financial planning 1 entrepreneurship knowledge vicenza, italy day 2 – january, 15th 2014...
TRANSCRIPT
FINANCIAL PLANNING
1
ENTREPRENEURSHIP KNOWLEDGEVICENZA, ITALY
DAY 2 – JANUARY, 15th 2014
©2009-2014 Piercarlo Cuccia
2
WHAT IS THE MAIN ACTIVITY OF THE BUSINESS?
What kind of business is the enterprise running? What does it mean “value for customer”? Which is the strategic approach within the enterprise is
proposing itself to the market? Which is the profile of your classic customer? What are the economics variables of a business as it?
the business can be defined on volumes or on margins? which is the framework of the costs of a business as it? are the business owners satisfied about their revenues?
3
WHAT MARK SHOULD YOU GIVE TO YOUR BUSINESS?
Which is the main level of satisfaction of your business activity?
What about sales? Which are the main business area where you can get an
improvement? Number of customers and prices? Are you improving your products/services or the wideness of
your offer? More sales or more relationship management? What about your marketing activities? Is the enterprise
customer oriented or product oriented? What about your organization? And your execution? What mark should you give to your revenue account? Are we enough capable to understand and manage business
accounts?
THE ESSENTIAL MEANING OF DOING BUSINESS
1. businesses want profits and still living during time2. customers allow business to get profits3. customers have got needs, necessity and wishes: business
must understand and anticipate those needs and wishes…4. offer a reply of value to customers needs 5. the entrepreneur is the one who have to command and direct
all the activities6. entrepreneur is the key figure for business success7. obviously the performance of people working all over the
activity of the business is very important: they must work like in a team and alone, their performance depends on the kind of leadership used by entrepreneur (the ability to guide, manage, delegate, attract, motive,…)
Value for Customers
=
Offered benefits
Asked sacrifices
CUSTOMERS LOOK FOR “VALUE SOLUTION”
Everyone of us can have different ideas about evolutions of markets and what to do with our business… all kind of strategies must be able to create value and to share it with customers
> 1
Value for the customer
= Intrinsic quality + functional benefits + emotional
benefits
price + other acquisition costs
LA “FORMULA” DEL VALORE PER IL CLIENTE
Customers want reply of value to their needs and wishes. This “value” can be offered in different ways.
> 1
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THE MAIN STRATEGIC APPROCHEAS
TO GIVE MORE AT LESS: to accept the iper-competition and to look for ways to get the lowest price possible (the risk: to be in a “red sea” situation).
TO GIVE MORE FOR MORE: to look for excellence, quality and innovation; the goal is to be knew as the best. It became necessary to be able to give something more and to be paid more (leader ambition).
TO OFFER SARTORY AND MAX SERVICE: personalization and service to create loyalty
TO GIVE SPECIALITY, ORIGINALITY, UNICITY: be special, unique; be different to e competitive ... (“purple cow”)
BE A TREND RIDER: green, web, social, ethic, brain, tech, ... bio, slow, ...
TO DEVELOP PARTNERSHIP WITH OTHER BUSINESS: together to cut some managing cost, to cover more competences and to promote marketing initiative more attractive...
TO GIVE NEW SOLUTIONS: product innovations, service innovations combined with new ways to operate and to organize; often it allows to set more affordable prices because managing costs get down: if it happens it can be possible to attract new customers e recover marginality. (“Blue ocean strategy”)
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REVENUES – COSTS = PROFITS
CU
ST
OM
ER
SS
UP
PLU
IER
S
Production Cycle
ProductsServices
Resources
Services
ECONOMICAL CYCLE OF A BUSINESS
INVESTED CAPITAL and FUNDING
ECONOMICS and FINANCIAL DINAMICS
9
BALANCE SHETT
INVESTED CAPITAL
year n
DEBTsfirst year (n)
EQUTYyear n
SELF FINANCING . +/-
COMMERCIAL POLITICS EFFECTS+/- NEW INVESTMENTS +/-
NEW FUNDINGS OR PAY BACK
= GENERATED CASH
FINANCIAL FLOWS
MANAGING
BALANCE SHETT
INVESTED CAPITAL year n + 1 +/-GENERATED CASH
DEBTs year n+1
EQUITYyear n + 1
OPERATING RESULT
+/-
REVENUES-
COSTI
= RESULT
ECONOMIC FLOWS
BEGINNING GOALS
- taxes
=NET PROFIT
pluralità di schemidi riclassificazione
GROSS REVENUES
- Deductions (discount; ecc.)
