Tag Archives: Financial Projections

How To Determine Potential Startup Costs?

How to Determine Startup Costs? From The Startup Garage

How To Determine Potential Startup Costs?

Startup expenses are the costs incurred before the business opens its doors.

Many first time entrepreneurs underestimate the amount of startup expenses that it will take to launch their business.

Before you start making your first expenses, it is important to create a plan of your initial financing so that you know exactly what it will cost.

When creating your startup expense plan, it is important to understand the different types of costs your startup will incur: expenses and assets.

Expenses are the costs that occur during the startup phase for operations, such as travel, rent, supplies, marketing materials, legal fees, and business incorporation fees.

Assets, also referred to as capital expenditures are one-time costs of buying assets such as inventory, property, or equipment.

Determine Your Startup Costs

To estimate your startup costs, start by brainstorming all of the various expenses and assets that your company will phase before you begin selling to customers.  Next begin to assign actual costs.  You may need to do some searching online, call service providers, and reach out to professionals.  Some of the most common expenses and assets include:

–        Legal

–        Collateral (sales and marketing literature)

–        Inventory

–        Consultants

–        Accounting

–        Rent and deposits

–        Research and development

–        Assets (leasehold improvements, fixtures, signage)

–        Long-term or fixed assets (land, plant, equipment, furniture)

–        Website or app development

Timing is Everything

Remember, your startup costs are incurred before you generate any income from the business.  Be sure to develop a budget for all of your startup costs as well as some additional funding as most businesses are not profitable for some time.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

What Do Investors Want in A Professional Business Plan?

What do investors want to see in a business plan? from The StartupGarage

What Do Investors Want in A Professional Business Plan?

Welcome to video Fridays from The Start Up Garage


A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from our viewers.

Key Take Aways From Video:

1. Investors want to see a clean, professional looking, honest, and reasonable assessment of the business.

2. Investor wantwell-sourced research sections, which include the market, industry, and competitive analysis.

3. Investors want an exceptional product description that explains all the features and benefits of the product or service you’re going to be selling.

4. Investors want a reasonable sales, marketing, and operational plan and budget.

5. Investors want 5-year financial projections.

Overall, investors are sophisticated and smart, this isn’t a traditional sales document.

Complete transcript below:

“What do investors want to see in a professional business plan?”

Great question Jen, overall investors really just want to see a clean, professional looking, honest, and reasonable assessment of the business. They want clear, well-sourced research sections. So this includes the market, industry, and competitive analysis. These really need to be cited with trusted sources, so add footnotes in there as well.

The next thing you want is a really good product description that explains why all the features and benefits of the product or service you’re going to be selling. Then they’re going to want a reasonable sales, marketing, and operational plan and budget — so you just need to be reasonable in these expectations of what you’re really going to be able to achieve in terms of growth.

And then they’re going to want to see a well thought out 5-year financial projections. These include balance sheet, cash flow, and profit/loss along with all the assumptions that go into making those up.

So overall investors are sophisticated and smart. So this isn’t a traditional sales document — you don’t want to make it too “salesy”. They want to see something that is just reasonable and honest — and I think you’re going to get a lot further with investors than something that is hyperbolic and exaggerated

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

What Startups Got Funded In May?

Startups That Got Funded In May from The Startup Garage

What Startups Got Funded In May?

May Monthly Startup Wrap-up.

Find Out Who Got Funded and What Type Of Deals Are Attracting Investment here:

May 1st Bookbub the bargain bin for ebooks, secured $3.8 million in it’s first round of funding.

May 3rd Waggl the startup survey app inspired by honeybees,
secured $1 millionin funding.

May 5th Automattic which runs WordPress.com, became a billion-dollar company, thanks to a new $160 millionin funding.

May 5th PearSports which acts like a human personal trainer, secured $5 millionin a second round of funding.

May 6th Allclasses an education startup, closed a $1.5 million dollar round of funding.

May 6th Flux a top-secret spinout from Google X, landed $8 millionin venture funding.

May 12th Adform an Ad-Tech Startup , that creates rich media display ads, raised $5.5 million in funding.

May 13th Bitpay a Bitcoin startup, secured $30 million, to provide business solutions for merchants.

May 14th FanTV a startup set to revolutionize cable, tuned into $8.3 million in funding.

May 15th Uber the app that delivers you sophisticated car service, raised a new round of funding estimated at $350 million .

May 19th Autopilot a marketing Automation Company, grabbed $7 milllon in new funding.

