Business Plan Financial Projections Project
Entrepreneurial Finance
PLEASE REMEMBER THE TEAM NUMBER ASSIGNED TO YOUR GROUP.
You are the management team of an early stage venture which is looking for at least $1,000,000 in EXTERNAL FUNDING. The project is to prepare an oral (in-class) presentation to prospective investors to convince them to provide the required capital; AND a written report in support of the oral presentation. Both presentations must focus almost entirely on theFINANCIAL MODEL which validates the commercial viability of thebusiness; and supports the request for funding. The model isin effect the FINANCIAL ANNEXof a business plan.The oral presentation (pitch) should take about 15 minutes; and be as it would be presented face-to-face to investors. There is no prescribed template for either the oral or written presentation; it should be designed to persuade an arm’s length investor to provide funding.
1. Product or Service description should be included only to the extent that it relates to Revenue projections and Value creation. You should identify the product or service as either a NICE to HAVE, WANT to HAVE, NEED to HAVE,or MUST HAVE. Explain how the classification relates to growth and access to funding. The classification may change during the company life cycle.

2. Remember that THE STARTING POINT FOR MOST FINANCIAL PROJECTIONS, PLANNING and FORECASTING is the SALES FORECAST.Make sure you explain and justify the assumptions on which the Sales forecast it is based. Identify your customers (target market(s)), how will you will capture them; and the costs associated therewith.

3. Cash management will be an important consideration for investors. Be prepared to address questions concerning Cash Build/Burn; and time to positive Cash Flow. You should be able to explain breakeven projections; and connect them to your revenue projections with timelines and tolerance (leverage) issues.

4. The crux of the presentations isa comprehensiveREVENUE and PRICING model. IDENTIFY andVALIDATE the proposed MARGINSand COST STRUCTURE.Also be prepared to discuss how you think the cost structure may change as the company grows.

5. Investors need to know how the external funds will be used. Identify when you will need the requested capital; and why the timing projection is valid. Three years is a good planning horizon. At the very least; you must know WHEN more external funding will be needed. Some variation of the forecasting models used in class should probably be used. A critical question is how the funding will CREATE NEW VALUE (that is, make the company more valuable).

4. You must provide and validate a VALUATION of the company which is realistic enough to interest investors. Typically a request for funding includes a proposal identifying the equity interest the investor will acquire. You should expect skepticism from investors about the value which is the basis of the funding request.

5. Your model and projections must be robust enough to support $1,000,000 in EXTERNALfinancing. THE PLAN MAY NOT BE SELF FUNDED.

6. Think about how to organize both the written and in-class presentations. You should not present all financial information in the oral pitch, but the answer to questions during the pitch should not be “its covered in the report”. Both presentations should be short and concise. Make the introductions powerful. You must get the investors’ attention and clearly explain what you are looking for (FUNDING) and why investors should be interested. After that, decide what you think are the most important and impactful parts of the firm’s financial story; and present them. There should be no misunderstanding about what you think the financial strengths of your company are.

7. THE WRITTEN REPORT: There is no prescribed format for the written report, except that it must includea Cover sheet and an Executive Summary (EXSUM); and present and explain the financial model which your propose will make the company successful.

a. Identify and validate ALL ASSUMPTIONS on which the model is based.
b. Summarize the screening methods used to support the viability of the venture
c. Include Statements of Cash Flowsand Income Statements and/or Net Cash Build/Burncalculations for at least Years 1 & 2. Most of the assumptions for this requirement will come from the Revenue and Pricing Model
d. JUSTIFY all IMPUTED VALUES included in the model
e. Identify the “EXIT STRATEGY”by which investors will realize their return.Explain the exit strategy projection and when you think the liquidation or recapitalizationevent will occur?
f. Present a reasonable CONTINGENCY PLAN. Remember the Gompers Questions: what can go wrong, what can go right, and what outcomes can you influence. (Decide how much of the “what can go wrong” stuff you should include in both presentations).
g. Grammar, spelling, precision and clarity of thought are critical elements of quality written commercial presentations, and along with professionalism of the in-class presentation, they will SIGNIFICANTLY INFLUENCE the project grade.The written report is ½ of the group project grade.
h. Put your best (but honest) foot forward. Be passionate—but make sense!!!!

ADDITIONAL GUIDANCE:

1. Present your MAIN POINTS FIRST, and make sure the rest of the presentation supports and explains them. IT IS NOT REQUIRED THAN ALL TEAM MEMBERS SPEAK DURING THE ORAL PRESENTATION; but unless otherwise indicated, I will assume that all members participated EQUALLY in preparation of the team’s work product. Submission of the PP slides as a supplement to the written packet is OPTIONAL.

2. The team should not conduct extensive market research (this is a FINANCE project), however, you must understand the financial characteristics and issues related to operating in the company’s market, including the potential impact of competition.

3. This assignment will count for 20%(20 points)of the course grade.The Group work will count for up to 17 points and up to 3 points will be awarded for timely submission of a Peer Evaluation. Oral presentations will be in Week 10.The day of presentation (Monday or Wednesday) will be randomly assigned by “lottery”.