= NET OPERATING REVENUES
-operating monetary costs
GROSS MARGIN
- Operating non monetary costs= OPERATING INCOME
+/- financial proceeds/burdens
+/- proceeds/burdens accessorial business
+/- additional income/burdens
= EARNING BEFORE TAXES
TAX MANAGEMENT
ADDITIONAL MANAGEMENT
ACCESSORIAL MANAGEMENT
ORDINARY OPERATIONS
FINANCIAL MANAGEMENT
10
MACROVOCI del CONTO ECONOMICO
INCOME STATEMENT VALUE-ADDED
REVENUES- consumes
- external services- other running costs
ADDED VALUE
EBITDA
=EBIT
- labour cost
- amortizations
Market appreciation
Business size
Operating cash flow
Earning from core business
11
INCOME STATEMENT – MARGIN OF CONTRIBUTION
REVENUES
MARGIN OF CONTRIBUTION
EBIT
- Variable costs
- Fixed Costs
Ability to pay fixed cost of the business
structure
12
Market appreciation
From core business
INCOME STATEMETN AT SELLS COSTS
REVENUES
- Industrial Costs
GROSS MARGIN
EBIT
- Commercial Costs-
Amministration and general
Costs
Market appretiation
Industrial Result
Income from core business
13
14
INVESTED CAPITAL COMPONENTS
BU
SIN
ES
S
INV
ES
TM
EN
TS
Capital Assets
Working capital
TANGIBLE
INTANGIBLE
FINANCIAL
STOREHOUSE
CREDITS TO CUSTOMERS
CASH
OTHER OPERATING CREDITS
15
FINANCIAL SOURCES
FIN
AN
CIA
LS
OU
RC
ES
OPERATING SOURCES
FINANCIAL SOURCES
EQUITY - OWN RESOURCES
DEBTS to SUPPLIERS
SEVERANCE PAY
OTHER OPERATING DEBTS
BANK DEBTS
LEASING DEBTS
DEBT TO PARTNERS
SHARE CAPITALE
RESERVES AND EARNINGS
EARNINGS
… GOING TO THE MANAGING – FINANCIAL BALANCE SHEET : FOCUS ON NATURE OF DEBTS
NET INVESTED CAPITAL
Where the business put the money?
How much has it
invested?
How can be juded the
investment structure?
CURRENT ASSETS
(this amount should return
in 1 year)
NON-CURRENT ASSETS
(more than 1 year)
EQUITY
Who give money to the
business?
How much money need
the business?
How can be judge the financial
structure of the financial
sources?
OPERATING DEBTS
EQUITY FINANCING
FINANCIAL DEBTS
CURRENT LIABILITIES
Trade Paybles, employess,…
NON-CURRENT LIABLITIES
- retirement, deferred taxation provisions, …
CURRENT FINANCIAL LIABILITIES
- Banks (short terms financial borrowing)
NON – CURRENT
FINANCIAL LIABILITIES- Long-terms
borrowings >12 months
EQUITY- Share capital- reserves
ASSETS LIABILITIES
CASH FUNDs
Cash and cash equity
TRADE RECEIVABLE
S
highlighting the amount expected to
be recovered over twelve
months
INVENTORIES
Property, plant & equipment Capitalized development costs Goodwill Other intangible assets Investments in associates Available-for-sale investments Deferred tax assetsLong-term loans receivable
16
CLASSI BALANCE SHEET – FOCUS ON DEADLINES
17
NET INVESTED CAPITAL
Where the business put the money?
