Business Plan Preparation Funding Plan Management Plan Frank
Business Plan Preparation Funding Plan & Management Plan Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado Funding Plan & Management Plan 1
Tonight Ø In the Fire 4 Operations Plan 4 Development Plan Ø Funding Plan Ø Management Plan Ø Team Meetings Ø Hand-in: 4 Operations Plan 4 Development Plan 4 Preliminary 5 year Income Statement Funding Plan & Management Plan 4 Customer acquisition costs 2
Two Weeks Ø Publishing your plan Ø Investor presentations Ø Hand-in 4 Management Plan 4 Financial Plan (4 slides) s s Income Statement Balance Sheet Cash Flow Assumptions Funding Plan & Management Plan 3
Funding Plan Ø Determine requirements Ø Prepare Sources & Uses Ø Offering Ø Valuation Funding Plan & Management Plan 4
Funding Requirement Ø Look at Cash Flow from 4 Operating Activities + 4 Funding Activities Ø Is this enough? Ø Look at monthly Cash Flow 4 Operating Activities + 4 Funding Activities Funding Plan & Management Plan 5
Sources & Uses Ø For each round of equity or debt, how will the money be spent? Ø Common uses 4 Marketing campaign to launch a new product 4 Set up Call Center 4 Development expenses of a new product or process 4 Prototype 4 Capital expenditure for equipment or systems 4 Working capital Funding Plan & Management Plan 6
Hecho en Casa Sources & Uses Statement Financing Amount Ownership Uses of Funds Round A (June 2005) $315, 000 41. 0% Salaries Inventories Working Capital Capex Other $221, 800 $ 60, 100 $ 16, 400 $ 15, 000 $ 1, 700 Round B (Oct. 2006) $310, 000 15. 5% Salaries Inventories Capex Other $197, 100 $ 79, 200 $ 30, 000 $ 3, 700 Round C (Q 3 2007) $170, 000 4. 0% Salaries Inventories Capex $122, 000 $ 41, 700 $ 6, 300 Funding Plan & Management Plan 7
Offering Ø Equity 4 Amount of investment 4 Form of investment s Preferred or common s Warrants 4 Share of equity 4 Exit strategy Ø Nontraditional 4 Joint ventures 4 Customers & Funding Plan & Management Plan Suppliers Ø Debt 4 Amount of loan 4 Interest rate 4 Repayment schedule 4 Collateral 4 Warrants or conversion rights Ø Grants 8
Advantages & Disadvantages Ø Equity Ø Debt Ø Grants Ø Non-traditional Funding Plan & Management Plan 9
Sources of Funding Ø Bootstrapping Ø F, F (and F) Ø Angels Ø Venture Capital Ø Guido Funding Plan & Management Plan 10
Valuation Ø Why do valuations? Ø Dilution: division of ownership between Investors and Founder Ø Think $ value, not % ownership Ø Art - not a science Ø Objective: reach agreement on approach Funding Plan & Management Plan 11
Methods for Determining Valuation Ø Tangible book value Ø Discounted cash flow Ø Price/Earnings 410 x Net Income 4 6 x EBITDA Ø Venture Capital method Funding Plan & Management Plan 12
Venture Capital Method - Key Assumptions Ø Net Profit Ø Valuation Multiple Ø Investor ROI Funding Plan & Management Plan 13
Required Rates of Return ROI Ø Seed Ø Start-Up Ø Early Stage Ø Second Stage Ø Exit 80%+ 60% 50% 40% 25% 5 yr. Increase Ø 19 x Ø 10 x Ø 8 x Ø 5 x Ø 3 x Funding Plan & Management Plan 14
Management Plan Funding Plan & Management Plan 15
Company Organization I Ø Describe how your company will be organized Ø Prepare an organization chart Ø Will you have a board of directors? Ø Will you have a board of advisors? Funding Plan & Management Plan 16
Company Organization II Ø What is the ownership structure of your company? Ø What percent of the company do each of the founders own? Ø Do you plan to have a stock option plan? Incentive plan? Funding Plan & Management Plan 17
Management Team Ø Describe the founders and principal managers who will run your firm. 4 Write a short paragraph on each of the key managers? (Include resumes in the Appendix) 4 What will be their duties and responsibilities? 4 What unique skills do they bring to the venture? Ø How will they be compensated? Ø Is there a significant “hole” in the team? How do you propose to fill it? Funding Plan & Management Plan 18
- Slides: 18