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NailTheNumbers.comHOW TO: SKETCH OUT YOUR STARTUP COSTS
AND CASH FLO PROJECTIONS©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
Playbook No2
Released: February 24, 2015
LEGAL STUFF, JUST BECAUSE…
This is a summary of the Terms of Engagement for Nail the Numbers Playbooks.
Disclaimer: This summary is simply a handy reference for understanding the full terms. Our full policy can be found at www.nailthenumbers.com.
Our goal is to: Engage and enlighten you [Startups] on the topic of money and finance. Have a lasting impact on your success and survivability. In the long run, spark money momentum and mastery among future generations of aspiring entrepreneurs.
Either as a Playbook Pro or a Startup, you are welcome and encouraged to review, use and/or contribute to Nail The Numbers Playbooks, with the understanding that: You License Freely Your Contributions. The content of the Playbooks is for informational purposes only and does not constitute professional advice.
ALL GOOD? READ ON>>>
THE PLAYBOOK PROS
Taunya Woods Richardson | Campaign Creator and Chair, Let’s Talk Money @TTaunya // nailthenumbers.com // @NailtheNumbers
Taunya’s reputation as the Startup’s Money Maven is built on her ability to dive into the uncomfortable topic of finance with tremendous transparency, empathy and humour. She is a thought leader, solution architect and financial literacy champion, with the rare ability to both motivate entrepreneurs and equip them with actionable change strategies to better control their finances and outcomes.
25 Years Experience ▫ Social Entrepreneur ▫ Investor ▫ Fund Manager
“DRAWING IS THE ROOT OF ALL KNOWLEDGE.” MICHELANGELO
I’ve come to realize the root of meaningful cash flow projections don’t start with spreadsheets, but
rather by first physically sketching out your ideas, assumptions and estimates.
Taunya Woods Richardson // @TTaunya
Campaign Creator and Chair, Let’s Talk Money @NailtheNumbersSO, LET’S GET SKETCHING>>>
WHICH BIZ MADE ME THE MOST $?
BIZ ACatering1 Client
Billed by Project$15,000 per Project
BIZ BConsulting7 Clients
Billed Hourly $125 per Hour
BIZ CBusiness Support
Services 2,500 Clients
Billed by Board $1,500 per Board
$540,000 $210,000 $3,250,000
60 hours/month/$100$72,000 / Draw +
$220,000 / Profit +$100,000 / Sale
140 hours/month/$125$210,000 / Draw
$0 / Profit$0 / Sale
240 hours/month/$21$60,000 / Draw
$0 / Profit$0 / Sale
WHAT YOU LEARN FROM CASH FLOWS*
*AKA… Pro Formas or Projections // Your budget for the business
If your concept is financially viable
Which of your products/services are most profitable
The starting point for your pricing strategy
The business’s break-even point
How much working capital you’ll require
The seasonality of your business
When to expand the business / hire employees
Where you’re making/loosing money
STEP 1: START WITH THE END IN MIND
When do you plan to exit
How do you plan to exit
For how much
To whom
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
“Raise twice what you need and plan on
it taking twice as long.”
Sam Hogg, Venture Partner
Open Prairies Ventures
“Fundraising sucks and it
never really ends until the
day you sell.”
@SamHoggVC #FinLitBootcamps
STEP 2: MAP YOUR JOURNEY
Starting with the end in mind, what milestones will get
you to your final destination?
Product Development
Growth (team, geography, infrastructure)
Capital Requirements
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
"You can eat an
elephant – just
one bite at a
time."
-Unknown
STEP 3: SKETCH OUT YOUR START UP COSTS Space / Leaseholds Business Set Up Legal / Accountant Fees Product Development Software / Hardware Equipment and Supplies Inventory Employee Recruitment
and Training Working Capital
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
TIPS
Get estimates /purchase orders
Be specific
Include taxes
Don’t forget processing and shipping
Don’t bank on friends and family – Budget
Track and record your expenses
Know why you need the money
@TTaunya @NailtheNumbers #Let’sTalkMoney
STEP 4: BREAK OUT YOUR REVENUE STREAMS*How will your business make money from its products and services?
*AKA… Profit Centres
Products / Fee for Service
Community Access
Subscriptions
Advertising
Commission / Transaction Fee
Licensing
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
Whatever you do… don’t lump all
your revenue streams into one
line item labeled “Sales”!@TTaunya @NailtheNumbers
STEP 5: CALCULATE YOUR COGS*
*AKA…Cost of Goods Sold
Materials
Direct Labour
Transaction Fees
Shipping / Transportation
Project Delays
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
“My single biggest
mistake with my first
business was with pricing.
I didn’t take into account
all the hidden costs.”
Sarah Shaw, CEO Entreprenette
STEP 6: SET A PRICE-POINT
Cost of Goods Sold Pain Killer or Bandaid Personal Knowledge Competition Industry Statistics Market Research Trials and Testing Operating
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
“I though you just sort of doubled
everything but that’s not correct.”
Sarah Shaw, CEO Entreprenette
STEP 7: DETERMINE THE EBB AND FLOW OF SALES How many units will you sell and when?
What’s the seasonality of your product/service?
When will revenues be received?
What’s your capacity?
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
STEP 8: FACTOR IN MONTHLY EXPENSES
Salaries, Wages and Benefits
Employee Development / Welfare
Professional and Consulting Services
Advertising and Promotion
Space and Operating
Bank Fees
Insurance
Travel and Vehicles
Fundraising Activities
Loan Repayment and Interest
Income Tax
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
Myth: You can rely on social media to build virality and attract customers for free.
Reality: It’s NOT free. It will take unbelievable amounts of time. Bank on 6 months to
a year before you’ve got even slight momentum.
Drew Williams, Author of Feed the Startup Beast
STEP 9: WORKING CAPITAL* NEEDS
*AKA… your Runway
Income – Expenses = Net Profit
At what point does your business turn a profit?
How much money do you need to keep you flush
until you reach that point?
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
“It doesn’t take a CPA to
figure out the longer you
take to launch, the longer
you go without money
coming in.”
Drew Williams, Author of Feed the
Startup Beast
STEP 10: CIRCLE BACK
©2014-2015 The Kolo Project, Inc. | Let’s Talk Money Campaign
Add working capital needs to Start Up Costs
Add loans/equity to the Income in your Cash Flow
Record your Start Up Expenses to Expenses in your Cash Flow
Build year 2,3,4… of Cash Flow projections taking into account your
milestones and what investors are looking for
NOW WHAT…
Do you have questions? Want to connect with the Pros, visit us at SpreeCast for a list of upcoming Playbook Drills, including HOW TO SKETCH OUT YOUR STARTUP COSTS AND CASH FLO PROJECTIONS.
Looking to get it done and make it happen? Book a Bootcamp. Action-packed and highly-interactive, you’ll work hard and sweating buckets, but you’ll take great pride in the end result. LET’S TALK CASH FLO PROJECTIONS + STARTUP COSTS INCITIES IN ACROSS CANADA
CHECK OUT UPCOMING BOOTCAMPS
CHECK OUT UPCOMING DRILLS
Keep me posted @TTaunya or taunya@letstalkmoney(dot)biz