Business Plan Preparation Funding Plan

1
Business Plan PreparationFunding Plan
Management Plan
0

• Frank MoyesLeeds School of Business
• University of ColoradoBoulder, Colorado

2
Tonight

• In the Fire
• Operations Plan
• Development Plan
• Funding Plan
• Management Plan
• Team Meetings
• Hand-in
• Operations Plan
• Development Plan
• Preliminary 5 year Income Statement
• Customer acquisition costs

3
Two Weeks

• Publishing your plan
• Investor presentations
• Hand-in
• Management Plan
• Financial Plan (4 slides)
• Income Statement
• Balance Sheet
• Cash Flow
• Assumptions

4
Funding Plan

• Determine requirements
• Prepare Sources Uses
• Offering
• Valuation

5
Funding Requirement
0

• Look at Cash Flow from
• Operating Activities
• Funding Activities
• Is this enough?
• Look at monthly Cash Flow
• Operating Activities
• Funding Activities

6
Sources Uses
0

• For each round of equity or debt, how will the
  money be spent?
• Common uses
• Marketing campaign to launch a new product
• Set up Call Center
• Development expenses of a new product or process
• Prototype
• Capital expenditure for equipment or systems
• Working capital

7
Hecho en CasaSources Uses Statement
Financing Amount Ownership Uses of Funds
Round A (June 2005) 315,000 41.0 Salaries 221,800 Inventories 60,100 Working Capital 16,400 Capex 15,000 Other 1,700
Round B (Oct. 2006) 310,000 15.5 Salaries 197,100 Inventories 79,200 Capex 30,000 Other 3,700
Round C (Q3 2007) 170,000 4.0 Salaries 122,000 Inventories 41,700 Capex 6,300
8
Offering
0

• Equity
• Amount of investment
• Form of investment
• Preferred or common
• Warrants
• Share of equity
• Exit strategy
• Nontraditional
• Joint ventures
• Customers Suppliers

• Debt
• Amount of loan
• Interest rate
• Repayment schedule
• Collateral
• Warrants or conversion rights
• Grants

9
Advantages Disadvantages
0

• Equity
• Debt
• Grants
• Non-traditional

10
Sources of Funding
0

• Bootstrapping
• F, F (and F)
• Angels
• Venture Capital
• Guido

11
Valuation
0

• Why do valuations?
• Dilution division of ownership between
  Investors and Founder
• Think value, not ownership
• Art - not a science
• Objective reach agreement on approach

12
Methods for Determining Valuation
0

• Tangible book value
• Discounted cash flow
• Price/Earnings
• 10 x Net Income
• 6 x EBITDA
• Venture Capital method

13
Venture Capital Method - Key Assumptions
0

• Net Profit
• Valuation Multiple
• Investor ROI

14
Required Rates of Return
0
5 yr. Increase
ROI

• 19x
• 10x
• 8x
• 5x
• 3x

• Seed 80
• Start-Up 60
• Early Stage 50
• Second Stage 40
• Exit 25

15
Management Plan
16
Company Organization I

• Describe how your company will be organized
• Prepare an organization chart
• Will you have a board of directors?  
• Will you have a board of advisors?

17
Company Organization II

• What is the ownership structure of your company?
• What percent of the company do each of the
  founders own?
• Do you plan to have a stock option plan?
  Incentive plan?

18
Management Team

• Describe the founders and principal managers who
  will run your firm.
• Write a short paragraph on each of the key
  managers?  (Include resumes in the Appendix)
• What will be their duties and responsibilities?
• What unique skills do they bring to the venture?
• How will they be compensated?
• Is there a significant hole in the team? How do
  you propose to fill it?