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Entrepreneurship I

Entrepreneurship I. Class #11 Finances: VOSG II. VOSG 1 reaction. 1 st person Page numbers Executive summary Management sectoin Market research Pick your market segement(s) Survey those not others Technology in search of a market Barriers to entry. Finances – VOSG II. Finances goal.

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Entrepreneurship I

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  1. Entrepreneurship I Class #11 Finances: VOSG II

  2. VOSG 1 reaction • 1st person • Page numbers • Executive summary • Management sectoin • Market research • Pick your market segement(s) • Survey those not others • Technology in search of a market • Barriers to entry

  3. Finances – VOSG II

  4. Finances goal • Need to understand: • Money coming in • Money going out • Money sitting there • How you are going to fund venture • Value creation

  5. Financial statements • GAAP • FASB • SEC • Weird but true!

  6. Three statements Income Statement Balance Sheet Statement of Cash Flows

  7. Income statement • Results of operating activities for a specified period of time • Revenues • Expenses • COGS • SG&A • Other • Net income = revenues - expenses

  8. Blue, Inc. income statement

  9. Income statement • Revenues - total number of products/services you realistically expect to sell each time period, month, quarter, year. • Cost of sales (or cost of goods sold: COGS) - direct costs of selling all products/services for that time period. Includes direct labor, materials, no SG&A (selling, general, and administrative).

  10. Gross profit - subtract total cost of sales from total net revenues. • Gross profit margin - percentage of total sales. Divide gross profits by total net sales. • SG&A - all other expenses. • Net profit (before taxes) - subtract total expenses from gross profit • Net margin - divide net profit by total sales

  11. Breakeven analysis • Variable costs+fixed costs=total costs • Plotted against revenues based on price and volume

  12. Breakeven at $1 per unit Number of Units

  13. Breakeven at $.75 per unit Number of Units

  14. Fixed Administrative Most salaries for a start up are fixed Variable Directly related to production Can be percentage of some fixed costs Total costs

  15. Balance sheet • Snapshot in time • Short term/long term • Assets - PP&E, FF&E = big stuff • Liabilities - what you owe • Shareholders equity • Owner’s claim on assets • Capital • Retained earnings

  16. Balance sheet • Assets reflect investment decisions • Liabilities and equity reflect financing decisions • Thus, assets = liabilities + equity • So, equity = assets - liabilities

  17. Blue, Inc. balance sheet

  18. Blue, Inc. balance sheet cont.

  19. Blue, Inc. balance sheet cont.

  20. Balance sheet summary

  21. Cash flows • Net cash flows for specific period of time. • Operating (day to day) • Investing (for future) • Financing (how you paid)

  22. Blue Inc. - cash flows

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