CASH FLOW PROJECTIONS – PART 5
Karl Dakin
Capital Coach | Stakeholder Investor Campaigns | Design, Stage, and Manage or Support | Reduce Time, Money, and Risk of Raising Funding | Increase Probability of Success! | Opportunity Management
FUNDING POINT – CASH FLOW PROJECTIONS – PART 5
Using an example of the sale of lemonade, through this series I am explaining my approach to development of a cash flow projection. A cash flow projection provides the foundation for crafting investment offers by showing how sharing of future profits can pay back a loan, participate in sales revenue or split profits.
My cash flow projections use two worksheets within an Excel workbook. The first worksheet is a set of assumptions, facts, and calculations from which I can lay out on the second worksheet all of the data to show when money comes in and out of an organization.
As I build a cash flow projection, I add more assumptions, facts, and calculations so that I may tell the future financial story as a series of transactions from the sale of products and services. It is important for the story to be understandable and believable to whomever I show it to.
When I evaluate anyone else’s investment pitch, I first review any statement of assumptions that supports how they developed their cash flow projection. These statements reflect the knowledge and experience of the author in operating a business. Overlooked expenses or unrealistic growth rates demonstrate a lack of competency in attaining the goals of the business or a disregard for other people’s money. Either is a good reason for an investor candidate to walk away.
At the conclusion of yesterday’s part 4 in this series, I had reached a point where my assumptions would not cover the repayment of the proposed loan principal and interest, leaving me short with a negative cash flow. It is necessary to change my assumptions in order to arrive at a positive cash flow through increasing revenue or decreasing expenses.
Anyone who has built cash flow projections has been in this situation. The challenge becomes to make a valid change in an assumption and not to cheat by changing an assumption to make the end justify the means. It is all too easy to take that best guess on new sales and bump it up to a higher number, resulting in greater revenue and profits without any market data or information to support it. It is also too easy to drop out some of the expenses and make do without some person, equipment, or marketing program as though it were not needed to make the original projections.
In crafting a cash flow projection, this is a good time to take a pause and consider what information you have or that you should obtain to justify making your best guess different.
SUCCESSFUL FUNDING
LAST TUESDAY, my guest on the Successful Funding show was Jeff Dangremond. From his financial experience, ?Jeff and I talked about ‘impact investing,’ ‘impact investors, and the motivations of people making impact investments. Within the last ten years, this factor has become a dominant topic of discussion, which is expected to grow as younger generations have demonstrated that impact (DEI, ESG, etc.) will be a key in their investment decisions. Businesses seeking capital should have both financial and impact projections to show who they are and to compete for funding.
You may see a recording of the show at:
You can see all of my shows at the time of broadcast or recordings of past shows at my profile on LinkedIn.
领英推荐
DON COHEN SHOW
WEDNESDAY, JULY 10, I was a guest on Don Cohen’s show at 9 a.m. MDT along with Jason Jurado. We talked about ‘transition.’ Transition was described as a necessary change to move from today to tomorrow in a manner that would make things better. The improvement is uncertain, and therefore, understandably, there is some concern over risk, but without change, everything remains constant.
You may see a recording of 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.
?SUBSCRIBE
You may subscribe to this Weekly edition of my Instant Funding Newsletter, or you may subscribe to my Daily edition.
Karl Dakin, the Capital Coach
Dakin Capital LLC
?
Capital Coach | Stakeholder Investor Campaigns | Design, Stage, and Manage or Support | Reduce Time, Money, and Risk of Raising Funding | Increase Probability of Success! | Opportunity Management
8 个月What is the best way to make a cash flow projection positive?