Business and Financial Planning

Financial Plan

• Shows the reader how all the ideas, concepts and strategies described elsewhere come together in a profitable way.

• The plan should include pro forma:– Balance sheet– Income statement– Cash flow statement

• Financing required and sources

Financial Plan

• Balance Sheet– Assests– Liabilities– Equity

• Income Statement– Revenues – Cost of Goods Sold = Net Income

• Cash Flow Statement – Operating Activities– Investing Activities– Financing Activities

Financial Plan

• Income Statement– Revenues – Cost of Goods Sold = Net Income

Startup Financing

• As an entrepreneur starting a new e-business, you must be prepared to invest time, effort, and your own money to get your new e-business off the ground.

• Personal Assets

• Friends and Family

• Venture Capital

• Business Incubators

Personal Assets

• Sweat Equity: putting in time and effort

• Mortgage Personal Assets: put up property as collateral to a bank

• Personal loans: taking a loan without collateral (higher interest rate)

• Credit card/credit line advance: similar to a personal loan (usually a high interest rate)

Friends and Family

• Friends and family investors are family members or friends who invest in a business.

• Many entrepreneurs successfully solicit startup money from their network of friends and family.

• A network of potential friends and family investors extends beyond immediate family members and friends, to their families and friends, to their families and friends, and so on.

Advantage: It might be the easiest money you’ll ever get.

Disadvantage: Putting their money at risk.

Venture Capital Investors

• Venture Capital (VC) firms are organized to invest specifically in new business startups.

• Typically take a significant equity interest in the firm with in exchange for providing startup capital.

• May also provide expertise.• Typically do not invest for the long term but

expect to “cash out” after the business establishes a successful track record and can be sold or acquired by others.

• There are many established VC firms

Venture Capital Investors

Business Incubators

• Have traditionally been government- or university-supported nonprofit organizations that nurture new businesses

• Provide startup companies with management advice, office space, networking opportunities, and other critical startup services

• May take an equity interest as well as charge for services

• Not-for-profit incubators may use returns from equity to reinvest

http://www.digitalrhine.com/

Commercial Business Incubators

• Offer startup e-businesses access to the same services offered by nonprofit incubators

• Are primarily interested in high-technology businesses that can become financially viable quickly and leave the incubator within six months to a year