Pro forma financial statements for entrepreneurs

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Pro forma financial statements for entrepreneurs by Mind Map: Pro forma financial statements for entrepreneurs

1. Common mistakes of entrepreneurs

1.1. Not understanding revenue drivers and overestimating projections.

1.2. Underestimating costs.

1.3. Underestimating time to generate revenues.

1.4. Lack of comparables.

1.5. Top-down versus bottom-up forecasting.

1.6. Time to secure financing, assumption it will close quickly.

2. Standard Financial Statements

2.1. Income Statement

2.1.1. Describes how well a company conducted its business over a recent period of time. Net income of the period.

2.2. Statement of Cash Flow

2.2.1. Transactions that involve cash.

2.3. Balance Sheet

2.3.1. Enumerates all of the company´s assets, liabilities and shareholder equity. Assets: Liabilities+ Shareholder equity

3. Purpose

3.1. It enables the entrepreneur to articulate his/her business to all stakeholders so that he/she can build momentum toward the ultimate launch of his/her busines

4. Financial Construction

4.1. Build-Up Method

4.1.1. Sources of revenue

4.1.2. Revenues for a "typical day"

4.1.3. Revenue drivers Costumers served Items bought Price of each product

4.1.4. Validate driver assumptions Primary reasearch Secondary reasearch

4.1.5. Total sales per year

4.1.6. Costs of good sold for a "typical day"

4.1.7. Total costs of good sold

4.1.8. Operating expenses Marketing Salaries General administration Rent Interest expenses

4.1.9. Refine operating costs Headcount schedule

4.1.10. Preliminary income statement

4.2. Comparable Method

4.2.1. Compare revenue projections to industry metrics

4.2.2. Scenario analysis

4.2.3. Compare common sized cost percentages to industry averages

4.3. Building integrated financial statements

4.3.1. Derive monthly income statements for first 2 years.

4.3.2. Create balance sheet

4.3.3. Create cash flow statement

4.4. Final steps

4.4.1. 2-3- pages explanation Overview Income Statement Cash Flow Balance Sheet