How much has it
invested?
How can be juded the
investment structure?
CURRENT ASSETS
(this amount should return
in 1 year)
NON-CURRENT ASSETS
(more than 1 year)
EQUITY
Who give money to the
business?
How much money need
the business?
How can be judge the financial
structure of the financial
sources?
OPERATING DEBTS
<12 MONTHS
EQUITY FINANCIN
G
FINANCIAL DEBTS
> 12 MONTHS
CURRENT LIABILITIES
Trade Paybles, employess,…
NON-CURRENT LIABLITIES
- retirement, deferred taxation provisions, …
CURRENT FINANCIAL LIABILITIES
- Banks (short terms financial borrowing)
NON – CURRENT
FINANCIAL LIABILITIES- Long-terms
borrowings >12 months
EQUITY- Share capital- reserves
ASSETS LIABILITIES
CASH FUNDs
Cash and cash equity
TRADE RECEIVABLE
S
highlighting the amount expected to
be recovered over twelve
months
INVENTORIES
Property, plant & equipment Capitalized development costs Goodwill Other intangible assets Investments in associates Available-for-sale investments Deferred tax assetsLong-term loans receivable
NET FIXED
ASSETS
FINANCIAL – MANAGING BALANCE SHEET ( 4 zones)
WORKING CAPITAL
EQUITY
FINANCIAL NET DEBTS
OPERATING FINANCIAL LIABILITIES
NON-OPERATING FINANCIAL LIABILITIES
EQUITY- Share capital- reserves
ASSETS LIABILITIES
TRADE RECEIVABL
ES
INVENTORIES
FIXED ASSETS
- Financial
- - Tangible
- - Intangibl
e
LIQUIDITYCash and bank
accounts-
NON-OPERATING
S LIABILITIES
-
OPERATING LIABILITIES-
++
= =F.N.F. =N.I.C.NET INVESTED CAPITAL=N.I.C
=
=
=
18
DEBTS AND ECONOMIC CYCLE
DE
First of all debt must be sustainable and it means that business must show an operating revenue able to pays at least passive interests… After it, it must be observed the economic cycle that the business is living:• growth: it increase the necessity of liquidity and so it would try to
pay just interests• stability: it should be to generate liquidity and to pay back the
capital.
In every case it must be a general financial equilibrium, due to business size and its characteristic; the financial system, after the crisis nowadays does not like the excess of debts [ D/E ratio]
Equity
Financial DebtsNFA
NICEquity
Financial Debts
=
WHEN DEBTS ARE TOO MUCH?
REVENUE CLASSES (Euro)
FROM TOBUSINESS
DIMENSIONGOOD ENOUGH PRE ALARM ALARM WARNING
tutte tutte QUOTED < 1 1<D/E<1,5 1,5<D/E<2 2<D/E<2,5 D/E>2,5
50/100 ml oltre big(n.q.) < 1 1<D/E<1,5 1,5<D/E<2 2<D/E<2,5 D/E>2,5
10 ml 50/100ml media(n.q.) < 2 2<D/E<3 3<D/E<4 4<D/E<6 D/E>6
2 ml 10 ml small(n.q.) < 3 3<D/E<4 4<D/E<5 5<D/E<7 D/E>7
0 2 ml micro(n.q.) high values can be allowed: their are easy to warrant
Patrimonio netto
Debiti finanziariAFN
CCNPatrimonio netto
Debiti finanziari
= DE
FINANCIAL STATEMENTS INDICATOR
FINANCIAL AND
PATRIMONIAL EQUILIBRIUM
PROFITABILITY DURATION
Current Assets
Financial liquidity
NFAN/NIC e NCA/NIC
ROS
ROI; RONA
ROE
i
TURNOVERInventory
days
ROI – i; RONA - i
The reciprocal of 365 are index
Days of grace
days before cash in
21
D/E
Net ROE
RNPN
RONA
ROCIN
Debts Loads
CINPN
No – core business weight
RNRO
ROS
RORevenues
Invested Cap.
