CASH FLOW PROJECTIONS – PART 1
Karl Dakin
I help you overcome challenges to raising capital. Take advantage of my Motivated Money Method to identify those investor candidates that are most likely to invest. Top expert in fundraising.
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July 8 – Don Cohen Show – 9 a.m., MDT – LinkedIn Live
July 9 – Successful Funding Show – 8 a.m. , MDT – LinkedIn Live, Facebook and YouTube
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FUNDING POINT – CASH FLOW PROJECTIONS – PART 1
?GUEST REQUEST
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FUNDING POINT - CASH FLOW PROJECTIONS – PART 1
I completed the first draft of a cash flow projection (pro forma) for RCI Community Funds today to move forward with the business plan, seed funding, and a Reg CF campaign for the first community investment fund. Having prepared hundreds of these over four and a half decades, I have developed my approach to crafting this very important document. Cash flow projections are needed to forecast future profits out of which investors may be paid back their investment. Without a cash flow projection, all talk of future wealth is simply that – talk.
I have been writing Funding Points on Different Money in Different Buckets, where I show that there are many sources of funding, each with a different motivation that may or may not match up with a need for funding. Using the current work of RCI Community Funds, which presents several different funding opportunities of different types, I have been reviewing these funding sources to reflect upon their motivation and how it may lead to an investment. I am taking a break from this analysis to dive deep into the important topic of crafting cash flow projections.
I will share here with you how I craft cash flow projections that can stand up to examination by business team members, investors, allies, and other sources of help and support.
As in the past, I will use the illustration of the sale of lemonade. For purposes of this illustration, I will suggest some additional details:
·?????? I plan to operate a beverage cart
·?????? I will sell lemonade in single servings
·?????? I will borrow money to start and operate the lemonade cart as a business
I start with an Excel spreadsheet.
On the first worksheet of a workbook, I write out my assumptions.
An assumption is a guess. It represents the author's best attempt to assign a numeric value.
I assume that:
·?????? I will buy one beverage cart
·?????? I will buy lemons, sugar, water, serving cups
·?????? I will obtain a loan
On the first worksheet of a workbook, I write out all of the facts that play a role in forecasting.
A fact is something that is true today.
Today, I can:
·?????? Determine the cost of a beverage cart
·?????? Determine the price of lemons, sugar, water, serving cups
·?????? The current interest rates charged to entrepreneurs starting a new business
The assumptions act as variables within the formulas within each cell of the worksheets.
With assumptions and facts, I can create formulas that generate calculations.
If I buy one beverage cart, I can calculate how much money I will need to pay for the cart.
If I buy 20 lemons, a pound of sugar, 2 gallons of water, and 100 serving cups, I can calculate the cost of purchasing these materials.
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With lots of assumptions and facts yet to go, I started to late out the second worksheet, which looks like a profit and loss statement.
In the first column, I will list each type of revenue that may be generated from operating of the beverage cart (cash inflow) which is then followed by each type of expense that may be incurred (cash outflow).
In the second column, I will insert assumptions, facts and calculations for each item in the first column.
After inserting data in each cell in column two, the cash inflow and the cash outflow should be totaled; then, the cash outflow is subtracted from the cash inflow.
If the value of the cash inflow exceeds the cash outflow, then cash flow is positive. If the value of cash inflow is equal to cash outflow, then cash flow is breakeven. If the value of cash inflow is less than cash outflow, then cash flow is negative.
Additional assumptions, facts and calculations will be added until the cash flow projection is good enough for the person who will rely upon the cash flow projection to make a decision.
Over the next several days, I will add steps in the crafting of the cash flow projection.
SUCCESSFUL FUNDING
NEXT WEEK, TUESDAY, JULY 9, my guest on the Successful Funding show will again be Jeff Dangremond. As a wealth advisor, he guides his clients in making impact investments. We will discuss investing in communities.
You can see all of my shows at the time of broadcast or recordings of past shows at my profile on LinkedIn.
DON COHEN SHOW
I will be a guest on Don Cohen’s show tomorrow morning, July 8, at 9 a.m. MDT. Don and I will talk again about community funding.
You may register to see the show at:
Don is an expert on LinkedIn, particularly on the use of Live streaming to build brands and communities. We will discuss using LinkedIn as a social media platform for building communities that support raising funding.
All shows where I have been a guest can be viewed on Don Cohen's LinkedIn page under Posts.
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Karl Dakin, the Capital Coach
Dakin Capital LLC