Financial Plan

(Entrepreneurship)
Hello!
MOHSIN RAZA
Lecture Acccounting & Finance
(SVLs Advisor MS-Deptt)
Superior University, Lahore.
“If you fail to plan, you
are planning to fail ”
- Benjamin Franklin
“Finance is the lifeblood
of a business enterprise.”
Why Financial Planning?
“One cannot raise necessary funds
to run a start-up just by presenting
his/her idea. There needs to be a
sloid financial plan for convincing
someone to invest/lend money”
Components of financial plan
Start-up
Sources of
Capital
Finance
Requirement

Prospected
Financial
Financial
Attractiveness
Statements
 Start-up capital requirement

● Facilities & Equipment Requirement

● Working Capital requirement
 Facilities & Equipment Requirement
Sr. No. Of Cost per Unit Amount
Description
No Units (Rs.) (Rs.)
1 Laptop/PC 05 35,000 175,000
2 Internet Connection 01 4,000 4,000
3 Electricity Connection 01 10,000 10,000
4 UPS/Electricity
01 24,000 24,000
Generator
5 Air Conditioner 01 50,000 50,000
6 Furniture and Fixtures -- 40,000 40,000
7 Security Deposit
-- 60,000 60,000
(Office)
8 Printer 01 20,000 20,000
9 Digital Marketing -- 50,000 50,000
10 Legal Fee -- 10,000 10,000
Total 443,000
 Working Capital Requirement
“Working Capital is used to run day-to-day operations”
Computation for a start-up
“operating expenses of first 3

Sr. No. Description Per Month Cost (Rs.)

1 Office Staff Salaries 60,000
(Peon, Cleaner, others etc.)
2 Rent Expense 50,000
3 Electricity Bill 15,000
4 Other Utilities expense 6,000
to 6 months”

5 Marketing Expense 10,000

Total 141,000
Required Working Capital 423,000
(141,000 × 3)
 Start-up capital requirement
Computation

Sr. No. Description Amount (Rs,)

1 Facilities & Equipment 443,000

2 Working Capital 423,000

Total Start-up Capital Required 866,000

 Sources of Finance
Equity Debt
Owners’ share in a business Owed by the business to a
party different from owner of
business.
Sources: Venture Capital,
Business Angels, Sources: Commercial Banks,
Crowdfunding, Bootstrapping Peer to Peer Lending
Prospected Financial Statements

● Pro forma Income Statement (Cash basis)

● Pro forma Balance Sheet
 Pro forma Income Statement
● Identify revenue streams

● Prepare Sales budget for year-1 (through market research)

● Estimate production cost/unit (in case of tangible product)
● Estimate annual operating cost (already computed)

● Apply taxation according to your sector

● Use Growth and inflation rates for future projections
Pro forma Income Statement
For Trading/Manufacturing For Service Business
Business
Rs. Rs.
Revenue XXX Revenue XXX
Less: CGS* (XXX) Operating Expenses (XXX)
Gross Profit XXX Operating Profit / (Loss) XXX
Operating Expenses (XXX) Less: Tax (XXX)
Operating Profit / (Loss) XXX Net Income after tax XXX
Less: Tax (XXX)
Net Income after tax XXX
 Pro forma Balance Sheet
Assets Rs. Liabilities & Equity Rs.
Laptop/PC 175,000 Debt 166,000
UPS/Electricity
24,000 Equity 700,000
Generator
Air Conditioner 50,000
Furniture and Fixtures 40,000
Security Deposit (Office) 60,000
Printer 20,000
Preliminary Expenses 74,000
(Marketing etc.)
Cash 423,000
(Working Capital)

Total 866,000 Total 866,000

 Financial Attractiveness
● Profitability Ratios
● Break-even Analysis
● Payback period for investor
 Profitability Ratios
Gross Profit
Gross Profit Margin = × 100
Revenue

Net Profit after tax

Net Profit Margin = × 100
Revenue
Net Profit after tax
Return on Equity = × 100
Equity at start of year
 Break-even Analysis
“Break-even analysis predicts the sales volume (No. of
Units) at a given price, required to recover total costs”
Annual Operating Expenses
Break Even Point =
Per Unit Contribution

Note: Contribution = Selling Price – Variable Cost

 Payback Period
“The time period in which investor will recover Principle
amount of his/her investment”

Payback period = Operating Profit

+ Years before full recovery
Revenue

Note: Based on the cash flow investor is getting every

year
 Thanks!
Any questions?
You can find me at mohsin.raza@superior.edu.pk

0323-4396303