10 Key Value Drivers 9　Financing strategy　中文

Main Idea

Financing simply means to secure enough funding to execute your business plan. It's backwards to finish your business plan and then decide how much money you can raise on the strength of it. Instead, your financing strategy needs to be the driving rationale behind the amount of money you are raising.

Supporting Ideas

Your business plan should complete and support your financing strategy. There are five general steps in developing a robust financial plan:

1. Complete your projected financial statements—which will model the growth trajectory you have envisaged for your new venture. Obviously, your financial plan must be consistent with the operational ideas and plans detailed elsewhere in your business plan. Your financial statements will consist of:
   • A pro forma income statement—which integrates your sales forecast, your growth strategy and your cash budget. This should be prepared for the next five years and include footnotes that explain your reasoning.
   • A pro forma balance sheet—which will track retained earnings and summarize how the business will be financed over the next five years. Again, this needs to be consistent with your overall business plan.
   • A statement of stockholder's equity or capitalization table—listing the capital structure of the enterprise, distribution of ownership, cost per share and so forth. This document will detail how you intend to finance the operation as it grows.
   • A capital requirements or use of proceeds table—which sets out where the investor's money will be applied.
   • Assumptions and notes—which document how you arrived at the figures given in your financial statements in fine detail.
2. Determine how much funding you'll need to support your 5- to 7-year growth strategy—which allows sufficient funding for capital investments in plant or equipment, working capital, marketing expenses and human capital.
3. Forecast how much funding you will generate internally from operations, and then decide how much external funding you'll need. Keep in mind the amount of external funding sought must be consistent with the value of your enterprise and the amount of equity offered. An outside investor will make net worth decisions on the strength of discounted cash flows using:
   • Net present value—the value today of the future cash flows and expenses related to your business. An investor will weigh up whether the present value is attractive taking into account the risks involved and the delayed return on their investment.
   • The internal rate of return—how much positive cash flow the venture will return to each investor taking into account the amount invested and the time that will be required. Simply put, unless the internal rate of return is high enough to offset the risks involved, most investors will look elsewhere. As a rule-of-thumb, for start-ups, venture capitalists would expect a 58-percent internal rate of return per year.
4. Establish a system of financial controls—which will govern the allocation and use of funds. Naturally, investors won't put up their funds unless they're confident your business plan will be carried out properly. There must be procedures and practices established and a chief financial officer in place who will be responsible for the use of funds.
5. Have a realistic time line—because it always takes longer than you anticipate to find an investor. If you approach the task systematically, your chances of success will be enhanced. The usual steps:
   • Working with your advisors, develop a list of potential investors who may be interested in your venture.
   • Prioritize that list.
   • Begin knocking on doors.
   • Keep going. Remember, out of a thousand business plans they see, the typical venture capitalist will meet with only about twenty of these management teams. Of that twenty, they will fund only one venture. So don't be discouraged by rejection.
   • Ask for feedback from the people you talk with, and revise your business plan as you move forward.
   • Keep working to expand your network of contacts. You never know where the right firm will come from.
   • Consider alternative sources of funding as well:
     • Corporate venture capital funds.
     • Small business investment companies.
     • Federal funding for technology transfer.
     • Private placements to sophisticated investors.
     • Asset-based lending secured with your assets.
     • Other forms of debt capital like trade capital or credit.