SVD 5 Finance

Paul Sturrock [email protected] @PSturrock www.simpleventuredesign.com

!http://www.flickr.com/photos/13902049@N00/5652405755/ el bidule cbdn

Simple Venture Design

Image from “Business Model Generation” Osterwalder & Pigneur

Implementation

Value= Opportunity/ Risk

• Modular adaptation and iteration • Accelerated learning • Risk reduction • Evidence based funding

Davide Casli, http://intenseminimalism.com/2010/the-dot-loop-the-simplest-process-possible/

W H AT ’ S Y O U R B I G G E S T L E A P

O F FA I T H ?

SMART GOALS

Relevant: Why?

Focus: Less is More

Time Based

Specific: 6 Ws

Attainable: How?

Measurable

What should you measure?• Sales Drivers

• Leads (clicks)

• Conversion

• Discount

• Repeat customers

• Customer acquisition

• Design your own!

What should you measure?• Profitability Drivers

• Yield and spoilage

• Returns

• Margins

• Return on assets & equity

• Revenue per employee

• Design your own!

• Customer profitability

Goal Double SalesPositive

Cashflow from Operations

Measure Revenue Net cash from operations

Strategy Expand Awareness Change payment terms

Tactics1. Identify Target Segment 2. Identify Awareness Channel 3. Position Value Proposition and

Differentiation 4. Develop Elevator Pitch 5. Clear Branding

1. Incentives for cash payment 2. Require deposit 3. Credit control system 4. Negotiate credit with suppliers

Start/End Dates

Time Allocation

Some Tools

• Subjective

• Teamly.com

• Max 5 goals : Year, Quarter, Month, Week, Today

• Trello.com

• Card based system based on agile practices

What are your next steps?

Finance in 8 Slides

Simple Questions• How much money do I have?

• How much money do I really have?

• How much do you make on each sale?

• How much do you make on each customer?

• What is your break even point?

• How much money do you have now?

• How did that happen?

Costs

• Product Costs

• Direct

• Indirect

• Fixed vs. variable

• Overhead

What are your major costs?

Assets (what you have) Liabilities (what you owe)

Cash £10,000 Accounts Payable £5,000

Accounts Receivable £15,000 Accrued Expenses £1,500

Inventory £20,000 Provision for Taxes £2,000

Current Assets £45,000 Current Liabilities £8,500

Equipment £50,000 Long-Term Loan £20,000

Property £100,000 Total Liabilities £28,500

Owner’s Equity £166,500

Total Assets £195,000 Liabilities + Equity £195,000

A Balance Sheet always BalancesBalance Sheet: How much money do I have?

Balance Sheet Basics

• Balance sheet is a snapshot

• Assets valued at lower of cost or market

• Working Capital = Current Assets - Current Liabilities

• Equipment is depreciated

• Owner’s Equity = Assets - Liabilities

• Assets= Liabilities + Owner’s Equity (Balance)

Turnover £150,000Cost of Sales £60,000Gross Profit £90,000

Salaries £10,000Premises £12,000Marketing £15,000

Admin £5,000Overhead Expenses £42,000

Operating Profit £48,000Interest £1,000

Profit before tax £47,000

Tax £9,400Net Profit after tax £37,600

Income StatementIncome Statement: How did that happen?

Payments Received from Debtors £20,000

Funds from Investors £50,000

Loans Received £25,000

Sources of Funds £95,000

Expenses paid in cash £10,000

Debt payments £10,000

Dividends £5,000

Uses of Funds £25,000

Net change in Cash (Cash Flow) £70,000

Cash Cash Flow: What really happened? Statement

Cash Flow Management• Get paid as soon as possible

• Incentives for paying cash

• Upfront deposits

• Credit control

• Chase payments

• Pay as slowly as legally and ethically possible

• Don’t let success bankrupt you!

• The more successful you are, the more working capital you need!

• Cash is King! Keep your eye on it!

Good Habits• Cash management!

• Monthly books

• Budget vs. actual

• Reforecast

• Credit collection

• 80/20 rule (don’t be penny wise and pound foolish)

• Use advisor but understand the numbers

Questions

Homework: What’s the Story?

Photo Credit:www.flickr.com/ Nicolò Paternoster creativecommons.org/licenses/by-nc-sa/2.0/