Download - Swifton CFOs LLC - Boston BizSpark presentation - Financial Projections for Investor Presentations
ABC Company, Inc.
Estimated Statement of Operations
For The Years Ended December 31, 2010. 2011, 2012, and 2013
2010 2011 2012 2013 2010 2011 2012 2013
Revenue:
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%
Direct Costs:
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%
Other Cost of Services 88$ 567$ 2,556$ 6,849$ 15.1% 12.5% 10.0% 7.5%
Gross Margin ($) 120$ 1,100$ 9,203$ 43,228$ 20.5% 24.2% 36.0% 47.3%
Gross Margin (%) 20.5% 24.2% 36.0% 47.3%
Operating Expenses:
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%
Other (Revenue) & Expenses:
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%
Net Income (Loss) (755)$ (3,374)$ (6,952)$ (2,485)$ -129.3% -74.3% -27.2% -2.7%
Statement Notes:
Revenue
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 Revenue 584$ 4,538$ 25,557$ 91,314$
Headcount
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 Expenditures 126.00$ 424.00$ 1,584.00$ 4,474.00$
Dollars (000's omitted) Percent (%) of Revenue
COPYRIGHT © 2010 COPYRIGHT © 2011
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
ABC Company, Inc.
Estimated Statement of Operations
For The Years Ended December 31, 2010. 2011, 2012, and 2013
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 Expenses:
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 Expenditures 126$ 424$ 1,584$ 4,474$
Dollars (000's omitted)
COPYRIGHT © 2011
Rule #2:
Use $ (dollar signs) on the
first and last row only.
Unless, of course, you are
mixing rows of $ and %, etc.
COPYRIGHT © 2011
FORMAT CREDIBILITY
The presentation format does
not interfere with
(or create noise for)
the reader
COPYRIGHT © 2011
Rule #3:
Numbers with thousands or
millions must have commas
This: 54,556
Not this: 54556
COPYRIGHT © 2011
ABC Company, Inc.
Projected Statement of Operations
For The Years Ended December 31, 2010 through 2013
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 ($) 120 1,100 9,203 43,228
Gross Margin (%) 20.5% 24.2% 36.0% 47.3%
Operating Expenses:
Sales & Marketing 555 2,949 11,500 31,960
Research & Development 175 998 2,811 8,218
General & Administration 44 295 1,533 4,566
Total Operating Expenses: 774 4,242 15,844 44,744
Other Expense/(Income) 101 232 311 969
Net Income (Loss) (755)$ (3,374)$ (6,952)$ (2,485)$
S t at ement Not es:
Headcount
Exis t ing 13 18 61 298
New Hires 5 43 237 830
Tot al Headcount 18 61 298 1,128
Capital Expenditures 126$ 424$ 1,584$ 4,474$
Dollars
COPYRIGHT © 2011
Rule #4:
Don’t mix fonts
Or font size……
And do not use a silly font
COPYRIGHT © 2011
Rule #5:
Text is left justified
Numbers are right justified
Violators confuse the reader
COPYRIGHT © 2011
Rule #6:
Do not overdo color
and
Do not highlight in
COPYRIGHT © 2011
Use Spot color!
Rule #7:
Round your numbers to the
nearest thousand for
presentations
COPYRIGHT © 2011
This: $456,000
Not this: $456,000,000
Rule #8:
Spelle Check
COPYRIGHT © 2011
And do not tell me you relied
on Microsoft…….
Financial Forecast in
your Slide deck is a
Marketing Effort!
COPYRIGHT © 2011
• 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
COPYRIGHT © 2011
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
Ty DancoMember, Mass Medical AngelsMember, North Country Angels
"I'll never believe your revenue numbers
anyway, but I sure want to scrutinize your
assumptions and expenses!"
COPYRIGHT © 2011
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
Set your goals from top down
but…..
Prepare the model from the bottom up
then….start over
with your top down goals
COPYRIGHT © 2011
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
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
COPYRIGHT © 2011
Developing The Financial Forecast
2. Creating the sales forecast (part 2)
Small
Client
Medium
Client
Large
Client
Average Hours Per
Week
4 Hours 8 Hours 16 Hours
Average Contract $
Per Week
$500 $1,250 $2,500
Predict by client (customer) types
• By market
• By size
Then ID certain characteristics
COPYRIGHT © 2011
Forecast Trap:
Why they call them “Gross Sales”
• Returns
• Discounts
• Rebates
• Chargebacks
• Markdowns
COPYRIGHT © 2011
Forecast Trap:
Do not over-estimate
first year revenue(what, we can’t sell millions in first month?)
COPYRIGHT © 2011
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
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)
COPYRIGHT © 2011
Tip:
Integration
Must use an integrated model
Headcount added
Payroll and benefits calculation
Summarized employee costs
Income Statement
Cash Flow
COPYRIGHT © 2011
Tip:
Use Rounding
Use the MS Excel “rounding
function” --- otherwise your
numbers may not add up
COPYRIGHT © 2011
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
Tip:Projection Numbers are not separate from
the Company Plans
Company Plans
Milestone Projects Responsible Revenue/
Cost
Dates
COPYRIGHT © 2011
Ben LittauerMember, 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
ABC Co.($ 000's omitted)
2010 2011 2012 2013 2014
Pro Forma Financial StatementRevenue -$ 1,875$ 44,953$ 108,238$ 180,161$
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
Net Income (2,639) (5,411) 16,893 55,530 100,603
0% -289% 38% 51% 56%
Pro Forma Cash FlowCash 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$
Income
Statement
Cash Flow
Statement
COPYRIGHT © 2011
ABC Company – Financials by Year
($ 000’s omitted)
COPYRIGHT © 2011
($25,000)
$25,000
$75,000
$125,000
$175,000
$225,000
2010 2011 2012 2013 2014
Revenue
Income
Cash
Milestone #1
Prototype
Milestone #2
Pilots
Milestone #3
Commercialization
Seeking $250k Investment
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
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
Developing The Financial Forecast
Contact Information:
Email:
Website:
Twitter:
Phone:
Cell:
COPYRIGHT © 2010
COPYRIGHT © 2010