Financial Modeling Made Easy by Andrew Wood & Jacob Gordon Using numbers to tell your story Financial Modeling Made Easy by Andrew Wood & Jacob Gordon

Welcome to Financial Modeling Made Easy Andrew Wood Jacob Gordon Entrepreneur's Perspective A Venture Capital Perspective

What is Financial Modeling? Common Definition: A financial model is a set of assumptions about future business conditions that drive projections of a company's revenue, earnings, cash flows and balance sheet accounts. In the end it is a dynamic tool. Our Definition: It is a tool in your investor-search toolkit to tell your story with numbers. It can create alignment across the team and forces you think about the drivers in your business. The ultimate goal of any business is to generate cash. The financial model tells others how you plan to do this.

Let’s Get Perspective You do not have to be an excel ninja. A Financial Model is not real and does not drive value? The only valuation that matters is the EXIT value. Financial modeling is a continuous exercise that is never really done. You need to know when to stop and who to elicit feedback from.

Investor Search Process – Other Tools Send Executive Summary to generate interest (excerpts) Non Disclosure Agreement Meeting to present the pitch deck (try to get this face to face) Follow up with Full Pitch Deck, Business Plan and Financial Model Term Sheet, Cap Table, Private Placement Memorandum Due Diligence (Defend your Model)

Steps in building a model 1.Historical Analysis A few years of analysis Calculate ratios 2. Assumptions Build ratios Explore drivers that are non financial Build your schedules 3. Forecast Forecast Financial Statements Sales Detail Assumptions Cost Assumptions 4. Valuation Discounted Cash Flow to derive a return assumptions 5. Other Analysis Stress test Graphs, dashboards Sensitivity analysis Steps in building a model

Move left to right then down - the same way you read a book Consistent Formula Use Align your months and years in the same columns across all spreadsheets Mark input cells in blue or another color Avoid elaborate formula Simplicity over complexity Focus on Key Drivers Consistent in Level of Detail Best Practices

Now let’s actually do some modeling… followed by Q&A