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Developing a Business Plan. Presentation to TPP November 2000 D.B. Matias. Overview of Last Discussion. Know your audience Who is your reader What is their risk profile (risk/reward analysis) Why would they invest in you (synergies) Know your forms of funding Private equity

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developing a business plan

Developing a Business Plan

Presentation to TPP

November 2000

D.B. Matias

overview of last discussion
Overview of Last Discussion
  • Know your audience
    • Who is your reader
    • What is their risk profile (risk/reward analysis)
    • Why would they invest in you (synergies)
  • Know your forms of funding
    • Private equity
    • Bank lending/asset securitization
    • Alternative funding (JV’s, alliance)
    • Government subsidies
  • Know your risks
risk reward profile
Risk/Reward Profile

Risk

Common

Equity

Ke

S&P 500

Kd

Bond

T-Bill

Reward

5%

8-10%

12%

20-40%

key elements to business plan
Key Elements to Business Plan
  • Market Assessment
  • Product Differentiation
  • Market Penetration
  • Sustainability
  • Operations
  • Management team
  • Funding
financial statements
Financial Statements
  • Balance Sheet
  • Income Statement
  • Statement of Retained Earnings
  • Statement of Cash Flows
basic accounting assumptions
Basic Accounting Assumptions
  • Fiscal period
  • Conservatism
  • Quantifiable items or transactions
  • Matching of revenues to expenses
  • Materiality
  • “Going Concern” concept
balance sheet relationship
Balance Sheet Relationship

ASSETS = LIABILITIES + EQUITY

balance sheet components
Balance Sheet Components
  • Cash and liquid securities
  • Accounts Receivable – related to customers
  • Prepaids – amounts paid in advance of service/good
  • Fixed assets – equipment used in providing service
  • Current liabilities – debts incurred in operation of business
  • Long term debt – form of funding with defined repayment
  • Paid in capital – form of funding without defined repayment
  • Retained earnings – increase/decrease in assets from prior periods
income statement components
Income Statement Components
  • Revenue – supported by assumptions developed in business plan
  • Cost of Goods Sold – variable cost associated with providing service
  • Research and Development – sunk costs used to create or improve technology/intangible assets
  • General & Administrative – all costs associated with creating and running “the business”
  • Interest expense – dependent on funding
cash flow shareholder s equity
Cash Flow/Shareholder’s Equity
  • No new entries created – simply recalculation of existing data
  • Focus on two items most important to running of business: cash and equity
  • Lower priority for this assignment?
ratio analysis
Ratio Analysis
  • Liquidity
    • Available cash to cover current debts and interest
  • Leverage
    • Use of forms of funding
    • Return to various stakeholders (debt or equity)
  • Profitability
    • Viability of business
conclusion
Conclusion
  • Follow PWC guide for structure
  • Use results of model to justify business plan
  • Develop funding proposal to match business requirements
  • Need for further discussion on mechanics of accounting?