Download as PDF, PPTX
Uploaded byJan Bendtsen
Budgets
The document discusses different types of budgets that are important for startups, including: 1) An establishing budget that outlines the costs to get a startup launched. 2) An operating budget/income statement that projects revenues, costs, and profits on a monthly or annual basis to understand when a profit may be achieved. 3) A cash flow budget to determine funding needs by projecting cash inflows and outflows over time. Budgets are seen as important planning tools for startups to test assumptions, set goals, and demonstrate viability to investors, but should be viewed as flexible financial simulations rather than rigid predictions since startups involve uncertainty.
More Related Content
Budgets
- 1. Budgets A plan withoutnumbers is just a dream!
- 2. We want toknow… • What will it take to get to get started? • When will we make profit? • What should our prices be? • What will we need to keep our business running? • How much funding do we need?
- 3. …or in investorterms • What do we have to invest? • What will be the return on our investment? • When will we get our money back? • How much cash do we need to keep it running?
- 4. The Startup Budgets • Establishingbudget • Operating budget / income statement • Sales prices and calculations • Cash flow budget • Funding budget • Budget assumptions
- 5. Why budgets? • Banks andinvestors will ask for them – no budget, no funding • The vision becomes very real • Understand how your business works • Measurable goals
- 6. But how isit possible to predict?
- 7. Forget about prediction… … itis impossible to predict for startups – and the ”getting it corret”mindset is blocking!
- 8. A startup isalways an experiment… … and the nature of an experiment is to test whether your assumptions are right!
- 9. …see budgets as • Afinancial simulation model where you can test different assumptions. • A management tool for monitoring and measuring whether your assumptions were right.
- 10. …or see budgetsas... • Goals to strive for. • Creative obstructions: How do we obtain…?
- 11. Establishing Budget What will itcost to get to START
- 12. Establishing budget A“shopping list” • How big an investment will it take to get started? (expenses before launch) …or a development plan • Phases of product- and business development and costs of each phase
- 13. COSTS Kr. Premises: Rent 18.000 Deposit (3 months rent) 50.000 Goodwill 50.000 Decoration and renovation 0 Shop interior and equipment: Pallet stacker 10.000 Stock: Take over stock 50.000 Purchase new goods 50.000 Car: Downpayment, car 40.000 Advisors: Advice from accountant, lawyer etc. 10.000 Marketing: Marketing materials 5.000 Total costs: 283.000
- 14. DKK Concept development Technologial development Proof of concept Wages 800.000 200.000 500.000 So.waredevelopment 3.000.000 Videoproduc=on 200.000 Other external salaries 50.000 100.000 120.000 Premises and office 70.000 Travel and transport 40.000 60.000 80.000 Marke=ng and sales 500.000 Total costs 960.0000 3.360.000 1.400.000 Development budget
- 15.
- 16. Operating Budget When willwe make profit?
- 17. Operating budget • Howbig a profit do I expect to earn and how soon? • One or more years – at least until profit • Monthly basis year 1 Extra • Best/worst case or sensitivity analysis
- 18. Operating budget (income statement) 1.000DKK Turnover 1.000 - Variable costs (direct cost of goods/services sold) 400 = Gross profit / Contribution margin 600 - Fixed Costs (staff, premises, marketing, administration) 400 = Earnings before interest, depreciation and tax 200 - Depreciation 50 - /+ Interest 10 = Net profit 140
- 19. Turnover 1.200.000 Variable costs (goods sold) -‐360.000 Contribu9on margin 840.000 Fixed costs Staff -‐143.000 Premises -‐215.500 Sales costs -‐35.500 Administra=on costs -‐34.300 Total fixed costs -‐428.300 Earnings before depecia=on 411.700 Deprecia=on -‐100.000 Earnings before interest 311.700 Interests -‐35.000 Net profit 276.700 Ex: Small retail shop
