SHOW ME THE
MONEY –
FINANCIAL STATEMENTS
INTRODUCTION TO
FINANCIAL STATEMENTS
Profit and Loss Statement
• Income minus expenses over a period of
time, usually 12 months.
• Includes some non-cash expenses such as
depreciation
• Cash or Accrual Basis: Accrual recognized
revenues when earned, and expenses
matched to related revenues, no matter
when actually paid
• Variable expenses (COGS) are a function
of sales units
• Fixed expenses (“SG&A”) is overhead
expense, not directly attributable to sales.
• “Other” expenses: atypical
• EBT: Earnings before taxes
• PAT: Profit after tax
INTRODUCTION TO
FINANCIAL STATEMENTS
Balance Sheet:
• Snapshot of financial condition at
a given period of time.
• Matches the end date of the P&L
• Assets – liabilities = Equity
• Equity less any distributions would
be the starting point for the next
year… modified by 12 months of
activity… creates a new balance
sheet.
• Balance sheets can be monthly,
quarterly, even daily.
INTRODUCTION TO
FINANCIAL STATEMENTS
Statement of Cash Flows
• Tracks actual cash in and out
• Aligns to P&L but…
•
•
•
•
Ignores non-cash expense
Includes capital expenditures
Includes investments and distributions
Includes principal payment on debt, rather than just interest
• Cash flow statement reconciles the income statement to the
balance sheet.
A business can have positive cash flow and yet not be
profitable. Why?
A business can have negative cash flow, yet be profitable.
Why?
What is the key financial statement you need to develop?
https://www.score.org/resources/businessplanning-financial-statements-template-gallery
QUICK START
REVENUE MODEL
WORKSHOP INCLUDES:
Overview of Revenue Model
Ways to Validate Revenue Model
Profit & Loss Template Example
An understanding of your costs & opportunity for
revenue is VERY important for your business model.
This understanding will allow you to financial
projection and have an accurate understanding of
your CAPITAL NEEDS.
What is your hypothesis regarding how much you will
charge for your product?
- This is the starting point for considering your
opportunities for revenue.
Please keep in mind -- until your revenue model is
VALIDATED- it’s a hypothesis.
You can use a simple tool to help you validate your price
point with your customers…
A matrix that identifies:
-How likely is this person to buy this product?
-How much would they spend?
Would you buy this product for yourself or someone else? How much would you pay for it?
Likelihood to Buy
Very Likely
Not Likely
$0
$10
$20
$30
(Use appropriate scale)
How Much? (Cost of Product)
Other ways to validate Revenue?
• Experience
• Comparable Financials
• Interviews
• Direct observation/competitor analysis
• Logical analysis
You must understand how much it COSTS to create your product.
This can include:
-Costs of Goods or Elements of Service
-Cost of Packaging/Dissemination
-Costs of User Acquisition & Conversion
-Cost of Customer Acquisition
WARNING!
You don’t want to lose money. This happens when it COSTS more to
create/disseminate you product than what you are CHARGING.
Some “seasonal” businesses may barely break even throughout much of the
year and start earning a profit in the fourth quarter: Black Friday.
Keep in mind that there are other kinds of costs to running a
business. These costs can include:
-Salaries
-Rent
-Fuel/Travel
-Insurance
-Equipment
-Marketing
Validating the expense model is relatively simple,
compared to Revenue validation, but not to be
underestimated!
See RMA Statement Studies
Comparable Financial Statements
Samples online
Taxes, insurance contributions, retirement
Let’s take a few minutes to consider:
-Product/Service Price Point
-Costs of Product/Service
-Extraneous Costs
QUESTION: What do you need to change (pivot) about your
concept to be profitable?
SOME LINKS FOR
FURTHER RESEARCH
Overview information on starting a biz
Financial projections Template
https://www.sba.gov/category/navigationstructure/starting-managing-business/startingbusiness
https://www.score.org/resources/financialprojections-template
Business Plan Components
Cash Flow Projections
https://www.sba.gov/writing-business-plan
https://www.sba.gov/blogs/projecting-yourbusiness-cash-flow-made-simple
Learning Center Articles and Videos
Cash Flow Projection Template
https://www.sba.gov/tools/sba-learningcenter/search/training
https://www.score.org/resources/businessplanning-financial-statements-template-gallery
Includes: Young Entrepreneurs / Finding and
attracting investors /Introduction to
Crowdfunding / Take your Business Global /
How to Write a Business Plan
Bare Bones Business Plan
Step-by-step business plan
https://www.sba.gov/tools/business-plan/1
Need to login and create userid and password,
has ability to save as you go – but will
probably take a long time.
https://www.sba.gov/blogs/bare-bonesbusiness-plan-any-business