Rotation
RevenuesCIN
IS %
BS%
x
x
x5
1 – profitability intrinsic in the invested capital
2 - Debts loads:
if CIN=PN = no debt
if PN=0 = all debt
3- usually in the financial framework is used the D/E ratio
4 e 5- they show operating efficiency
2- 3
4
REVENUE INDEX
22
1
Variable costs are those ones that change in order to variation on
the volume of activity
Example: materials
Variable Costs
Tota
l C
ost
s (Y
)
Activity volume (X)0
Variable costs can be not proportionally linear at the growth
of units
Cost
Quantity
VARIABLE COSTS
23
Fixed costs are those ones that don’t change at the variation of the activity volume
Fixed Costs
Tota
l C
ost
s (Y
)
Activity Volume (X)0
Example: ammortizations
Cost must be considere fixed in:- A given timeline - In a relevant range of activities- They move in a “stairs” way
FIXED COSTS
Numbers of units
Am
ort
izati
on
s
200100 300
24
COST ANALYSIS: TOTAL AND UNIT
Activity Volume x
Costs Fixed a
Variable Costs(b=300) b . x
Total CostsY = a + bx
10.00020.00030.00040.00050.000
1.000.0002.000.0002.000.0002.000.0003.000.000
3.000.0006.000.0009.000.000
12.000.000 15.000.000
10010066,65060
300300300300300
400400
366,6350360
y = a + b . x
y/x = a/x + b
4.000.0008.000.00011.000.00014.000.00018.000.000
25
Fixed unit cost a/x
Variable unit costb
Total unit costy/x
UNIT COST
TOTAL COSTS
Variables costs
costi fissi
Total costs
revenues
Numbers of units
EU
RO
Break even point
Revenues = total costs
Margin of Contribution = Fixed Costs
BREAK EVEN POINT
26
27
PRODUCT A B TOTAL % (x/Sales Volume.)
Sales Volume 200 300 500 100,0%
Variable production and selling costs 110 140 250 50,0%
EBITDA for each product 90 160 250 50,0%
Fixed costs 200 40,0%
OPERATING INCOME 50 10,0%
DIRECT COSTING, SOME NUMBERS
28
PRODUCT A B TOTAL % (x/sales.)
Volume sales 200 300 500 100,0%Variable production and selling costs 110 140 250 50,0%Gross Margin Contribution (1° GMC)
90 160 250 50,0%
Specific fixed costs (direct) 40 110 150 30,0%Second Gross Margin Contribution (2°GMC)
50 50 100 20,0%
Common fixed costs (indirect) 50 10,0%
OPERATING INCOME 50 10,0%
DIRECT COSTING WITH DIRECT FIXED COSTS
29
PRODUCT A B TOTAL % (x/sales.)
Volume sales 200 300 500 100,0%Variable production and selling costs 110 140 250 50,0%Gross Margin Contribution (1° GMC)
90 160 250 50,0%
Specific fixed costs (direct) 40 110 150 30,0%Second Gross Margin Contribution (2°GMC)
50 50 100 20,0%
Common fixed costs (indirect) 20? 30? 50 10,0%
OPERATING INCOME 30? 20? 50 10,0%
FULL COSTING
PLANNING THE BUSINESS DEVELOPMENT…
Prior experinces
Dreams … Passions
Markets opportunitie
s
IDEA
The development of the idea
Strategy and business model
BUSINESS PLAN
INV
ES
TM
EN
TS
PARTNERS
BANKS
REVENUES
-costs (variables, fixed)
= OPERATING INCOME
-passive interests
= RESULT BEFORE TAXES
-taxes
= NET RESULTS
INPUTS
-OUTPUTS
= GENERATED CASH FLOWS ?
START MANAGEMENT
REVENUES?
