University:
Boston University
Course:
QST BA 472 | Business Experiments and Causal Methods
Academic year:

2024
Views:

221

Pages:

19
Author:

Tatiana Mullen

Revenue- assumptions – important numbers Boston University Slideshow Title Goes Here  Price  Product or service  Sales cycle  How long from the time you meet a customer until you make a sale  What are the steps to making a sale  Pipeline  How to build a pipeline  How will it lead to a sale You have to know your sales process… Boston University Slideshow Title Goes Here • One saleman • Three calls per hour • 25 calls per day • Never happen Calls 100 Two weeks Second Call 50 out of 100 Four weeks Webex 20 of 50 Two months Visit 10 of 50 Two months 5.5 months so far …to create a pipeline Boston University Slideshow Title Goes Here Second visit 4 of 10 Three months Proposal review Negotiation 2 of 3 3 of 4 One month** One month** ** usually more like three to six month! Sale 1 of 2 Sales cycle: 10.5 months total Components of a financial plan – idea to financing Boston University Slideshow Title Goes Here START HERE • Objective  Vision, strategic intent • How to make money • Value proposition • Can you build it?  ASSUMPTIONS REVENUE • Business model • Customer(s)  Addressable market  Revenue forecast  ASSUMPTIONS COST FINANCING • Vendors  Expense forecast (COGS, Operating)  Break even  ASSUMPTIONS  Cash table  Milestones Amount required  Use of funds  Type of funds • Long term plan or Exit* • Capitalization table*  ASSUMPTIONS Costs tend to appear easier – but not if you want to do it right Boston University Slideshow Title Goes Here       Basic costs are available, such as rent, people Cost of Goods Sold (COGS) takes a lot of work  THIS is important  Shipping time  Credit terms Your operating plan feeds your operating costs  Most entrepreneurs don’t consider an operating plan, to their detriment  What type of operations will you have? In house? Outsourced? Headcount  When, who, you need to hire Space requirements and expansion Cost of development (product)  Talk with vendors, competitors, Advisors, other entrepreneurs  Assumptions, assumptions, assumptions Know your breakeven – it’s the point after which you start MAKING MONEY Boston University Slideshow Title Goes Here  Breakeven by dollars, units, what have you  This is a huge risk-reducer  Don’t give it another thought. Just DO it Fixed Costs B/E = Price – Variable Costs Calculating B/E Boston University Slideshow Title Goes Here Fixed costs = $500,000 Price per unit = $100 Variable cost per unit = $50 B/E = FC/(Price-VC) B/E = $500,000/($100 - $50) = $500,000/$50 = $10,000 units How many units do you have to sell to break even? At the 10,001st unit cash is coming in the door Components of a financial plan – idea to financing Boston University Slideshow Title Goes Here START HERE • Objective  Vision, strategic intent • How to make money • Value proposition • Can you build it?  ASSUMPTIONS REVENUE • Business model • Customer(s)  Addressable market  Revenue forecast  ASSUMPTIONS COST FINANCING • Vendors  Expense forecast (COGS, Operating)  Break even  ASSUMPTIONS  Cash table  Milestones Amount required  Use of funds  Type of funds • Long term plan or Exit* • Capitalization table*  ASSUMPTIONS The cash table is my construct – but everyone has a version INVESTMENT Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4 Week 3 T Week 4 Equity Boston University Slideshow Title Goes Here Loan Grant TOTAL REVENUE Product 1 Product 2 TOTAL OPERATIONS Travel Rent Salaries Materials TOTAL BANK BALANCE Starting Ending Week 1 Week 2 Components of a financial plan – idea to financing Boston University Slideshow Title Goes Here START HERE • Objective  Vision, strategic intent • How to make money • Value proposition • Can you build it?  ASSUMPTIONS REVENUE • Business model • Customer(s)  Addressable market  Revenue forecast  ASSUMPTIONS COST FINANCING • Vendors  Expense forecast (COGS, Operating)  Break even  ASSUMPTIONS  Cash table  Milestones Amount required  Use of funds  Type of funds • Long term plan or Exit* • Capitalization table*  ASSUMPTIONS * If necessary. Will be required for equity financing Milestones drive value, use of funds AND amount required Boston University Slideshow Title Goes Here  Milestones should be  Objectively auditable  Adding value, by anyone’s measure  Reducing risk, by anyone’s measure  Whatever resources you’ll need to achieve your milestones is your “use of funds”  Calculate how many $$ to reach each milestone and add up the milestones – that’s how much you need This is one of the most important slides in the deck Don’t ask: “How much money should I raise?” Wrong question Milestone-driven financial planning – the market will tell you what’s important Boston University Slideshow Title Goes Here  Investors are buying milestones  YOU should not be the person to state your milestones  To determine what are the milestones for you:  Understand other companies’ milestones (comparables)  Advisors and mentors  Customers  Acquirers  Investors  Collaborators Exemplar activity: Product Development Boston University Slideshow Title Goes Here      Engineer (FT): $100,000/year Outsourced prototyping house: $100,000  $25,000/iteration  Assume four iterations Software engineer (PT): $50,000/year Manufacturing expert (PT): $50,000/year Outsourced commercial manufacturing house**: $400,000  $100,000/iteration  Assume four iterations to commercial product  Assume after two iterations, you’ll have a test market device ** replaces the proto house after protos finished $400,000 buys us a first proto Boston University Slideshow Title Goes Here First Prototype End Q2 Product Development: $300,000/year First Proto: 0.5 * $300,000 + 0.5 * $500,000 = $400,000 Pilot Products: $937,500+ $400,000 = $1,337,500 Pilot Products End Q1 Commercial Products End Q4 $600,000/year Test Market* End Q2 Sales: $150,000/year Fixed Costs: $500,000/year Q1 Q2 Q3 Q4 Year 1 * In the hands of five paying customers Q1 Q2 Q3 Year 2 $937,500 Q4 The type of funding is a function of objective and business (cash) Boston University Slideshow Title Goes Here  Objective: If you don’t want to sell, don’t take equity  Cash: If your business will not generate cash for a while, don’t consider debt Capitalization (‘Cap’) Table – tells who owns what Boston University Slideshow Title Goes Here Investment Thing 1 Thing 2 Price Shares % Rana’s definition of an investment Boston University Slideshow Title Goes Here  An investment is an opportunity with the risk quantified, reduced: risk and reward quantified  How to convert an opportunity into an investment?        You KNOW the first answer!! Assumptions, assumptions, assumptions Experience REAL, hands on, advisors Clear about what you don’t know or have Plan to acquire what you don’t know or have Path from here to there The important threesome Boston University Slideshow Title Goes Here  Match your funding sources with fundability** and objective## ** See Self Assessment tutorial ## See What’s My Objective tutorial Exit Boston University Slideshow Title Goes Here  Just comparables  Doesn’t matter if you’re public or private, it’s what you can negotiate

Building a Financial Plan - Revenue Assumption

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