company finances 101 for junior agency people

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Company finance 101Ged Carroll renaissancechambara.jp

In this presentationFinance lifecycleFinancial healthBurn rateCashflowProfitabilityEfficiencyGrowth versus value

Finance lifecycle

The idea

Finance lifecycle

The idea

bootstrapping

Finance lifecycle

The idea

bootstrappingangel fundingseed fundingincubation

Finance lifecycle

The idea

bootstrappingangel fundingseed fundingincubation

venture capital

Finance lifecycle

The idea

bootstrappingangel fundingseed fundingincubation

venture capital

exit:IPOacquisitionmergerliquidation / bankruptcy

Finance lifecycle

The idea

bootstrappingangel fundingseed fundingincubation

venture capital

exit:IPOacquisitionmergerliquidation / bankruptcy

Why does this matter?

7 out of 10 web journeys start with search52% of online PR work is done by non-PR agenciesTodays news is no longer tomorrows chip papersSearch plays a major role in pre-purchase researchAmazon-Hachette disputeSearch is important for reputationEU right to be forgotten

Financial health

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 10

Organisations measure their financial health in a number of ways depending where they are in their lifecycle:Burn rate how fast they are going through money invested in themCash flow are they getting in enough money quickly enough to keep going and growingProfitability how much money do they make for investorsEfficiency how well are the businesses run

Financial health

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 11

What kind of news hooks could come from this data?

Burn rate

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 13

Burn rateBefore businesses are profitable they burn through cash reserves. The business is running at a loss. It becomes bankrupt when it doesnt have enough money to pay for its liabilities. It is often expressed as a burn rate:How much they are going through over time (month/ year)How much time they have left before going under / needing additional fundingIn 1997, Apple was within 3 months of bankruptcy

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 14

Cashflow

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 15

Cashflow

Cash flow is not the same as profitabilityHow much money does the company have on hand to pay expensesHaving too much business too quickly can be bad

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 16

What does burn rate and cash flow mean?

17

Profitability

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 18

Profitability

You think that you would know how much money you make? Businesses look at this differentlyMeasures of profitability that take out the cost of business investment EBITA, EBITDA looks at operating profitabilityHow do they book sales? When is a sale a saleWhat are third-party expectations versus reality The Number predicted EPS

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 19

Efficiency

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 20

Efficiency

Many other measures to consider:ROIRevenue / employeeARPU / basket sizeCompetitor benchmarkingMarket sentimentDividend

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 21

What kind of information do you think market analysts will care about?

Growth vs. value

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 23

Growth vs. value

It used to be that the technology sector was full of companies that were growth companies an expanding market and ever expanding horizonsMost traditional technology businesses (Microsoft, Oracle, IBM) are now value businesses steady income slow growth rate

Source: http://www.internetworldstats.com/stats.htm

Internet population has reached 1 billion in Asia. 24

Thanks for your time

More readingThe Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America by Alex Berenson The Economist guide to Financial Markets by Marc Levinson

Reuters Glossary really good guide to financial and business terms

Jargon busterEBITDA - earnings before interest, taxes, depreciation and amortisation (which is a posh word for regular payments to reduce debt like a mortgage)EBITA similar to EBITDA without depreciation both are measures of a companys earnings from ordinary operationsEPS earnings per share Market captialisation total value of a companys shares quoted on the stock marketCredit rating measure of a borrowers creditworthinessBull someone who thinks an item or market will increase in valueBear the opposite of a bearBond corporate or government IOU legal document offers to pay back lender at a X interest rate for Y timeShare part ownership in a company and right o share profitsShare class affects voting rights, order of payout, level of payoutVC / venture captialist high risk investment in start-ups or expansion of existing private companiesAngel investor provides backing for start-ups before VC moneyPrivate equity - firms which invest pools of capital raised from financial institutions in a wide range of commercial projects managed by investment professionals

Keeping on top of your clientPublicly listed clientsStocks.app on iPhoneYahoo! FinanceGoogle Finance

About meAmazon author page: amzn.to/1SeO5IlLinkedIn page: linkedin.com/in/gedcarrollAbout: renaissancechambara.jp/aboutBlog: renaissancechambara.jpEmail address found here: scr.im/renaissanceTwitter account: @r_cSina Weibo: renaissancechambara

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