Surviving the First Year:Cash Flow & Budget Planning

Bentley Growth Management, LLC

Chris Bentleychris@bentleygrowth.com

610-247-4110

Bentley Growth Management, LLC

GREAT IDEA

STRONG MISSION

SUFFICIENT MARKET

VIABLE BUSINESS MODEL

Bentley Growth Management, LLC

EXIT

PROFITABILITY SCALABILITY

MARKET

COMPETITIONTEAM

DEMAND

Why Start-ups are Different No History

Use comparables Requires bold assumptions

Should be backed interviews State all assumptions Test what happens when you are wrong

Break business down to the key dials that control outcomes Growth Costs Timing

Bentley Growth Management, LLC

Key Controls Growth

Number of customers Number of users Number of distributers

Costs Commissions Capital expenses Material Marketing

Timing Customer norms User / payer dynamics Timing of cash

Bentley Growth Management, LLC

How to build a budget The relationship between revenue and expenses is developed through an

iterative process: Market research in identifying the market Understanding of the value proposition of the offering Understanding the channels of distribution Reasonable general and administrative costs

Steps Predict revenues Predict COGS Predict sales and marketing costs Predict start-up costs (where appropriate) Predict fixed and variable operating (non-production) costs Sensitivity analysis on line items Sensitivity analysis on the entire Pro Forma

Bentley Growth Management, LLC

Sales process, channels, cycle What is the process by which buyers buy?

Direct○ Outside sales force○ Internal sales force○ Web or catalogue○ Bidding

Distributors VAR’s System Integrators Partnerships (?)

Sales cycle: How long does it take to decide Meet Educate Propose Decide

Bentley Growth Management, LLC

Costs notes One line summary of every general and administrative cost,

with accompanying notes Repeated for a minimum of a three year period Include:

H/R costs- fully loaded Marketing costs Infrastructure costs Outside consultants and special project costs Does not include adjustments, investment interest, taxes or misc.

charges

Bentley Growth Management, LLC

PROFIT & LOSS STATEMENT

FINANCIAL PROJECTIONA UNITSB PRICEC=AXB SALESD COGSE=C-D GROSS MARGINF OPERATING EXPENSEG=E-F EBITDA

Bentley Growth Management, LLC

MARGINGROSS MARGINS REVEAL HOW MUCH A COMPANY EARNS TAKING INTO CONSIDERATION THE COSTS THAT IT INCURS FOR PRODUCING ITS PRODUCTS AND/OR SERVICES.

Bentley Growth Management, LLC

EXAMPLEHIGH GROWTH COMPANY$20 SALES$10 COGS$200 OP EXP

Bentley Growth Management, LLC

EXAMPLEHIGH GROWTH COMPANY$20 SALES$10 COGS$100 OP EXP

Bentley Growth Management, LLC

EXAMPLEHIGH GROWTH COMPANY$20 SALES$5 COGS$200 OP EXP

Bentley Growth Management, LLC

Dynamic Analysis Evaluate Strategic Options

Enter into two markets simultaneously or phased entry Risk / Reward Analysis

Sales projections off by 50% Sensitivity Analysis

Adjust inflation assumptions from 3-5% Long term growth Conversion rates

Bentley Growth Management, LLC

Thank You!

Bentley Growth Management, LLC

Bentley Growth Management, LLC

Chris Bentleychris@bentleygrowth.com

610-247-4110