May 20th Sumologic a log management app, pulled in $30 million in funding.

May 20th Centrify a cloudbased I.D. service raises $42 million in funding.

May 21st LiveOakVenturePartners an early stage lead investors, secureed $109 milion in investment funding.

May 27th AverInfomatics a health care billing system startup, secured $8.5 million.

May 28th MessageBus a custom email platform, raised $4 million in funding.

 

May was a momentous month for the 16 startups listed above.
Uber, ranked supreme, securing the top $ investment of $350 million bringing the company’s validation to an estimated $3.5 billion.

 

From Education Startups to Cable TV Startups, a common theme remains amongst those that secured investment, they all provide innovative solutions to modern day inconveniences.

Whether you have a question about Startup Funding or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation

To read more on all success stories referenced above click here.

Legal Tech VC Funding Beginning to Stagger

Legal Tech vs Funding Stagger from The Startup Garage

Legal Tech VC Funding Beginning to Stagger

Although the legal industry is massive ($300B), it is seeing a drop in funding by 16% year-over-year as investments are concentrated at the seed stage and exit activity is lukewarm. Funding to legal tech startups barely topped $100M across 30+ deals, with the largest deal representing 45% of total investments.

 

Deal Flow

Oddly enough, the industry actually experienced a 41% increase in deal activity despite the 16% decrease in actual funding as depicted in the graph below:

 

Although the legal industry is massive, it is seeing a drop in funding as investments are concentrated at the seed stage and exit activity is lukewarm.  The Startup Garage. TSG Enterprise.

Graph thanks to CB Insights.


 

Whether you have a question about Legal Tech VC Funding, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Writing Your Business Plan

Writing Your Business Plan from The Startup Garage

Writing Your Business Plan

Business Plan Benefits

You can be sure that writing your business plan will be a time consuming process.  However, undertaking this process is completely worthwhile.  Your plan will help you gain focus, sync all of the supporting programs, develop short and long term strategies, show investors what you are doing and what you are asking, and support your vision with an evolving guide to evaluate your progress and plans for the future.

Getting Started

Familiarize Yourself with the Business Plan Table of Contents

Download a business plan template or review some of our sample plans to get a sense of what goes in a plan as well as the table of contents.

Start with What You Know

Begin by completing the business plan in outline form with what your currently know about the business.  For now, keep it short and choppy.  The goal for this phase is to leave with an understanding of what you know about the business and what you don’t know.

Research

The industry analysismarket analysis and competitive analysis are three very important sections of the business plan.  On the one hand, they help you assess the market opportunity, the size of the market, trends in the market, etc.  What you learn here can have effects on the nuances of your product and service as well as your sales and marketing strategies for how you will position your product and service.  Additionally, this research will allow you to understand the strengths and weaknesses of your competitors and determine just how you will differentiate yourself from them.

Strategy Development

Now that we have the supportive research to help us tackle the sections that you were originally unable to complete it is time for a brainstorming session.  This looks different for each business plan and each entrepreneur as the gaps, red flags and concerns are never the same.  In any case, take the time to dive into these incomplete sections.

Financial Model

The next step before you are ready to complete a first draft is to build out your financial projections.  The financial plan breaks down the financial projections of the company in detail, compiling all revenues, expenses and profits into conventional accounting sheets (a balance sheet, cash flow statement and profit & loss statement).  The goal of this section is to show how the strategy outlined in the plan is sound from a financial standpoint, presenting a realistic business and investment opportunity.  This section also communicates the need for any outside investment and the uses of these funds.

Create a First Draft

Once you have complete the strategy development phase, you’ve ironed out all of the kinks, and you’ve created your financial model, you are ready to take your initial outline, your research and your newly minted strategies and complete a draft of the business plan.

Edit, Edit, Edit

Read through your business plan several times to ensure that you catch all of the grammatical and design mistakes.  You will also want to read through your business plan to ensure that you have provided enough content and context in each section so that the reader is not left with any questions after reading a particular segment.

 

If you would like help writing a business plan or have questions about our writing services, feel free to contact us for a free consultation!

The “Series A Crunch” Myth

The “Series A Crunch” Myth from The Startup Garage

The “Series A Crunch” Myth

Despite the concerns about a crunch, the reality is that the level of Series A activity is holding steady. At the same time, the number of seed deals have exploded. As a result, the Series A Crunch is nothing more than excessive demand for a limited supply of Series A financing. While the number of startups receiving funding overall declined in 2012, they raised 22% more capital on average and closed 30% faster than in 2011.

