business 16 stanford department of continuing education class # 2, 9/28/09 financial statements...
TRANSCRIPT
Business 16Stanford Department of Continuing Education
Class # 2, 9/28/09
Financial Statements
David [email protected]://www.alloyventures.com/class.html
Administrationo Questions from last week?
Overview
oWhat is in the financial statements
o Who uses the data
o Common mistakes
o Sources for examples
o Preparing financial statements
o Company valuation
o Real world extreme example
What is in the financial statements?
o Your 5-year business plan in numbers
o An Outcome
o Sales
o Subscribers
o Milestone (pharmaceutical)
What is in the financial statements?
o Support for the outcomeo Balance Sheeto Profit & Loss Statemento Cash Flow (use of funds)o Head Counto Milestones
Who uses the data?
o Management
o Operational Blue Print
o “What if” analysis
o Banks
o Credit Lines (Growth Capital, Equipment)
o Investors
o Determining Valuation for Investment
o Acquired Companies
Common Mistakes
o Math Errors
o column sum, carry forward, x-ref of amounts
o Unrealistic Assumptions
o Revenue of $10B by Year 5
o Lack of parallels with existing companies
o Excessive Backup
o 120 pages of supporting schedules
Sources for examples
o Similar companies o Annual reportso EDGAR Online
o (http://www.sec.gov/edgar/searchedgar/webusers.htm)
o Investment bankers
o Professional advisorso Attorneyo CPA
o Commercial bank
Preparing Financial Statements
o Web 2.0.com, Inc.o Three founderso Develop online search engineo Office space is $6 sq fto Can sell advertising for $5 (Per
Thousand Impression)o Expect to sell 3B impressions in 2013
Company Valuation
o Price to sell the company in 2013o Price to sell equity in 2009 and 2010
Real world extreme example
o YouTube, Inc.o Sold ~25% stake in 2005, 2006 for a total of
11.5M, that became worth ~400Mo Google acquired company in 2006 at a valuation
$1.5B
Finance Strategies
o Sell Debto Maintain ownershipo Who is liable (personal guarantee)o Small Business Administration (SBIC)
o Sell Equityo What do you get in exchange (other than capital)
Asset Protection
o Business Insuranceo Property, workers compensationo key man
o Real Estateo property lease options
o sub-leasing to others, expanding etc.
o Computer file back-upo offsiteo disaster recovery
THE END
Remember class is on next week!