Financial Planning For Startups

Before you reach out to investors and pitch them up, you need to know certain important things to be a successful entrepreneur. It’s a part of building pitch that will make your investors go wow for your financial planning. It needs to be absolutely practical and should narrate the exact story of business and it needs to be relative in terms of operational needs. What is the secret sauce behind your successful financial planning for startups is a five-star team and considerations of important investors.

However, in case you are looking forward to catching up and share your business ideas with the right investor, then Evolvers is one such platform which can fulfill your needs. Evolvers help you get in touch with the mentors, small business starters, business tycoons, investors and many more like you. It is exactly the place where you meet your right investor.

When the matter comes for the presentation of your business idea in the most convincing forms, then financial planning comes at the top of the list. Here, in this article, I’m about to share all the relevant details are included in the list of financial planning that you need to know for your startup. You might be thinking that what exactly investors and audiences are looking for. Plus, this also becomes crucial to put together all the information on the operational platform according to the priorities as your startup evolves after funding.

What Wows Investors?

More than anything else, what allures investors towards an idea is strategic thinking. Now, you might be confused about the term. Let me clarify that. Basically, they expect you to have a thorough knowledge of the operations of your business. In other words, it can also be further explained as you need to be aware of every single working and details of your startup. You should be able to provide a detailed summary of what your business is now and what are your aspirations for the same after three or five years or so.

Investors keep a desire to know that you have already run numerous practical scenarios that are variable and fixed in terms of costs, revenue, and functioning, etc. It is possible that you may not have enough time in your pitching that can every single and small relevant details of your business. However, you need to be always prepared with the backup plans of all the possible consequences with confidence as well as evidence.

Apart from this, you need to be very attentive and able to justify all the core expenses that can say on its own that you have invested some time for the evaluation of appropriate utilization of funds in your business. Whatever be the assumptions can, or should, you should go ahead with the analyzing part for your business based upon the market industry that your business is all set to serve. Also, you should evaluate one of the most important parts of your startup that how it is going to offer you profits in terms of financial perspectives. You should also understand that your startup might need some short-term changes according to the changing scenario of the market industry.

Henceforth, you need to give some spaces accordingly. You will have to do a lot of research and seek the experts’ advice. Make yourself clear that you know and understand everything about your business and can interpret it anywhere where your business sits on the landscapes of investment. This will surely help you as well your investors to grab the position you desire in your startup in a short span of time.

In case you are absolutely new in this field of pitching game, it may be related with the help from the outside. The platform of Evolvers is perfect for all those small business startups where the innovative minds can get in touch with the mentors, investors, business tycoons and many more.

By the way, I guess, I have made you sure of what the investors of today’s generation want from you. Now what all you need is the perfect financial planning to execute your innovative ideas actively. At this stage of business, you will need some financial statements for your startup for pitching your presentation.

Henceforth, some relevant financial statements that you will need for your business are as follows:

• Financial projections
• Key assumptions worksheet
• Departmental expense worksheet
• Revenue worksheet (profit & loss)
• Sources and uses of funds statements

Sequence Your Financial Statements

The very first step that you need to take on the way of implementing your business idea in your startup is to work on the budget of your startup. Here, you will need to maintain your startup cost worksheet. This job is considered to be one of the toughest jobs because you will have to do a lot of estimating. However, behind the completion of every task, there is a trick and especially when it is a difficult one. Similarly, in this case, too you need a trick which can help you out; making your job easy. So, the trick is you need to underestimate the income whereas overestimate expenses.

Thereafter your next job after this is to work on the profit and loss statement throughout the whole year. An investor is always willing to see this statement of profit and loss; even though they themselves know that it’s really meaningless. However, it helps in managing the balance sheet for the startup.

Apart from these financial statements, the break-even analysis and the cash flow statements- are some of the best ones to have but in case you run out f time, you can give them later. You can also include the break-even analysis if you are selling a product line. However, this is not such an indispensable task for a service business.

How To Create A Business Startup Budget?

Now, one question might be revolving in your head and that is how to create a budget for your business startup. So, don’t panic as I’m going to get that clear too.

Here is a brief description of how you can create a business startup budget plan:

Step 1: Plan For The ‘Day One” Of Your Startup

You need to think in a way that how will be your day one of your startup. Also, you need to plan accordingly by determining things in the right direction.  The ‘day one’ budget plan can be further categorized into four categories. They are as follows:

1. Facilities Cost:

Facilities cost generally deals with the business location which can either be rental or the purchase of store, offices or the warehouses. It also includes costs of ease security deposits, tenant improvements, and signage.

2. Fixed Assets:

Fixed assets are also known as capital expenditure. This includes expenditure on furniture, equipment, vehicles, computers, and machinery. In other words, fixed assets can be considered as expenditure on every small thing which is required to set up your business.

3. Materials And Supplies:

Now, here comes the most important section where you need to invest your funds. Materials and supplies like advertising and promotion, you need money for money to invest.