According to an analysis published by The Big Data Group and SiSense, the number of Series A deals actually increased in 2012, and those deals closed faster than they did in 2011. However, fewer Series B deals were done in 2012, with 45 more days on average needed to close the deals.Dave The Big Data Group reports, “It’s more of a Series B crunch than a Series A crunch.”

The “Series A Crunch” myth boils down to supply and demand; with a fixed number of Series A investments to go around and a lot more entrepreneurs fighting for them, many will go unfunded.  It’s not that there is less funding (supply), there are just more entrepreneurs (demand), causing those who do not find funding to blame it on a mythical “crunch.”


 

Whether you have a question about the “Series A Crunch” Myth, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Big Data Report – $4.9 Billion Invested Across 523 Deals Since 2008

$4.9 Billion Invested Across 523 Deals Since 2008 from The Startup Garage

Big Data Report – $4.9 Billion Invested Across 523 Deals Since 2008

Big Data investment has been gaining momentum seeing nearly $5 billion of funding over the last five years. 2012 was the biggest year of deals and saw YoY growth of 19.5% over 2011. The graph below highlights the five-year financing trend to Big Data companies.

In addition to the acceleration in financing activity, big data exits have also increased with 2012 seeing 20 exits including several IPOs. IBM and Oracle lead the pack with the most acquisitions of Big Data companies.

Below is the five-year financing trend to Big Data.

The Startup Garage. TSG Enterprise.  $4.9 Billion Invested Across 523 Deals Since 2008

The Big Data exit activity level has also seen a sizable uptick with 2012 seeing many exits via M&A and 3 IPOs including ed up as well.

The Startup Garage. TSG Enterprise.  $4.9 Billion Invested Across 523 Deals Since 2008

 More information including a link to the full Big Data Report can be found here.

 

Whether you have a question about The Big Data Report, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Top 5 Benefits of Creating Financial Projections

Top 5 Benefits of Creating Financial Projections from The Startup Garage

Top 5 Benefits of Creating Financial Projections

An old Woody Allen joke resonates with financial modelers and forecasters: “If you want to make God laugh, tell him your future plans.” We all know that financials projections are based on assumptions that likely never come true.  Yet, putting together the financial information for your startup might be one of the most important and eye opening experiences before the launch date. Sales projections for an existing business are derived based on past sales figures and reports as well as statistics regarding other known pertinent internal and external factors. Yet when projecting for a startup, all previous sales history is non-existent and therefore, there are some arbitrary fundamental assumptions that need to be made. Almost every experienced entrepreneur will tell you that financial projections are absolutely necessary for any launch process. Below are 5 of the major benefits that novice entrepreneurs will enjoy simply by spending time projecting hypothetical financial projections for their business plan.

  1. You will be able to show potential stakeholders that you have a levelheaded grip of reality and your expectations are practical. Possible creditors or investors are most certainly looking for realistic financial expectations in your business plan.  Creating financials that are not too optimistic or too pessimistic will earn the respect of potential investors and give them confidence in what you are presenting.
  2. You will be able to price goods and services more accurately and competitively. Lining up costs with revenues will provide you with an idea of your Break Even Point. This knowledge will be essential when it comes down to setting up an appropriate price to charge. If you charge too little you will make an inadequate profit, or if you charge too much you will end up alienating and losing customers.
  3. You will be able to trim costs strategically. Once you have categorized your projected expenses you will see emerging spending habits associated with your business. Noticing excessive spending before it has occurred will force you to create innovative money saving strategies to create value with less capital. Paying attention to areas that you are overspending can improve your bottom line. For example, if you anticipate spending money on outsourcing, you might notice that this expense could be eliminated by adding the duties to some of your employees. If you considered business lunches, those might have to be transformed into coffee meetings instead. In other words, consider if each expense category is sufficiently helping your business to generate income. Depending on your answer, you may need to take preventative actions.
  4. You will be able to pace your growth more effectively. At the startup point you will not have any idea of when you might need to hire more employees, find suppliers on a bigger scale or extend your services to other markets. In reality, you will consider expansion when sales and profits are growing consistently for a several month period. At startup you need to be prepared for that possible expansion and be able to recognize and respond to it accordingly.  Creating a cash flow statement will allow you to consider corresponding income to expenses and will not leave your business grasping for cash during a crucial point of early development.
  5. You might be able to reduce taxes. Often startup businesses don’t know how to take advantage of controlling their tax spending. If your projections predict that you will be making profits by the end of the year that means that you will be paying taxes. So, if you plan on spending for a company vehicle, the best time would be exactly before the end of the tax year, so you can take advantage of the tax deductions. Businesses that are sloppy about predicting their expenses are willing to miss dollar saving tax opportunities. Financial projections and following up on actual bookkeeping will help you decrease the tax spending of your business.

