Core idea: pay attention to cash flow
To do a good job in the financial budget of a startup, we must first look at what constitutes the bright future of the startup.
The most important financial budget of a startup is "cash flow".
"Cash flow" means that the money in the company should flow in and out like running water, and the running water cannot be broken. Only in this way can the company be considered healthy. Of course, before the income of the startup company comes in, the company must prepare enough funds to support the team until the company generates sales revenue and cash flow. If the self-provided funds can't last that day, then the CEO must be able to know when the company's cash flow will be interrupted. He (she) must find investors before that day and let the investment money flow into the company account, so that the startup company can continue to flow and smell delicious.
The CEO of a startup company should ensure that there is no less than 6 months of cash reserves in the company account at any time. There are two reasons: first, as long as there is money in the account and cash continues to flow, the startup will not die; Second, it usually takes six months to complete a round of financing, and startups need to have enough cash reserves, so that the company can stick to the day when investors come in.
In short, "cash flow" is the lifeblood of a startup, and cash flow holds the power of life and death of a startup. A startup, no matter how good the idea is, no matter how excellent the team is, if the cash flow is cut off, it will all die. The CEO must know every figure of his company's cash flow and understand that the financial budget of a startup is not entirely a CFO's business, but your CEO's own major event. Don't wait for the company to grow bigger, find a CFO to handle the financial budget, and the CEO who ignores cash flow may not live that day at all!
Budgeting the "cash flow" of a startup company is a very delicate job, which requires CEOs to calm down and do their homework seriously. The following three details will determine whether the financial budget (cash flow budget) of the startup company is reasonable, true and credible.
Step 1: Basic assumptions of income
The logic of budget revenue is simple, which needs: the pricing of products/services and the number of customers. Put them in the framework of time and see how they grow. This is the "income budget".
◎ Product pricing
No matter whether your company makes products or services, it must have basic pricing.
Suppose you are a company that produces MP3 players. Step 1: Add spare parts and the profit you want to get the possible price. Step 2: Compared with similar products on the market, it is cheaper than iPod and more expensive than cottage machine. Will the final price not come out? If you figure out that the price is lower than your production cost, then your business can't be done, and there must be serious problems.
Number of customers
When does the first customer come in for a startup? How many customers are there? These are all headaches and puzzles. When calculating the number of customers, never use percentages such as "market share", because startups are small companies, and they have to be careful when operating with a small budget.
Or take an MP3 player company as an example: (a) If it is sold by distribution, ask the dealer. A mature dealer can tell you how many MP3 players he can sell every month without blowing off dust. (b) If direct selling is adopted, you must consider the placement of advertisements. For example, if you advertise in Consumer Games magazine, the circulation of the magazine is 654.38+ 10,000, and the general advertising efficiency is 2‰~3‰, then the first issue of Consumer Games magazine may bring you 654.38+000,000× 3 ‰ = 300 customers at most.
Who are the target customers and how many potential customers are there? Entrepreneurs should have a number in mind.
◎ Time frame
According to the assumptions of product pricing and customer number, put them into a time frame. Generally speaking, investors will ask you to make a 3-5 year budget.
The financial budget of a startup company is most taboo to be calculated by "year". Most startups are short-lived, and living for three years is fatal. The financial budget of a startup company must be calculated in "months". Pregnancy in October, full moon, one year old, making money, tying and generating profits are all precious milestones for a startup company. If you don't use "month" to calculate, you actually ignore the most cherished moment in life.
Once the figures are broken down into parts and calculated monthly, regardless of the income or expenditure budget, the figures will immediately let you feel and grasp the financial budget. For example, you need three months to design and develop products, plus three months to test, improve and mass-produce, and then formally put them into the market. Therefore, the company's income will not arrive until the seventh month at the earliest. This is uncertain. Maybe the dealer still has a 90-day account period. In this case, the money may not be received until the first 10 month. Next is 1 1 month, and the income should increase. Can it continue to increase next month? It is more accurate to make a monthly budget, because it is easy to figure out how much can be done in 30 days. If it is calculated by year, it is often just lip service. The monthly financial budget can not only be used to discuss the details with investors, but also be convincing. More importantly, it can be used to compare and guide your daily operations every month. If the budget figure can be reached every month, it is easy to finish the annual plan before the end of the year.
