=if Financials NOEW Presentation 3.2016 (revised) copy

NUMB3R5 1N TH3 BU51N355 M0D3L

“As far as I can remember, not a single revenue model was anywhere close to accurate in the first 24 months, other than the ones that said there would be $0 revenue.”

- Brad Feld

What makes a good financial projection?

DEFENSIBLEREALISTIC

CONFIDENCE

Serves your intended purpose.

Why?

Internal • Business planning• Budgeting• Setting milestones• Short-term goals• Long-term goals

• Feasibility Analysis• Capital Ask• Valuations

External• Applications• Accessing Capital• Bank Loans• Investments• Negotiations• Offerings• Valuations

BUILD FROM BOTTOM UP

DEFEND FROM TOP DOWN

Assumptions

TimeVolumeValue

Assumptions

Assumptions

Assumptions

Where do you find assumptions?

• Historical data (best)• Experience – personal, advisors, mentors, peers• Industry and market reports– Aswath Damodaran – NYU Stern

• Competitors– SEC data – EDGAR, 10-K &10-Q reports

• Google, Yahoo• census.gov• Angel List, glassdoor.com

Process

Problem

Industry Averages

Solution

Growth

Analysis

Expenses

Hiring

Pricing

Capital Inputs

Assets

Market & Industry

Cost of Goods Sold/Sales

INTERCONNECTEDNESS

INITIAL PLANNING

Ideation & Growth Potential

IDEATION

Product or

Service

Growth Potential

Serviceable Available Market

Total Available Market

ServiceableObtainable

Market

Growth Potential

×AMBITION

THE MODELIn

puts

&

Ass

umpt

ions

THE MODEL

= Growth Line

Target & Trajectory

Numerical Patterns

Growth Target and Trajectory

Trajectories

How do you measure GROWTH?

15,0005,000

30,000

80,000

50,000

How do you measure GROWTH?

How do you measure GROWTH?

1,657

769

3,213

8,100

4,973

64

How do you measure GROWTH?

1,657

769

3,213

8,100

4,973

64 15,0005,000

30,000

80,000

50,000

Simple versus Compounding

96203327521

1,000

96

626299

1,1472,147

19,555

581

10,695

2,4195,631

Growth Behaviors

Churn

S-Curves

GROWTH BEHAVIORS

THE MODEL

THE MODEL

THE MODEL

General & Administrative

Sales & Marketing

Research & Development

Operations

THE MODEL

= TEAMMarket

Product

THE MODEL

%%

THE MODEL

THE MODEL

THE MODEL

Direct costs associated with making and selling the products OR the direct costs associated with providing the service(s)

Day-to-day costs of operating, independent of the level of sales.

Inventory

Total Expenses

THE MODEL

THE MODEL

Intangible – Amortization

Tangible – Depreciation

Asset Straight Line Depreciation

THE MODEL

THE MODEL

Taxes

TAXES and FEESEMPLOYMENT & BENEFITS• Employer Health Insurance Mandate Tax• Employer Medicare Taxes• Employer Social Security Taxes• Unemployment Tax (SUTA, FUTA)• Individual Health Insurance Mandate Tax• Medicare Tax• Self-Employment Tax• Social Security Tax• Worker’s Compensation Tax

BUILDING & CONSTRUCTION• Building Permit Tax• Inspection Fees• Property Tax• Real Estate Tax• Zoning Permit Fees

OPERATIONS & REVENUE• Corporate Taxes (Local , State, & Federal)• Income Taxes (Local, State, & Federal)• Franchise Business Tax• Import Taxes• Inventory Taxes• Sales Tax• Use Tax

THE MODEL

Cash BasisOnly when money is

received or paid

Accrual BasisA/PA/R

InventoryDeferred Revenue

THE MODEL

Dilutive Capital• Equity Investments• Seed Capital• Angel Investments• Venture Capital

• Publically Offerings

Non-Dilutive Capital• Loans• Convertible Notes• Sponsorships• Capital Leases• Grants• SBIR, STTR• NIH• Foundations

• Tax Credits• Competitions• Crowd funding

Capital Inputs

Capital & Business Stage

Concept Start-Up Expansion Mature

Seed

AngelVen

ture

Publicβ = Risk

Outputs & Analysis

Outputs & Analysis

Outputs & Analysis

Statements

Statements

Annual

Quarterly

Monthly

___________

Revenue

- COGS

Gross Profit

EBITDA

Net Income

- Expenses

- ITDA

___________

___________

Income Statement

Assets

Liabilities

Owners’ Equity

Balance Sheet

Assets = Liabilities + Owners’ Equity

Balance Sheet

Cash Flow Statement

Cash Flow Statement

Break Even Point

Capital NeedsCash

Flow Pre-

Fundin

g

Cash Flow

Post-Fun

ding

Cash Flow Positive

Valley of Death

Cash Flow Statement

Cash Flow

Pre-Fun

ding

Cash Flow

Post-Fun

ding

Outputs & Analysis

• Key Performance Indicators• Valuations• Sensitivities

• Growth Rates & CAGR– Revenue – EBITDA– Net Income

• Expenses as a % of Revenue– G&A, S&M, R&D– Revenue per employee

• Profitability Ratios– Gross Profit, margins– EBITDA– EBIT – Net Profit Margins

• Return on Investment Ratios– Return on Assets– Return on Invested Capital– Return on Stakeholders Equity– Asset Turnover Ratio– Inventory Turnover Ratio– Net Working Capital

• Liquidity Ratios– Current Ratio– Quick Ratio

• Leverage Ratios– Debt to Equity Ratio– Interest Coverage Ratio

Key Performance Indicators

Company Stage Risk Level Discount Rate

Startup Very High Risk 50% - 70%

Launched High Risk 40% - 60%

Revenue Generating Moderate Risk 30% - 50%

Growing Low Risk 20% - 40%Established Very Low Risk 10% - 30%

• Discounted Cash Flow Valuation• Multiples Methods• Comparable Valuation – (Competitor Analysis)

Valuations

Capital & Business Stage

Concept Start-Up Expansion Mature

Seed

AngelVen

ture

Publicβ = Risk

Analysis - Valuations

EV/Sales x 2.59

Analysis - Valuations

EV/EBITDA x 10.91

Analysis - Valuations

Forward PE x 28.34

Analysis - Valuations

Summaries

Graphics

Write-ups

Outputs & Analysis

Dashboard

Alternative Growth Graphics

1

2 3

58 1

Fibonacci Sequence

1

2

3

4

567

8

9

10

11 12

Dec

embe

r

Janu

ary

February

MarchSeptember

August July June

May

AprilOctober No

vem

ber

?

S&P 500 Index

Dow Jones Industrial - DJI

Amazon - AMZ

Apple - AAPL

Google (Alphabet) - GOOG

??