In preparing the financial plan look creatively at

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also can serve as an operating plan for financial management using financial benchmarks. In preparing the financial plan, look creatively at the venture and think about bootstrapping techniques, especially in the early days. Highlight the important conclusions, such as what is the maximum amount of cash required is and when it will be required, the amount of debt and equity needed, how fast any debts can be repaid, start up costs, etc. Given the earlier discussed strategies and assumptions, show when the venture will attain a positive cash flow. Show if and when you will run out of cash. Note any significant changes in cash flow that will occur as you grow and add capacity. Given your entry strategy, marketing plan, and proposed financing, how long it will take to reach the unit breakeven sales level. How many months to breakeven? Highlight sales and profit performance patterns over time. To help validate your financials compare critical financial ratios from your plan with those of your industry. Explain and justify significant differences. Pro forma income statements capture your financial model for the venture and indicate the financial feasibility of the business. Usually the level of profits, particularly during the start-up years of a venture, will not be sufficient to finance operating asset needs, and since actual cash inflows do not always match the actual cash outflows on a short- term basis, a cash flow forecast that will indicate these conditions and enable management to plan cash needs is needed. Further, pro forma balance sheets are used to detail the assets required to support the projected level of operations and through liabilities, to show how these assets are to be financed. The projected balance sheets can indicate if debt-to-equity ratios, working capital, current ratios, inventory turnover and the like are within the acceptable limits required to justify future financing that are projected for the venture.
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IMAGINE > BELIEVE > CREATE 23 B. Cost Controls: Describe how you will obtain information about and monitor costs and how often, who will be responsible for the control of various cost elements, and how you will take action on budget overruns. Explain any unusual items not identified in the financial statement. C. Documents to be Developed for this Section (Put Financial Statements in Appendix) As part of the financial plan, financial exhibits need to be prepared. Be sure to give the investors the columns and rows that they want to see. The more detail you give them, the more difficult it will be for them to challenge your assumptions. You need to prepare: i) Pro forma income statements (3-5 years, done monthly for at least the first 1-2 years); ii) Pro forma balance sheets (3-5 years), and iii) Pro forma cash flow analysis (3-5 years, done monthly for at least the first 1-2 years). To estimate cash flow needs, use cash-based, rather than an accrual-based, accounting (i.e., use a real-time cash flow analysis of expected receipts and disbursements).
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  • Spring '17
  • Yongseok Jang
  • Marketing, The Market

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