31
THE BUSINESS MODEL
THEBUSINESS MODEL shows how a business
create value for his customers
involve them and how distribute value
receive value from his clients
THE BUSINESS PLAN can be intended as the way as a company want to realize his own business model
POINTS OF BUSINESS MODEL:1. To identify target clients, to hear, to understand and to speak with them
2. To phrase a value approach as answer to their needs
3. To develop contacts, to build relations and to communicate
4. To chose the best sale channels and sale ways
5. Revenues structures and ways to get it
6. To identify key activities
7. To identify key resources
8. To identify key partners and to focus on cooperation modes
9. How to sustain costs and its structure
Il MARKETING MIX – LE 4 P
WHAT IS OFFERED Product
IN CHANGE OF WHAT Price
IN WHICH CHANNELS Distribution
IN WHICH WAY Communication
33
brand, packaging, choises
conditions, promotions, lists
Channels, sales network
Public relations, advertising, direct marketing
MARKETING MIX – 4 C
CUSTOMER VALUE Offered value
CUSTOMER COMMUNICATION
How we hear customers? How we face them?
CUSTOMER EXPERIENCE
Buying experiences
CUSTOMER COST Asked sacrifices
34
How will we solve his needs?
hearing, communication, involvement, new media
All the buying experiences
Price and other acquisition costs
BUSINESS PLAN: WHAT IS IT? HOW DOES IT WORK?
BUSINESS PLAN IS:
An effective tool useful for owners: it promotes the market
analysis that look for opportunities and threats
It allows to be focused on objectives and to define strategies
It helps to underline business weakness and strengths
It allows a feasibility study on economic and financial
variables
It is the document supporting financing requests, the
investors research, partnerships development.
IL BUSINESS PLAN (1)
THE TEAM AND THE IDEAS (NO MORE THAN 1 PAGE) Who we are: how is composed our entrepreneurial team Business idea, goals and times What is demanded – what is offered?
SCENARIO AND MARKET ANALYSIS Macro - environment analysis: what is happening in the
political, economic, social, technologic world? Can it has a strong impact on our business??
Demand analysis: who are our customers? What they need? How they behave?
Supply analysis: who are competitors? Where they are stronger and where they have got weakness? Where we can compete?
Opportunities and threats summary
IL BUSINESS PLAN (2)
PROGETTAZIONE STRATEGICA … synthesis of threats and opportunities: which is your vision of
the future? Which strategy can allow to catch the most interesting
opportunities and fight threats? How to build and irresistible offer for the customer? Which marketing plan can best prepare to first sales? Sales Budget and sales goals definitions
ORGANIZATIONAL PLANNING Who decide? Who does? Who checks? Organization structure: who does what and when? With which
resources? To who he/she must report? What is done inside the business and what outside? How we select our suppliers?
BUSINESS PLAN (3)
Feasibility study on economic and financial aspect (excel)
Investment planning economic forecasts Financial feasibility and cash budget Choice of the financial funds and financial equilibrium
CONCLUSIONS Things to do immediately First issues to meet and to fight
FINANCIAL INVESTMENT LOGIC - 1
Flows
....
FnF3
F2
F1
F0-1.000.000
-500.000
0
500.000
1.000.000
time
€
F0= initial exiting cash flow for the investment
F1, F2, F3 = Net cash flows during the time
Fn = Final Project Value a the ending of the managing activity
FINANCIAL INVESTMENT LOGIC - 2
FLOWS
....
FnF3
F2
F1
F0-1.000.000
-500.000
0
500.000
1.000.000
time
€
F0= initial exiting cash flow for the investment
F1, F2, F3 = Net cash flows during the time
Fn = Final Project Value a the ending of the managing activity
? : too much optimism through the blue line in the graphic?
CASH FLOW of a NEW PROJECT
t1 t2 t3 t4 t5 t6 t7 t8
First times with negative
cash flows
Positive cash flows
equilibrium of cash
flows
Bu
sin
ess
Pla
nn
ing
I
X?
€
t0
I = initial investiment
X = negative peak
CASH FLOW: Buying activity
t1 t2 t3 t4 t5 t6 t7 t8
Initial Investments
POSITIVE CASH FLOWS
G = goodwill
Bu
sin
ess
Pla
nn
ing
I
G
€
t0