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

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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

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Rule #6:

Do not overdo color

and

Do not highlight in

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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

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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


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)

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2. Creating the sales forecast

BEST - Predict by customer as detailed as

possible

….but include customer turnover

BETTER – Predict by market

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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

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Forecast Trap:

Do not over-estimate

first year revenue(what, we can’t sell millions in first month?)

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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

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

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

swifton cfos llc - boston bizspark presentation - financial projections for investor presentations

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