- 20. 3 year budget Note 2009 2010 2011 1 Turnover 6.750 9.960 12.660 2 Cost of sales -‐3.970 -‐5.830 -‐7.180 Gross profit / Contribu=on margin 2.780 4.130 5.480 3 Staff -‐1.743 -‐1.583 -‐2.245 4 Rent, electricity and heat -‐230 -‐243 -‐262 5 Marke=ng, sale and travel -‐456 -‐460 -‐470 6 Administra=on -‐359 -‐415 -‐475 9 Deprecia=on -‐245 -‐275 -‐275 Earnings before interest and tax -‐253 1.154 1.753 7 Interest on bank deposit 6 6 6 8 Interest on bank debt -‐141 -‐93 -‐32 Earnings before tax -‐388 1.067 1.727
- 21. Note 1: Salesbudget Net turnover 2009 2010 2011 Product A 3.460 5.260 7.960 Product B 3.290 4.700 4.700 Total 6.750 9.960 12.660
- 22. For 1 /920XX to 31 /8 20xx Sept. Oct. Nov. Dec. Jan. Febr. Mar. April May June July Aug. Total Turnover 250.000 250.000 300.000 400.000 200.000 250.000 250.000 350.000 250.000 250.000 150.000 200.000 3.100.000 Cost of goods sold 185.000 185.000 240.000 300.000 160.000 185.000 185.000 250.000 185.000 185.000 115.000 160.000 2.335.000 Contribution margin 65.000 65.000 60.000 100.000 40.000 65.000 65.000 100.000 65.000 65.000 35.000 40.000 765.000 Fixed Costs Staff 0 0 0 0 0 0 0 0 0 0 0 0 0 Premises 18.000 18.000 18.000 18.000 18.000 18.000 18.000 18.000 18.000 18.000 18.000 18.000 216.000 Vehicles 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 24.000 Administration 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 60.000 Marketing 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 12.000 Other costs 5% of fixed costs 1.300 1.300 1.300 1.300 1.300 1.300 1.300 1.300 1.300 1.300 1.300 1.300 15.600 Total fixed costs 27.300 27.300 27.300 27.300 27.300 27.300 27.300 27.300 27.300 27.300 27.300 27.300 327.600 Earnings before depreciation and interest 37.700 37.700 32.700 72.700 12.700 37.700 37.700 72.700 37.700 37.700 7.700 12.700 437.400 Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 Depreciation 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 12.000 Net profit 36.700 36.700 31.700 71.700 11.700 36.700 36.700 71.700 36.700 36.700 6.700 11.700 425.400 Monthly budget
- 23. Sensitivity analysisRESULT 1 RESULT 2 RESULT 3 Turnover 950.000 1.200.000 1.550.000 Cost of goods sold -‐285.000 -‐360.000 -‐465.000 Staff -‐107.250 -‐143.000 -‐264.550 Premises -‐195.500 -‐215.500 -‐242.000 Marke=ng and sales costs -‐29.000 -‐35.500 -‐43.000 Administra=on costs -‐32.750 -‐34.300 -‐36.350 Total costs -‐649.500 -‐788.300 -‐1.050.900 Earnings before deprecia=on 300.500 411.700 499.100 Deprecia=on -‐95.000 -‐100.000 -‐105.000 Earnings before interest 205.500 311.700 394.100 Interests -‐35.000 -‐35.000 -‐35.000 Net profit 170.500 276.700 359.100
- 24. … back tobasics (income statement) 1.000 DKK Turnover 1.000 - Variable costs (direct cost of goods/services sold) 400 = Gross profit / Contribution margin 600 - Fixed Costs (staff, premises, marketing, administration) 400 = Earnings before interest, depreciation and tax 200 - Depreciation 50 - /+ Interest 10 = Net profit 140
- 25. Estimating your costs 3methods • The hard way – estimate and calculate cost by cost. • The direct hands on way – speak to experts – fx entrepreneurs or accountants. • Rough estimates – based on statistical data.
- 26. Assumptions about costs • Price pr. m2 • Man hours • Salary per hour/month • Other costs of staff - estimated 30% • Travel activity • Marketing plan – cost per ad, cost per click etc. • Depreciation rates (lifetime of asset) • Interest rates • Etc.
- 27. Statistical Reality Check: Averageindustery profitability Industry Gross profit Net profit Return on equity invest. Hotels 76,7 6,9 7,3 Restaurants 62,7 3,6 24,4 Retail, clothing 44,3 8,3 28,9 Retail, food 37,3 3,1 18,6 Cardealers 16,3 2,5 18,9 Petrol sta=ons 13 0,9 19,6