=if Financials NOEW Presentation 3.2016 (revised) copy
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Transcript of =if Financials NOEW Presentation 3.2016 (revised) copy
NUMB3R5 1N TH3 BU51N355 M0D3L
“As far as I can remember, not a single revenue model was anywhere close to accurate in the first 24 months, other than the ones that said there would be $0 revenue.”
- Brad Feld
What makes a good financial projection?
DEFENSIBLEREALISTIC
CONFIDENCE
Serves your intended purpose.
Why?
Internal • Business planning• Budgeting• Setting milestones• Short-term goals• Long-term goals
• Feasibility Analysis• Capital Ask• Valuations
External• Applications• Accessing Capital• Bank Loans• Investments• Negotiations• Offerings• Valuations
BUILD FROM BOTTOM UP
DEFEND FROM TOP DOWN
Assumptions
TimeVolumeValue
Assumptions
Assumptions
Assumptions
Where do you find assumptions?
• Historical data (best)• Experience – personal, advisors, mentors, peers• Industry and market reports– Aswath Damodaran – NYU Stern
• Competitors– SEC data – EDGAR, 10-K &10-Q reports
• Google, Yahoo• census.gov• Angel List, glassdoor.com
Process
Problem
Industry Averages
Solution
Growth
Analysis
Expenses
Hiring
Pricing
Capital Inputs
Assets
Market & Industry
Cost of Goods Sold/Sales
INTERCONNECTEDNESS
INITIAL PLANNING
Ideation & Growth Potential
IDEATION
Product or
Service
Growth Potential
Serviceable Available Market
Total Available Market
ServiceableObtainable
Market
Growth Potential
×AMBITION
THE MODELIn
puts
&
Ass
umpt
ions
THE MODEL
= Growth Line
Target & Trajectory
Numerical Patterns
Growth Target and Trajectory
Trajectories
How do you measure GROWTH?
15,0005,000
30,000
80,000
50,000
How do you measure GROWTH?
How do you measure GROWTH?
1,657
769
3,213
8,100
4,973
64
How do you measure GROWTH?
1,657
769
3,213
8,100
4,973
64 15,0005,000
30,000
80,000
50,000
Simple versus Compounding
96203327521
1,000
96
626299
1,1472,147
19,555
581
10,695
2,4195,631
Growth Behaviors
Churn
S-Curves
GROWTH BEHAVIORS
THE MODEL
THE MODEL
THE MODEL
General & Administrative
Sales & Marketing
Research & Development
Operations
THE MODEL
= TEAMMarket
Product
THE MODEL
%%
THE MODEL
THE MODEL
THE MODEL
Direct costs associated with making and selling the products OR the direct costs associated with providing the service(s)
Day-to-day costs of operating, independent of the level of sales.
Inventory
Total Expenses
THE MODEL
THE MODEL
Intangible – Amortization
Tangible – Depreciation
Asset Straight Line Depreciation
THE MODEL
THE MODEL
Taxes
TAXES and FEESEMPLOYMENT & BENEFITS• Employer Health Insurance Mandate Tax• Employer Medicare Taxes• Employer Social Security Taxes• Unemployment Tax (SUTA, FUTA)• Individual Health Insurance Mandate Tax• Medicare Tax• Self-Employment Tax• Social Security Tax• Worker’s Compensation Tax
BUILDING & CONSTRUCTION• Building Permit Tax• Inspection Fees• Property Tax• Real Estate Tax• Zoning Permit Fees
OPERATIONS & REVENUE• Corporate Taxes (Local , State, & Federal)• Income Taxes (Local, State, & Federal)• Franchise Business Tax• Import Taxes• Inventory Taxes• Sales Tax• Use Tax
THE MODEL
Cash BasisOnly when money is
received or paid
Accrual BasisA/PA/R
InventoryDeferred Revenue
THE MODEL
Dilutive Capital• Equity Investments• Seed Capital• Angel Investments• Venture Capital
• Publically Offerings
Non-Dilutive Capital• Loans• Convertible Notes• Sponsorships• Capital Leases• Grants• SBIR, STTR• NIH• Foundations
• Tax Credits• Competitions• Crowd funding
Capital Inputs
Capital & Business Stage
Concept Start-Up Expansion Mature
Seed
AngelVen
ture
Publicβ = Risk
Outputs & Analysis
Outputs & Analysis
Outputs & Analysis
Statements
Statements
Annual
Quarterly
Monthly
___________
Revenue
- COGS
Gross Profit
EBITDA
Net Income
- Expenses
- ITDA
___________
___________
Income Statement
Assets
Liabilities
Owners’ Equity
Balance Sheet
Assets = Liabilities + Owners’ Equity
Balance Sheet
Cash Flow Statement
Cash Flow Statement
Break Even Point
Capital NeedsCash
Flow Pre-
Fundin
g
Cash Flow
Post-Fun
ding
Cash Flow Positive
Valley of Death
Cash Flow Statement
Cash Flow
Pre-Fun
ding
Cash Flow
Post-Fun
ding
Outputs & Analysis
• Key Performance Indicators• Valuations• Sensitivities
• Growth Rates & CAGR– Revenue – EBITDA– Net Income
• Expenses as a % of Revenue– G&A, S&M, R&D– Revenue per employee
• Profitability Ratios– Gross Profit, margins– EBITDA– EBIT – Net Profit Margins
• Return on Investment Ratios– Return on Assets– Return on Invested Capital– Return on Stakeholders Equity– Asset Turnover Ratio– Inventory Turnover Ratio– Net Working Capital
• Liquidity Ratios– Current Ratio– Quick Ratio
• Leverage Ratios– Debt to Equity Ratio– Interest Coverage Ratio
Key Performance Indicators
Company Stage Risk Level Discount Rate
Startup Very High Risk 50% - 70%
Launched High Risk 40% - 60%
Revenue Generating Moderate Risk 30% - 50%
Growing Low Risk 20% - 40%Established Very Low Risk 10% - 30%
• Discounted Cash Flow Valuation• Multiples Methods• Comparable Valuation – (Competitor Analysis)
Valuations
Capital & Business Stage
Concept Start-Up Expansion Mature
Seed
AngelVen
ture
Publicβ = Risk
Analysis - Valuations
EV/Sales x 2.59
Analysis - Valuations
EV/EBITDA x 10.91
Analysis - Valuations
Forward PE x 28.34
Analysis - Valuations
Summaries
Graphics
Write-ups
Outputs & Analysis
Dashboard
Alternative Growth Graphics
1
2 3
58 1
Fibonacci Sequence
1
2
3
4
567
8
9
10
11 12
Dec
embe
r
Janu
ary
February
MarchSeptember
August July June
May
AprilOctober No
vem
ber
?
S&P 500 Index
Dow Jones Industrial - DJI
Amazon - AMZ
Apple - AAPL
Google (Alphabet) - GOOG
??