Financial ProjectionsWhat is a business Plan?
A business plan is a written representation of a company's dreams and of how and when they are going to be realized. The plan not only outlines the goals of a company but also details the strategies designed to achieve the goals. These strategies have to be made for all aspects of a business, i.e managerial, operational, organizational, financial, marketing, tackling competition, risk management, research and development, expansion, reviews etc. A business plan thus shows both the results desired and the steps being taken to achieve the desired result.
Why is it needed?
The first and foremost reason why a business plan is written is to attract investment. For an investor and especially a venture capitalist to invest in the project, the company needs to communicate to the potential investor, to get its message across, and to motivate a potential investor to actually invest in its business. It aids in the valuation of a business, especially in the case of startups, which have no past results to go by. It can serve as a management tool, a guideline for the course of action to be taken for achieving desired objectives and also to measure actual performance with the projections in the business plan. It is perhaps the only document which puts the past, the present and the future on a single frame which aids analysis of past results, guides future course of action, and implementation, and give the time-frame for achieving goals. It serves as the navigating tool, the route to follow to reach one's destination in the business.
How do you make it achieve its purpose?
1.It should be realistic:The business plan in order to achieve its purpose, should be realistic and should not aiming for achieving the impossible. A certain amount of hyping may be necessary in order to generate interest among investors but over hype could lead to disastrous results. The higher the expectation level, the greater will be the chance of dissatisfaction when the targeted results are not reached. It is better to adopt the conservative approach and take realistic estimates which are possible to meet. If the projections are exceeded it will make everyone involved happy.
2.Clarity of vision :The vision of the company for the future must be clear enough to be translated into writing. This would make it easier to execute the vision. The business plan must be drafted in such a way that it communicates the message of the company to the potential investors and to all the people for whom it is made. The plan must convey the message of an efficient, competent and vibrant organization capable of achieving its goals. This can be communicated only when the vision as well as the route to be taken, is clear in the mind of the entrepreneur.
3.Clear expression of ideas and thoughts :Many an entrepreneur could not execute his vision since he could not translate his vision into text, because he could not express himself. Good communication skills are an essential requirement for success, specially in the virtual world, which has very little tangible assets to show. It is here that we professionals enter the scene. Since we possess the requisite commercial knowledge, an understanding of the client's requirements and the capability to draft, we can help the client in preparing a business plan, more capable of achieving its objectives
What are the steps involved in writing a business Plan?
1.Obviously the first step is to identify the objectives of the business.
2.The next step is to collect historical financial information, to conduct study of the market and see where our particular business stands.
3.Identify and analyse the target market and its characteristics to see how our product would be able to meet market requirements. Alos estimate what percentage of the market our product would be able to capture and the marketing strategy needed to capture the market.
4.Identify risk factors which may come in the way of achieving the goals and the strategy required to manage those risks.
5.Identify competitors and form a strategy to deal with competition to retain market share.
6.Plan the expansion process, and the research and development required in order to keep your product ahead of the rest and also to produce ancillary to produce ancillary products and capture ancillary markets.
7.Make a SWOT analysis of your business and identify the chances of success of your project.
8.Finally make an estimate of the funds required to implement the formulated business plant and make the projections of profitability.
What should the contents of a business plan be?
The contents of the business plan can be derived from the introduction to a business plan.
a) Goals of the business: The business plan identifies the objectives of the business and the products and services for which the business has been set up. A detailed description of the products or services to be produced/offered by the company should be given and also the edge they have over similar products/services.
b)Market analysis : The plan should contain the comparative figures for the relevant industry and its characteristics and trends. It should also contain details about target markets and the level of penetration of the business in the market and its share of the market.
c) Marketing strategies and strategies to combat competition
d) Operational plan to achieve the result as stated above and the strategy to penetrate the market and achieve market share
e) SWOT analysis of the project
f) Organisational plan
g) Expansion plans
h) Financial projections.
It is not necessary to follow the same order as detailed below in the contents. The order can be decided based on the client’s preference and the emphasis which the client would want to give to the various aspects of the plan. However, it should not be in a very haphazard fashion either. After all, the foundation has to be laid first and one cannot start building from the first floor!The Business Plan should be divided into various sections dealing separately with various aspects.
a. Table of contents
The First section appearing in the business plan is the table to contents. This will contain the list and order in which various sections appear in the plan. This is to facilitate the user of the business plan to know exactly where to look for a particular section without skimming through the whole plan.
