Business Plan Financials Richard O’Callaghan

A Business Plan A business plan is a communication tool A snapshot of your business at one point in time – constantly evolving!!! What is it used for? Raise funding Part of a broader communication strategy towards investors and other stakeholders The operational plan for your business. Drawn up to show how the business will achieve success with the business Can and will (if properly used) be your road map to success

A Business Plan Describes… The business - What business are you in? The markets - Where is the opportunity? Industry forces - What are the competitive threats? What’s our competitive edge? Who is the team to implement the Plan? What resources are available for success? How much capital is required? What are the financial rewards to investors?

Typical Business Planning Model Opportunity Product/Service Industry, Buyer & Competitor Analyses Why this business? Why now? Why you? What are you going to provide and who wants to buy it? Operating Plan Marketing Plan Cost Projections Sales Projections What will we be doing? What will it cost to produce your product or service? Why buy from us? What will it cost to sell any given amount of your product or service? Financial Plan Profit AND Cash Projections How will your business make money? How much? For how long? Risks?

Used for Funding What are you trying to do? Raise Angel funding? Apply for a grant? Applying for a loan? Raising Venture Capital?

Gathering Information for the Business Plan

Before you start writing the plan itself You must gather a significant amount of information on: You Your firm Your product Your finances Your targets Future potential

Business Planning is an Iterative Process… Tell the story… (Draft your narrative sections) Run the numbers… (Develop your Financial Plan) Verify the story… (Examine the narrative sections) 1 2 3

Convey to the Reader a Clear Picture This is the market opportunity This is my product These are the key benefits: the value proposition This is the evidence that substantiates the value proposition And these are the people who will make it happen - and why

What is your Market? Having understood your core proposition the reader wants a clear picture of your market in terms of … market size market segmentation and niches actual and projected growth rates in target market geographic breadth and variation market context - relevant environmental, regulatory, technological, demographic/social changes

How do people make money in this market? Basis of competition - price, differentiation, range, discount structure, etc. Nature and number of substitutes (and “near substitutes”) The ease or difficulty of gaining market entry The margin opportunity - current and future It is essential to demonstrate a real understanding of what makes the market “tick”, why it is an attractive market, and why it will remain so for some time

How will your Product or Service be Produced? The operational part of the plan should set out ... what is involved in producing the product or delivering the service resources required to do this: labor, material, facilities, etc. capital expenditure - amount and phasing which activities will be controlled in-house (eg. design or assembly) and which will be sub-contracted (eg. packaging) what it will take to gear up production post start-up status of any agreements with suppliers

What are your Financial Projections? This part of the plan should focus on ... core assumptions behind the financial model the link between these assumptions and your market data key financial indicators - projected cash flow, maximum cash requirement, summary profit & loss statement, balance sheet your expected base case and rationale for it the potential downside (what happens if “the wheels fall off”) and upside (what happens if “it really takes off”)

Cost Behaviour Cost € Cost € Q Q Fixed Variable Cost € Q Semi-Variable

Fixed Costs

Variable Costs

Semi-Variable Costs

Estimating Income and Variable Costs Units projected for sale Units to be produced Direct Materials Direct Overheads Direct Labour Electricity Telephone Etc

How much Money do you Need? Your summary financial projections will drive the funding requirement. For investors, the key issues are ... how much money is needed what it is need for: staff, premises, capital expenditures, research & development, market testing, and so on when and in what stages it is required the key milestones against which funds will be drawn down the form in which the finance is required

Ability to make Repayments The projected timetable for the business to achieve lift off Target time to break even, generate positive cash and profit Repayment projections, and proof how you can meet them Valuations achieved by comparable businesses