Assume you are an entrepreneur seeking investors to help fund your new startup company for an innovative new product you have invented. You are preparing a condensed business plan that is intentionally focused on the financial aspects of your startup. Your audience is a group of savvy investors (e.g., individual investors, private equity investors, venture capitalists, and hedge-fund managers) who might be interested in investing in your startup. Your goal is to provide them informative, credible, and realistic financial information about your company that is backed by key assumptions.
The Math Center has created the following examples:
Pro Forma Income Statement
Pro Forma Cash Flow Statement
Pro Forma Balance Sheet
These examples walk through the instructions, step-by-step, to create the statements required for this assignment.
A video recording of each statement, created in an Excel spreadsheet, is provided for the examples. Closed captioning is available once you access the video.
These are fantastic resources to help you create the specific components required for your assignment.
Note: To emphasize, this is a condensed business plan and intentionally focused on financial aspects because that is the focus of this course.
Create a condensed business plan with the following sections clearly labeled.
- Executive summary (100–150 words): Explain the highlights of your overall plan.
- Company description (100–150 words): Explain what business you will be in and the overall company goals.
- Products or service (100–150 words): Describe your product and the benefits it provides customers.
- Competitive analysis (100–150 words): Describe your major competitors and how you will differentiate.
Include the following sections in the financial plan component of the business plan.
- Source and use of funds (300–400 words): Explain how much money the company needs, how it will raise the money, and what the money will be used for.
- Income statement: Create a pro forma income statement for the current year and the next four years (five years total).
- Balance sheet: Create a pro forma balance sheet for the current year and the next four years (five years total).
- Cash flow statement: Create a pro forma cash flow statement for the current year and the next four years (five years total).
Tip: The pro forma financial statements should be done in Excel and embedded in your Word document. Alternatively, they can be created in Word. Do not submit separate files for the financial statements. Be sure your financials are realistic. For example, many companies lose money in Year 1 because of the initial startup expenses.
- Assumptions (100–150 words): Explain at least three key assumptions on which the financial statements are based.
- Trend analysis (100–150 words): Based on the pro forma financial statements, explain one significant financial trend that may be of interest to the potential investors.
- Financial risk (100–150 words): Based on the pro forma financial statements, explain one financial risk and how you will mitigate that risk.
- Ratios (100–150 words): Based on the pro forma financial statements, calculate two financial ratios of your choice, and explain what these mean in terms of financial health of the company. Tip: Show the numerical calculations for the two ratios using data from your pro forma financial statements, and explain it.
- Future valuation (100–150 words): Based on the pro forma financial statements, explain how much the company will be worth in five years, assuming it achieves its financial targets. Justify your valuation opinion.
Your completed business/financial plan should be at least five pages in length and include at least three outside sources, one of which must come from the CSU Online Library. Follow APA Style when creating citations and references for this assignment.