b. Executive summary
The table of Contents should be followed by the Executive Summary. The Summary states in brief what the rest of the plan details. It encapsulates the essence of the entire plan. It should be long enough to convey to the user an understanding of the entire business but should not be so long as to put off the user from reading the Executive Summary itself. It should be capable of arousing the interest of the user in the project and induce him to go through the detailed part of the plan. Since the business plan is mainly prepared in order to attract investors and investors are not only a difficult lot to please but are also very busy people, it is crucial that the executive summary is well drafted. Since investors go through many business plans in a single day and the busier ones go through several plans in an hour, they first go through the Executive Summary only. Many plans my be put down at this state itself and the investor may not go beyound reading the Executive Summary. Hence utmost care hs to be taken while drafting the Executive Summary. This section, even though appearing in the beginning of the plan, should be drafted only after the rest of the business plan is completed as as to present succinctly the essence of the plan.
c. Company details
This section should contain a description of the Company, its main activities, its earlier performance, if any, its main products, target use, scale and area of activity, objectives, beliefs and motto of the Company etc., The objectives of the company containing its plan for future expansion like going public, mergers and acquisition plans etc. are the aspects on the basis of which the user i.e. the investor assesses the company. The products or services can be dedicated to the product details since the heart of the business lies in its products or services.
A Company is set up to pursue certain objects. The main objects of a company are invariably the production of an article or provision of a service. In the products lies the main attraction for the investors. Only if the products or services are interesting enough to an investor will he be even bothered to read how the company plans to achieve its objectives. All products and services may have their own USP-Unique Sales Proposal, which has to be communicated clearly and effectively so as to attract the investors’ interest. It it is a product, appropriate physical attributes can be described. In case of a service, the full details of the services being offered along with the unique features, functional effectiveness etc., has to be detailed. When unique products are being developed and promoted, it is important to detail the market readiness for the product so as to allow assessment of the venture’s viability. Also, the states of development must be shown, i.e how the product or service came to be visualized, developed and how it is going to evolve in future. However, in addition to an appropriate description of the product, it is advisable to have a prototype, or a sample or a computer presentation accompany the business plan. Once the product details are conveyed, it is necessary to know how the product is to be launched in the market, the target market for the product or service, what portion of the market is expected to be captured etc., This is the next section of the business plan.
e. Marketing Plan
Plainly speaking, the foremost objective of any business is money-making and the products and services are just the means towards this end. How to make the means achieve the end is what the marketing plan is all about. A business must be capable of manipulating the market and reacting to changes in the market to achieve its sales targets. The business must be capable of exploiting favourable market conditions, must be able to tide over difficult ones, convert indifferent conditions to your favour etc., its is all a matter of adaptation to the market and
Charles Darwin’s theory of ‘survival of the fittest’ works here to too, perhaps more surely than anywhere else! the marketing strategy should cover many aspects like, a market introduction, market penetration, market widening, distribution strategy, media publicity, market response gathering, sales strategies etc., Let us examine these aspects one by one. Fist is the introduction of the product into the market. This strategy is crucial to the business since a need has to be created in order to induce the customer to buy. This is more so in case of an innovative product or service. The next part is to work on the need created and penetrate the target market. Once the product or service has carved its niche market, the company should look for growth prospects and look for market widening. This could be both horizontal i.e. widening of market base, and vertical i.e. providing different product to samer users and also at different levels of the distribution network. When the strategy to expand one’s market base is made, the distribution networks should be in place and functioning. This creates the need for a distribution strategy. This market expansion strategy also includes advertising of the product or service and an advertising strategy has be drawn which includes promotion via the press and TV media, printed material like brochures, catalogues etc., it is also necessary to formulate a market research programme in the sales strategy where the total sales force, their training, compensation package etc. are to be detailed. Now we know the company, we know its products, and we know how this product is expected to fare in the market. The way the company will go about all this forms the operational plan.
f. Operational Plan
Organising and work out arrangements for all the above i.e. the production and marketing of the products and services, forms the part of the operational plan. The operational plan should correspond to the rest of the plan and also with the financial projections. This section of the business plan details procedures for various activities viz. Identification of suppliers for raw materials, techniques for getting competitive advantage and economics of scale, delivery procedures, dealing with shortages, cost reduction or cost effectiveness procedures etc. The operational plan should cover all the key areas of a company’s activities but should not be too technical or complicated as to putofftheuser. It should also not include operational details of mundane everyday activities or routine administrative matters.
understand how to prepare CMA data and techniques in preparing it, understanding and analysing financial statements, ratios and CMA data.
Normally the fee for CMA data preparation by professionals in India is not less than 10k- 20k and no upper limit.Time that may need to spend is around 2 working days.
CMA DATA MEANING:
Full form of CMA data is Credit Monitoring Arrangement data. It is the report to be presented to bank to show your past financial history, current financial position and future financial planning.It covers 7 statements related to finance.
WHY DOES BANK REQUIRE CMA REPORT?
