technology ventures: from idea to enterprisechapter 17: summary summary budgets are not merely...
TRANSCRIPT
Technology Ventures: From Idea to EnterpriseChapter 17: Summary
Summary
Budgets are not merely affairs of arithmetic, but in a thousand ways go to the root of prosperity of individuals, the relation of classes, and the strength of kingdoms.
William E. Gladstone
How do entrepreneurs describe the financial elements of their new venture?
Entrepreneurs build a financial plan to determine the economic potential for their venture. This plan provides an estimate of the potential of the venture.
The Financial Plan
17
Chapter 17:Table 17.1 – building a financial plan
Four Steps to Build A Financial Plan
1. The Sales Forecast• Time Frame — Two or three years• Assumptions about sales per customer, number of customers and growth
rate of sales• Calculation of the sales forecast
2. The Costs Forecast• Assumptions about the costs of doing business in the specified time frame• Calculation of the costs associated with the projected sales of Step 1.
3. The Income and Cash Flow Forecast• Assumptions about the timing of cash receivables and payables specified in
the time frame.• Calculation of the income and cash flow associated with the projected sales
and costs on a monthly basis over the time frame.
4. The Balance Sheet• Assumptions about the starting value of cash and assets.• Calculated based on the income and cash flows from Step 3.
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17:Figure 17.1
AssetsThe Value of Items Owned
Income
LiabilitiesThe Value of Items Purchased, Borrowed, Owed, or Leased
Expenses
Net Income
S+ _ Assets generate income and liabilities lead to expenses. Net income is income minus expenses.
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Cash Flow is the amount of cash flowing into or out a firm during a specific period.
TC(N+1) = (CF – Disbursements) + TC (N)
Where:
TC(N) = Cash on hand at the end of the Nth month
CF = Cash Flow into the firm in the Nth month
Chapter 17: Cash Flow
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17: Figure 17.2 – Calculation of income statement
Calculations of the Income Statement
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17: Figure 17.3 – Cash flow process
The Cash Flow Process
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17: Breakeven
Breakeven is defined as when the total sales equal the total costs.
R = Q x P
TC = FC + VC and VC = Qc
Then: Q x P = FC + Qc
Breakeven Q =
Where:
c = Cost Per UnitP = Price Per Unit )( cP
FC
)( cP
FC
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17: Table 17.8 – accounting principles for entrepreneurs
)( cP
FC
The Financial Plan
17
Accounting principles for entrepreneurs (Riggs, 2006)
Technology Ventures: From Idea to Enterprise
Chapter 17: Principle
A sound financial plan demonstrates the potential for growth and profitability for a new venture and is based on the most accurate and reliable assumptions available.
The Financial Plan
17
Technology Ventures: From Idea to Enterprise
Chapter 17: DVD Video
DVD Video
“Keeping a Financial Focus”
Gajus Worthington (Fluidigm)
The Financial Plan
17
Technology Ventures: From Idea to Enterprise