, mentors and consultants

• Each session with guest speaker (entrepreneurs, investors, mentors, etc.)

• Language: English / Turkish

• Thursdays 17.15h – 19.30h

• Next session: Thu 10. March 2016

• Topic: Digital Marketing Planning and Control

• Certificate provided for participants joining at least 70% of the sessions

• Early registration for each session required (eventbrite), limited capacity!

• Priority for regular participants

Startnowhow – Seminar 5 09.02.2016 2

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StartNowHow - Seminar Topics (preliminary)

1. Thu 1.10.15: The entrepreneurial ecosystem in Turkey

2. Thu 15.10.15. Entrepreneurship as a profession

3. Thu 12.11.15: Opportunity recognition and evaluation

4. Thu 10.12.15: Planning, developing and testing a business model

5. Thu 7.1.16: Market and competitor research

6. Thu 11.2.16: Financial planning for startups

7. Thu 10.3.16: Digital Marketing planning and control

8. Thu 14.4.16: Funding the startup – stage financing for ventures

9. Thu 12.5.16: The investment process – pitching, negotiations and termsheet

10. Thu 9.6.16: Success and failure as an entrepreneur


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Step 1: Revenues and Cost of Goods Sold Planning

09.02.2016 4 Startnowhow – Seminar 5

• Revenue Estimation

• Identify all sources of revenues

• Estimate future revenues after establishment per day (or month, depending on industry)

• Understand revenue drivers

• Number of customers

• Number of products / average ticket per customer

• Average Revenue per customer (net, after VAT)

• Cost of Goods Sold Estimation (Direct Cost)

• Calculation of direct cost of goods sold (Examples: buying price, direct production cost)

• Calculation of gross margin (revenues minus direct cost) per unit and product / service

• Aggregation for income statement calculation

• Calculation of monthly revenues / COGS / gross margin based on assumptions about seasonality / sales growth over time / time until business is established

• Calculation of first three years on monthly (or quarterly) basis, years 4 + 5 on yearly basis

• Result: Revenues / COGS / Gross margin years 1- 5

• Consideration of risk for gross margin part of income statement

• Scenario analysis (e.g. Best / expected / worst case)

• Sensitivity analysis (for full, integrated set of financial statements)

• Simulation (possible with probabilities / Monte-Carlo-Simulation as well)

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Revenues


Source: Bygrave, W.D. / Zacharakis, A., The Portable MBA in Entrepreneurship, p.143

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Cost of Goods Sold



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Step 2: Completion of Pro-Forma Income Statements


• Other Operating Expenses (indirect production cost, marketing + sales, gen.admin.cost)

• Calculation of personnel cost

• Personnel planning for full five years (position x number of employees / position x average salary incl. Employer part of social security contributions, other personnel-dependent cost)

• Calculation of all other time-dependent operating expenses

• Calculation of start-up cost during setup period

• Calculation of depreciation / amortization based on investment plan / depreciation plan

• Calculation of cost on monthly basis for years 1-3, yearly basis years 4-5

• Other Operating Income

• Calculation of other operating income positions for 5-year period

• Gross margin – operating expenses + other operating income = EBIT

• EBITDA = EBIT + depreciation / amortization

• Calculation of financial result

• Consideration of interest expenses for long-term loans or other types of debt

• If applicable, calculation of other regular financial income / financial expenses

• EBIT +/- financial result = EBT (earnings before taxes)

• Calculation of taxes on income

• Normally in % of EBT, if applicable consideration of losses carried forward

• Net Profit / Loss = EBT ./. Taxes on income

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Personnel Cost



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Operating Expenses



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Income Statement



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Step 3: Comparison


• Recommended step, not always done: Comparision with „industry standards“

• Comparison of COGS %,

• Comparison of gross margins %

• Comparison of operating expenses %

• Comparison of operting results %

• Sources

• Published financial statements from public companies

• Associations

• Published statistical information

• Result: Confirmation / Modification of estimated income statements

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Comparison



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Seasonality and Sales Growth



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Step 4: Determination of Operative Cash Flow


• Indirect calculation of operative cash flow: Starting point net profit / loss of period

• + adding back: depreciation / amortization of that period

• +/- changes in working capital

• - increases in accounts receivables

• - increases in inventories

• + increases in accounts payables

• Alternative: direct calculation of operative cash flow

• Consideration of cash-effective revenues in month of cash effectiveness

• Example: 70% cash, 20% credit card = 1 month later, 10% per invoice with 5% payment within one month, 5% payment within two months after purchase

• Consideration of cash-effective expenses in month of cash effectiveness

• Example: standard payment term for suppliers of 30 days = consideration of cash outflow one month after purchase

• No consideration of non-cash-effective expenses, e.g. depreciation

• = Operative cash flow

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Operative Cash Flow Months 1-6



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Step 5: Determination of Complete Cash Flow Statements


• Calculation of investment plan

• Calculation of all investments in fixed assets for full five-year period (material, immatierial, financial investments)

• If applicable, consideration of desinvestments

• All investments / desinvestments with full cash amounts

• Calculation of financing plan

• Consideration of long-term loans for financing the venture

• Consideration of interest expenses in income statement

• Consideration of principal repayments

• Consideration of equity measures (increases / decreases)

• Consideration of dividend payouts

• Cash Flow Statement Structure

• Cash at beginning of period

• +/- Operative cash flow

• +/- Cash flow from investment activities

• +/- Cash flow from financing activities

• = Cash at end of period

• Cumulative cash flow statement (for full five years) is used for iterative funds required calculation / funds planning

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Total Cash Flow / Funds Needed



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Step 6: Completion of Pro-Forma Financial Statements


• Balance sheet at beginning of venture

• Normally only initial equity + cash

• Balance sheet at end of each period

• Consideration of income statement for period

• Consideration of changes in working capital (accounts receivables, inventories, accounts payables) in balance sheet at end of period

• Consideration of investments and depreciation in balance sheet at end of period

• Consideration of loan repayments / additional loans in balance sheet at end of period

• Consideration of equity measures / dividend payouts in balance sheet at end of period

• Result: Full set of integrated pro-forma financial statements

• Balance sheets for t = 0 to t = 6

• Income statements for periods t0-1 to t4-5

• Cash flow statements for periods t0-1 to t4-5

• Investment plans for periods t0-1 to t4-5

• Financing plans for periods t0-1 to t4-5

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K StartNowHow - Outlook

• Today‘s materials will be made available to participants for downloading

• Next Seminar: „Digital Marketing planning and control ”

• Guest Speaker: Esra Günel, BIC Angels / Havas

• Thursday, 10.3.2016, 17.15 – 19.30h

• Don‘t forget to register early (eventbrite) - capacity 50 people!

• Priority for participants / registrants from today‘s session

• General rule: Allocation of seats according to participation

• Regular participation = certificate (70% participation)


BIC ANGEL INVESTMENTS Dr. Joachim Behrendt

Phone: +90 212 328 1939 Fax: +90 212 328 1933

www.bicangels.com http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

Email: [email protected]

http://twitter.com/joachimbehrendt

http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a



Startnowhow - Financial Planning for Startups

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Transcript of Startnowhow - Financial Planning for Startups