We all know that banks are require to follow RBI guidelines to run finance business. RBI suggests not to only rely on CMA data for granting loan. Still almost all banks are asking for CMA data. Even for small loans like 4 lakhs to 6 Lakhs submitting CMA report is required. The reason is that by analyzing it, banks can understand the flow of funds ( Past and proposed) of borrower and viability of projects.
WHAT REPORTS ARE COVERED ?
It covers following statements:
Details of existing and proposed fund limit: In this report, details about your current financial condition, borrowed fund and proposed fund are covered.If business is new, proposed data is required to be given.Operating statement: You are required to show past 2 years and future 3 years ( Proposed) operationg statements. There may be some changes as per loan needed and business nature.The profit and loss account should be presented here.Analysis of balance sheet: Details about your balance sheets of past years are required to show. It is also required to show proposed balance sheet data to show picture of your future business plan. Details about current assets, fixed assets, current and long term liabilities are presented in this statement.Comparative statements of current assets and liabilities: This statement describes the viability of your working capital cycle.Calculation of MPBF: Calculation of maximum permissible bank finance. This statement shows the capicity of borrower to borrow money. It depends on two methods which are dependent on working capital.Fund flow statements: This statement shows the fund flow statements for current and future years. It shows the fund utilisation and sources of funds.The statement is important because it highlights the utilization of fund. To make sure the bank that you are using the fund for the purpose you have borrowed.Ratio analysis: This is also one of the long and important statement of CMA data.It covers key ratios. Some ratios are current ratio, MPBF, Net worth ratio, quick ratios, turnover ratios, debt equity ratios, DSCR etc.
NO SAME REPORT FOR ALL BUSINESSES:
There are different business types and according to their business nature and size, cma report is prepared. It is not similar for all businesses. Similarly, CMA report is prepared as per nature of borrowed fund. The data is different for working capital loan or for CC or for CMA data for bank guarantee.
WHAT IS THE BENEFIT OF SUBMITTING CMA REPORT?
By submitting CMA data report with right ratios and proper presentation of usage of funds, your chances of getting loan has been increased. Provided you follow other procedures and requirements of banks.
BSE CERTIFIED - Financial Modeling Training
About Financial Modeling
Financial Modeling is the most fundamental and widely sought after skill in the finance industry. It is the art of building a model using excel to depict financial statements and investment analysis. This helps you arrive at optimal business solutions by analyzing various parameters. Financial models can be used to represent the performance of a business, a project or any other investment. In today’s world all decisions are based on quantitative analysis. That’s why Investment bankers, equity research analysts and fund managers find financial modeling indispensable.
Why Financial Modeling
· Prerequisite for Investment Banking, Equity Research, and Commercial Banking jobs·
· Provides techniques to value and analyze the firms, IPOs, and FPOs·
· Valuing investments in the nascent stage: Private Equity/ Venture Capital Investing·
· Required for business modeling and decision making for firms·
· To evaluate various project opportunities: checking viability of the projects·
· For project appraisal and risk evaluation using different scenarios·
· Commercial Banks: For disbursing loans for the projects.·
· Project Management: For performance tracking of the on-going projects·
· Comprehensive analysis of complex transactions: Merger and Acquisition Deals·
FINANCIAL MODELING CERTIFICATION
Financial Modeling Certificate is the most sought out Certificate for candidates who are aspiring for opportunities in Financial Research, Investments Banking and other streams of Finance.
“CERTIFICATION OF PARTICIPATION” – EduPristine
“CERTIFICATE OF EXCELLENCE” – EduPristine & BSE
The participants who will clear the Financial Modeling Tests will be provided with ”CERTIFICATE OF EXCELLENCE
EduPristine has provided Financial Modeling training to over in Mumbai, Bangalore, Hyderabad, Delhi, Chennai, Pune and Online. Further we have conducted similar programs for various leading corporate and colleges like 5000+ professionals JP Morgan, Bank of America, Mizuho Bank, E&Y, ING Vyasa, HSBC, IIM C, IIM I, NUS Singapore, FMS, ISB Hyd,IIT D etc.
Financial Modeling course with NSE India CertificationIMS Proschool and NSE India (NCFM - Examination body) offers Financial Modeling Certification Program. Proschool is funded by NSDC, a PPP promoted by the Union Ministry of Finance, Govt of India.This program will help you realize or augment a career in the fields of Investment Banking, Equity Research, Project Finance, Corporate Finance and Credit Rating among others. The program: “Financial Modeling through Excel” is offered across various mediums such as classroom, live virtual classroom and online self study.
NSE India conducts the Financial Modeling course Exam in Pune, Mumbai, Delhi, Ahmedabad, Bangalore, Hyderabad, Chennai, Kolkata, Jaipur, Indore, Nagpur & all other major cities.
