17 Summary The Financial Plan Budgets are not merely affairs of arithmetic, but in a thousand ways go to the root of prosperity of individuals, the relation of classes, and the strength of kingdoms. William E. Gladstone Summary How do entrepreneurs describe the financial elements of their new venture? Entrepreneurs build a financial plan to determine the economic potential for their venture. This plan provides an estimate of the potential of the venture. Chapter 17: Summary Technology Ventures: From Idea to Enterprise

17 The Financial Plan Four Steps to Build A Financial Plan The Sales Forecast Time Frame — Two or three years Assumptions about sales per customer, number of customers and growth rate of sales Calculation of the sales forecast 2. The Costs Forecast Assumptions about the costs of doing business in the specified time frame Calculation of the costs associated with the projected sales of Step 1. 3. The Income and Cash Flow Forecast Assumptions about the timing of cash receivables and payables specified in the time frame. Calculation of the income and cash flow associated with the projected sales and costs on a monthly basis over the time frame. 4. The Balance Sheet Assumptions about the starting value of cash and assets. Calculated based on the income and cash flows from Step 3. Chapter 17:Table 17.1 – building a financial plan Technology Ventures: From Idea to Enterprise

The Financial Plan 17 Assets The Value of Items Owned Income Liabilities The Value of Items Purchased, Borrowed, Owed, or Leased Expenses Net Income S + _ Assets generate income and liabilities lead to expenses. Net income is income minus expenses. Chapter 17:Figure 17.1 Technology Ventures: From Idea to Enterprise

The Financial Plan 17 Cash Flow is the amount of cash flowing into or out a firm during a specific period. TC(N+1) = (CF – Disbursements) + TC (N) Where: TC(N) = Cash on hand at the end of the Nth month CF = Cash Flow into the firm in the Nth month Chapter 17: Cash Flow Technology Ventures: From Idea to Enterprise

17 The Financial Plan Calculations of the Income Statement Chapter 17: Figure 17.2 – Calculation of income statement Technology Ventures: From Idea to Enterprise

17 The Financial Plan The Cash Flow Process Chapter 17: Figure 17.3 – Cash flow process Technology Ventures: From Idea to Enterprise

The Financial Plan 17 Breakeven is defined as when the total sales equal the total costs. R = Q x P TC = FC + VC and VC = Qc Then: Q x P = FC + Qc Breakeven Q = Where: c = Cost Per Unit P = Price Per Unit Chapter 17: Breakeven Technology Ventures: From Idea to Enterprise

The Financial Plan 17 Accounting principles for entrepreneurs (Riggs, 2006) Chapter 17: Table 17.8 – accounting principles for entrepreneurs Technology Ventures: From Idea to Enterprise

The Financial Plan 17 A sound financial plan demonstrates the potential for growth and profitability for a new venture and is based on the most accurate and reliable assumptions available. Chapter 17: Principle Technology Ventures: From Idea to Enterprise

DVD Video 17 “Keeping a Financial Focus” Gajus Worthington (Fluidigm) The Financial Plan 17 DVD Video “Keeping a Financial Focus” Gajus Worthington (Fluidigm) Chapter 17: DVD Video Technology Ventures: From Idea to Enterprise