How Much Do You Want? Why Do You Want It? When Can I Get It Back? Understanding The Cash Flow of Small Start-Up Ventures Chris Bovaird, 8 February, 2005

 

 

 

 

Key Points/Topics:

1. Business Plan is Marketing Document

2. New Venture is an Investment

3. Cash Flow lays Out case for Investment

 

 

 

 

 

1. Business Plan is Marketing Document - Aimed at Investors

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Business Plan has 2 Essential Purposes:

Planning document

Marketing document

 

Business Plan as Planning Document

Written for internal audience

Articulates goals and strategies

Set targets and measurables

Allows for revisiting - control

 

Business Plan as Marketing Document

Must Address Needs of Readers

arouse their interest

establish your credibilty

tell a compelling story

address their needs

you need $$$  - they need confidence

 

 

 

 

 

 

2. A New Venture Is An Investment

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Investment: forego $$ now, expect more $$$$ in future

Examples:

Purchase bonds

Purchase education

 

Investment Cash Flow Curve

venture absorbs cash

venture generates returns

curve measures cash flows vs. time

 

New Venture Creation is Cash Absorbing

venture must incorporate

lease/purcahse premises

lease/purchase plant and equipment

product development

market research

marketing communications

salaries

 

Cash Flow Forecasts Shows Whether

You have thought things through

You have done your critical path

You have done your costings

You are Realistic/Conservative

You have incorporated contingency

 

 

 

 

3. Key Investment Criteria

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Capital at Risk

Even Angels & VCs have finite capital

Your venture merely one in a larger portfolio

Time to Realisation

The longer you wait, the greater the risks

Potential Returns

Future revenues and profits

Risk

Defined as: Variability of Return

Importance of sensitivity analysis