Copal Institute and AIMA jointly bring Financial & Valuation Modeling Certificate Program
In today's world of extensive data where decisions are highly quantitative based financial modeling has become an indispensable tool. It is the most sought after skill required in the field of investment banking, equity research , project management, commercial banks and mostly all other sectors in the financial services industry . Financial modeling is the art of building a model using excel to depict financial statements and investment analysis. It builds a structure that integrates various statements and schedules to enable decision making. A financial model represents the performance of a business, a project or any other investment.
This Financial & Valuation modeling program involves the fundamental theories and practices of valuation analysis, strategy analysis, prospective analysis, DCF modeling, trading comparables and transaction comparables. Modeling through Excel will build enough confidence in the participants so that they are able to create their own financial model right from scratch, and use it for solving their business problems. The program is designed to offer students the intensive instruction and training needed to successfully compete in rapidly developing global financial markets.
After completing this course, the participants will be able to:
· Build a financial model from scratch as done at financial institutions
· Work on Excel and use formatting best practices, efficient formula construction, and appropriate driver selections
· Use Advanced Excel functions to present various sensitivities to projected financial metrics
· Fix circularity problems, iteration, and other common modeling troubleshooting
· Cross check the Balance Sheet/ Cash Flow Statement
· Understand and describe valuation and how historical valuation is done
· Understand and explain the techniques, elements and approaches of forecasting
· Provide an overview of Discounted Cash Flow
· Explain the Dividend Discount Model
· Calculate the Free Cash Flow to Firm (FCFF) & Free Cash Flow to Equity (FCFE)
· Calculate the Discount Rate (Cost of Debt, Cost of Equity & Cost of Capital)
· Identify the Revenue Drivers and Cost Drivers
· Prepare a Full DCF Model
· Calculate Equity Value Multiples: P/E, P/CF, P/BV, P/S, PEG, Dividend Yield
· Provide an overview of Trading Comparables
· Calculate basic EV and perform various CACS Adjustments
· Normalize the Earnings and identify the exceptions
· Calculate Last Twelve Months (LTM) or Trailing Twelve Months (TTM)
· Perform Trading Multiples analysis – EV/EBITDA, EV/EBIT, EV/Sales
· Provide an overview of Transaction Comparables
· Describe the different kind of Deal Considerations
· Practice working on the Transaction Template
· Perform the Private and Public Transaction Comp
· Perform Transaction Multiples analysis – EV/EBITDA, EV/EBIT, EV/Sales
Program Fee & Study Material
· Rs. 28,000/- payable at the beginning of the Program (a service tax of 12.36% would be applicable).
· Books would be provided.
FINATICS is an institute committed to engaging students in the field of Applied Finance like never before! The programs offered areclass leading in every respect, be it Fundamentals of Finance, Data modeling & analysis, Financial Modeling & Valuation or Merger & Acquisition modeling/analysis.
Financial Modeling is one of the most fundamental and widely sought after skills in the finance industry. It is the art of building a model to depict financial statements and investment analysis using MS Excel. This helps arrive at optimal business solutions by analyzing various parameters. At the end of the course,You will be able to do the task of building a model depicting financial statements/business model, which helps in decision making.
The EduPristine Financial Modeling course will teach you the basic of MS Excel all the way to creating successful Financial Models. By the end of the course, you will be able to independently build models that are robust and provide dynamic projections that can be used to thoroughly analyze a company from multiple standpoints: operations, investment, financing and valuation.
Learn Financial Modeling with us in the classroom environment with hands on experience. The first module is Equity Evaluations and the second module teaches advanced Excel. So you can make a model firstly, and then understand how to use that model for various purposes like projections, evaluations etc.
Ÿ Tips for Setting up a Financial Model
Ÿ Obtaining Source Data
Ÿ Formatting & clearing data
Ÿ Spreading Historic Financial Statements
Ÿ Setting up model framework
Ÿ Analyzing past trends
Ÿ Normalising earnings and source data
Ÿ Key adjustments
Ÿ Calculating Key Ratios
Ÿ Determining Growth drivers
Ÿ Arriving at Key Assumptions
Forecasting Income Statement
Ÿ Determining revenue / cost drivers
Ÿ Forecasting Income Statement (5 Years)
Modeling Fixed Assets
Ÿ Drivers on Asset intensity
Ÿ Forecasting Capital Expenditure
Ÿ Modeling integrated financial model.
Ÿ Key links to other statements for cash flow
Ÿ Modeling cash flow statement
Ÿ Calculating cash flow to equity
Ÿ Understanding and calculating WACC
Ÿ Estimating cost of Equity
Ÿ Calculating Beta
Ÿ Determining Peer group
Ÿ Valuation using discounted cash flow (DCF)
Ÿ Terminal cash flows, growth and terminal values
Advance Data Presentation Skills
Business Analytics & Intelligence course from IIM Bangalore