Lastly but probably most importantly your financial projections are a way for your business to set goals and to try to reach them. Your employees are all working towards a clearly outlined financial goal and reaching it will only provide satisfaction for all involved.
 

Whether you have a question about Financial Projections or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Revenue Sources: Donations

Donations to Non-Profits from The Startup Garage

Non-Profit Revenue Sources: Donations

Target the Best Potential Donors

  • Know where to begin your donor search.  It is more cost-effective to strategize who will be most likely to make a donation and target those potential donors rather than spend the time and effort to cast your net as far and wide as possible.  Start with the board of directors and their contacts, since they already share a passion and drive for the pursuit of the mission.

Know Why People Donate

  • Maybe it’s because they share in your commitment to the non-profit’s vision.  Maybe they want a tax write off if you have qualified as a 501(c)(3).  Maybe they want the PR benefit of being able to call themselves a donor to your organization.  No matter what the reason may be, it is important you are paying careful attention to why your donors choose to donate.  It’s a great way to effectively target them for future donations.

Stay Organized

  • Putting prospective donor information into some sort of system will be incredibly helpful in streamlining your efforts to secure donations.  This way you can have an effective system for knowing how much, when, and why a donor chose to help your organization.
  • If you plan on having a membership option for your donors, make sure you have a system in place that tracks their membership details.

How to Ask for a Donation

  • For in-person and phone requests, it is critical that you train your staff and volunteers on how to ask for a donation.  You can identify who are your strongest donation solicitors.  Make sure they are prepared to handle rejection and can interact with a potential donor in a conversation.  Ask for a donation in a specific amount (or suggest several specific amounts) rather than just asking for any donation – it’s better to propose amounts as options rather than “yes” or “no” as options.
  • For e-mail and paper requests, bear in mind that these two forms of contact are usually numerous and easy to disregard amongst the rest of the “junk mail”.  E-mails are inexpensive, but if not done carefully, can alienate your prospective donor.  Make sure to include your organization in the subject line, include a link to your organization’s web page, and encourage the potential donor to forward the e-mail along.  You should also provide options to unsubscribe as well as hide the e-mail address from the rest of the recipients on the list.  You can save on postage if you obtain a non-profit discount on bulk mail.  Your mailing should include a letter asking for a specific donation, a brochure about the organization and a response card for the donor to return.

 

Whether you have a question about Non-Profit Revenue Sources, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Revenue Sources: Grants

Grants for Non Profits from The Startup Garage

Non-Profit Revenue Sources: Grants

Sources of Grants

  • Unlike donations from private individuals, grants come from foundations, government agencies, private businesses and other groups.  As these groups have access to larger accounts, the grants they give out are usually much larger than individual donations.
  • Many grants are only available to 501(c)(3) tax-exempt organizations.
  • Grant givers are often looking for an organization that meets the giver’s criteria in terms of the activities and projects conducted by the recipient.  It is important that you look for grants that specify criteria you can meet in order to have the best shot at winning the grant.

Writing Grant Proposals

  • Many grant givers have specific application procedures and deadlines, so make sure you are up to date.  Many grant applications have two rounds to screen for appropriate recipients and save the non-profit the time necessary to prepare a full grant proposal.  The full proposal, if you are invited to submit one, includes a cover letter, cover sheet, description of the organization, a needs assessment, program goals and objectives, financial information, a conclusion and any appendices or attachments as necessary.

Corporate Sponsorships

  • Approaching local businesses, banks or institutions for corporate sponsorship can also generate a large amount of revenue for the non-profit.  Most corporate sponsors want some kind of recognition – such as their name and logo on a banner or t-shirt – for their contribution.  However, you are only allowed to “acknowledge” your sponsor, not provide them with advertising.  Providing them with advertising can count as unrelated business income (UBI) and be subject to tax or losing your 501(c)(3) exemption status.  Consulting with an attorney may be helpful if you are not sure whether your form of recognition is acknowledgement or advertising.  If you do provide recognition with a commercial value (advertising) than the donor can only deduct the difference in value between the donation and the item of commercial value provided the item exceeds $75 in value.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Non-Profit Grant Sources, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!