4. Other Costs:

Other costs include the expenses of attorney and accounting set-up fees, licenses and permits, insurance deposits, and fees to set up your business.

Step 2: Estimate Monthly Fixed And Variable Expenses

Yes, you will need to gather complete information about the monthly expenses which is fixed and the one which is going to vary. This will help you in getting a rough idea of how many funds you need for efficient working of your business.

Some of the common monthly fixed expenditures are mentioned as follows:

• Rent
• Utilities
• Phones (business phones and cell phones
• Credit card processing – monthly fees (transaction fees are variable)
• Website service fees
• Equipment Lease Payments
• Office Supplies
• Dues/Subscriptions
• Advertising, Publicity, and Promotion commitments, like social media, online ads
• Business insurance
• Professional fees (legal and accounting)
• Employee Pay/Benefits
• Expenses
• Business Loan Payment

Some of the common variable expenses are as follows:

• Commissions on sales
• Production costs
• Raw materials
• The wholesale price of goods to be re-sold
• Packaging and shipping costs.

Step 3: Estimate Monthly Sales

Estimation of monthly sales is one of the most difficult tasks. This is because; you can’t get an exact idea on how much profit you can gain from a new business startup.  You can go through these three varying sales projections. These are as follows:

• The best case scenario is when you show more positive results of sales in a month.
• The worst case scenario is when you show the least results of your sale in a month.
• Likely scenario is such a situation when you show your results somewhere in between the estimated and the exact ones’ sales in a month.

Step 4: Create A Cash Flow Statement

You need to combine the whole of the expenses by collaborating with total costs, total sales and collections altogether every month.

So, this is the whole procedure on how you can create your business budget plan for your startup.

A business budget plan is something like that projects the flow of cash but its efficient working depends on the efforts that we make in the beginning with the help of some extra guesswork. You can also go ahead for the budget even if you don’t need the funds for your startup.

The basic reason behind the business startup budget is that the investors at Evolvers want to know that what exactly your budget is, what you expect from them and how much you are expecting them to spend every month. Lenders need thorough information of your business startup which also includes a commitment that you will follow the budget and won’t spend extraordinarily.

Apart from this, they wish to see how much you will be efficient in paying your bills when it starts welcoming your target audiences. You can also term it as working capital in the financial terminology. Apart from this, an investor is always curious to know that how much time you need for a positive flow of cash or you can consider it as bringing more money than your spending. There are many times when this budget is called as ‘cash flow’ statement. In order to manage your budget, you will need to maintain a worksheet till three years which will further help the investor to analyze how you generate cash flow to make monthly loan payments.

Startup Costs Worksheet

In this worksheet, you will get the answers to the questions like, “What do you need money for?”. In other words, it can be said that cost worksheet shows complete purchase on how much money you need to make in order to kick-start your business. You may also consider it as a statement for the preparation for the ‘day one’ of your business startup. This is because you are surely going to need all these kinds of stuff on the very first day of your business. What is important is to keep a check that you have included all the relevant things that are required for kick-starting your business. Henceforth, it is sometimes advisable to over-estimate of all the things that you will need. This is because it won’t let you face the shortages of even smallest thing.

Break-Even Analysis

Understanding it in the simplest terminologies, your break-even analysis allows your investors and mentors at Evolvers to know that point of your business when you will begin to make a profit. However, basically a break-even analysis is considered useful for those businesses who are selling products but this analysis has proved out to be equally useful of the service-type startups. Apart from this, make sure that you also include a graph of the break-even analysis as it is an effective tool at depicting your growth clearly.

Beginning Balance Sheet

Beginning things with the balance sheets in your business startup is considered to be one of the most complicated processes of your business. You might need mentors present at Evolvers for the completion of this job. The main purpose of going with the balance sheets is important because it helps in adding values to your assets that you have purchased for your startup. It portrays a clear image of the amount of funds that you owe to the investors and various creditors. Apart from this, it also gives you an exact idea of the investments that you have made for gearing up in your startup. Consider your day of using a spreadsheet for your business as a day one of your business.

Profit And Loss Statement

Once you are all done with the completion of the monthly budgets and collecting information on various kinds of stuff that relate to your startup, then you should be able to perform the most crucial analysis of your business. Here, I’m talking about the completion of the profit and loss statements of your business. You may also consider this statement as an Income statement as it will directly flashlight on the success rate of your business. You need to maintain a monthly sheet of profit and losses till the end of the first year of your business and later on, you can go ahead with the annual gains or losses’ spreadsheet. This statement also helps you analyze the estimated amount of tax that you will have to pay.

Sources And Uses Of Funds Statements

Various business tycoons do include the Sources and Uses of Funds Statements in their annual reports. You too can create yours which can be slightly different from theirs to portray in front of your investors or other creditors of the exact amount that you need for your startup and working capital. Apart from this, your statement of sources and uses of funds also interprets that how much collateral you can bring about in your business and how many funds you need to borrow for your startup. In other words, it can be said that the sources and uses of funds statements clearly states the amount and purpose of utilizing the funds are included.