Create Financials Stephen Lawrence and Frank Moyes Graduate School of Business University of Colorado Boulder, CO

Course Outline

This Week

Create Financial Statements n Financial Projections –Drivers –Model –Assumptions n Financial Dynamics n Dean Abrams n Present Operations Plan

Financial Plan n Income Statement n Balance Sheet n Cash Flow n Summary n Assumptions

Operating Expenses Year 1 Year 2 Year 3 Marketing R & D Administration Total Cost of Goods Year 1 Year 2 Year 3 Direct Indirect Total Income Statement Year 1 Year 2 Year 3 Revenue COG’s Oper Expenses

Fixed Assets (Plant) Year 1 Year 2 Year 3 Assets Depreciation Fixed Assets Working Capital Year 1 Year 2 Year 3 Receivables Inventory Balance Sheet Year 1 Year 2 Year 3 Receivables Inventory Fixed Assets

Revenue Drivers n Number of customers, transactions or units n Price per customer, transaction or unit n Average revenue per customer or transaction n Distribution channel discount n Market penetration n Response rate n Churn rate n Growth rate n New services or product

Cost of Revenue Drivers n Personnel costs (labor and/or salary) n Materials costs n Yields n Website operating costs n Systems costs n Warehouse and shipping expenses n Returns n Outsourcing expenses n Lease and/or rental expenses n Cost reductions n Depreciation large capital expenditures

Operating Expense Drivers n Sales & Marketing –Customer acquisition cost –Personnel expenses –Sales commissions –Exhibitions –Brand building –Tech support –Customer service

Operating Expense Drivers n Research and Development –Personnel expenses –Beta testing –Time to market –Patent and copyright application –Prototyping –Subcontracting n General and Administration –Personnel expenses –Recruiting expenses –MIS expenses –Office rent and utilities

Financial Dynamics n Who does the financial projections? n Investor questions n Drivers n Optimism vs. Pessimism

Financials Spreadsheet Template