Step 2: Calculate the cost
The cost is easy to calculate, everyone will, and here is a brief mention.
fixed cost
Including: employee salary, rent, insurance, employee welfare, office expenses, etc.
◎ Variable cost raw materials, packaging, transportation, direct labor costs, etc.
selling cost
Including: advertising, sales, customer service fees.
Equipment input
Including: decoration, office furniture, computers, servers, production equipment, etc.
tax
Like income, costs occur bit by bit within a time frame. If you break down the cost to each month, you will immediately find that many costs are not paid in one lump sum on the opening day of the company.
For example, if you are an Internet company, it is estimated that you need 30 servers, but you don't need to put them all in place on the first day. On the contrary, with the increase of website traffic, you will buy servers one after another. Maybe you won't reach 30 servers until the second or third year. At that time, your company's income may have come in, and there is no need for startups to raise a lot of money at once. Maybe you can find a partner to chip in to start a startup!
For another example, the advertising fee is not paid out for hundreds of thousands or millions of yuan on the first day. Advertising expenses should be the "sales expenses" in your budget, and the purpose of this money is to generate sales income. Therefore, every time advertising expenses are spent, sales revenue must flow into the company, otherwise advertising expenses will be paid for. In practice, the advertising fee for one month has been paid out, and the sales income has not yet come in. The advertising fee for next month must be stopped immediately! Perhaps the flexible CEO will ask: then how should the advertising expenses spent on company image and brand building be calculated? Good question! Start-ups are not blessed with brand advertising or image advertising. The advertisements of start-up companies are likely to be promotional advertisements, which should be tied to sales revenue. If the advertising of a startup company can't make the sales revenue soar, it's nonsense to talk about anything else.
Step 3: Analysis and adjustment
When you put the monthly income budget and the cost budget in the same time frame, the wonderful life line diagram of a startup company appears: cash flow!
Pay attention to finding the "break-even point", add up all the expenses before the break-even point, and you will get the amount of money you need to start a business-if an investor asks you how much money you need, give him or her this amount, no more, no less, and you don't have to grab the scalp and say "give me 5 million, if there is 2 million" empty talk.
Check the relationship and proportion between the main data to ensure the healthy and reasonable business of this startup company from the financial budget data. If necessary, you need to adjust and balance the key ratio between income and cost. Of course, the principle of adjustment is still to return to your original monthly data and analyze its accuracy and rationality.
Gross profit margin-With the extension of time and business expansion, the gross profit margin of a startup may rise from 10% to 60% or even higher, which is the vitality of a startup.
Operating profit rate-the management expenses in the company are relatively fixed. With the increase of income, its proportion in the total cost is getting smaller and smaller, and the operating profit rate will be greatly improved.
Growth rate and scale-With the financial budget table, the annual growth rate of startups is also clear at a glance. See when you can reach the IPO standard of GEM and whether your company is attractive to investors and shareholders.
The financial budget of a startup company is not static, so it should be carefully compared and monitored every month, and adjusted according to the operation situation to make it more real and optimized. If the actual situation is always far from the budget, we should find out the reasons in time to improve the situation quickly, otherwise we should decide to stop and reconsider the future strategy of the startup company.
I suggest you make two budgets, one is the "conservative" budget mentioned above, so that you can have a clear understanding of the bottom line of the startup company and won't make a fuss even if something goes wrong; Another budget is "optimistic" See if you can do better and faster under ideal circumstances, make the enterprise stronger and bigger quickly, and create an IPO miracle as soon as possible. An "optimistic" budget will give wings to your entrepreneurial ideal and give you unlimited work impact!
The key to the financial budget of a startup company is to make realistic assumptions about the company's future income. According to the budget made by the above method, fooling VC is definitely not a problem. The most important thing is that entrepreneurs can no longer fool themselves! You will never be a fool again, waiting for the day when the business of a startup suddenly becomes lucky and prosperous. The financial budget seems to give you a pair of eyes, so that you can see the details of your daily tasks and see every footprint you have to make. In short, the financial budget is first used to monitor your actions, and then thrown to investors.