Create Financials

Create Financials Stephen Lawrence and Frank Moyes Graduate School of Business University of Colorado Boulder, CO 80309-0419

Course Outline

This Week

Create Financial Statements ■

Financial Projections – Drivers – Model – Assumptions

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Financial Dynamics Dean Abrams Present Operations Plan

Financial Plan ■ ■ ■ ■ ■

Income Statement Balance Sheet Cash Flow Summary Assumptions

Operating Expenses Year 1 Year 2 Year 3 30 45 65

Marketing R&D Administration Total 60

90

140

Cost of Goods Direct Indirect Total

Year 1 Year 2 Year 3 70 130 160 30 70 90 100 200 250

Income Statement Year 1 Year 2 Year 3 Revenue 250 350 500 COG’s 100 200 250 Oper Expenses 60 90 140

Fixed Assets (Plant) Year 1 Year 2 Year 3 Assets 200 300 400 Depreciation 140 210 260 Fixed Assets 60 90 140

Working Capital Year 1 Year 2 Year 3 Receivables 100 200 300 Inventory 50 75 125

Balance Sheet Year 1 Year 2 Year 3 Receivables 100 200 300 Inventory 50 75 125 Fixed Assets 60 90 140

Revenue Drivers ■ ■ ■ ■ ■ ■ ■ ■ ■

Number of customers, transactions or units Price per customer, transaction or unit Average revenue per customer or transaction Distribution channel discount Market penetration Response rate Churn rate Growth rate New services or product

Cost of Revenue Drivers ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Personnel costs (labor and/or salary) Materials costs Yields Website operating costs Systems costs Warehouse and shipping expenses Returns Outsourcing expenses Lease and/or rental expenses Cost reductions Depreciation large capital expenditures

Operating Expense Drivers ■

Sales & Marketing – – – – – – –

Customer acquisition cost Personnel expenses Sales commissions Exhibitions Brand building Tech support Customer service

Operating Expense Drivers ■

Research and Development – – – – – –

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Personnel expenses Beta testing Time to market Patent and copyright application Prototyping Subcontracting

General and Administration – – – –

Personnel expenses Recruiting expenses MIS expenses Office rent and utilities

Financial Dynamics ■

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Who does the financial projections? Investor questions Drivers Optimism vs. Pessimism

Financials Spreadsheet Template