FREE online courses on Venture Capital Funding - Major Sections of a Business Proposal - Analysis of operations and projections

 

Here you should present your own analysis of the company's prior operating history as well as projections for the future.

 

General

In this section you need to start out with some general profit and loss information which will be based on financial data from your company. For example, for the last three years and for the next three years in the future, take net revenues, cost of sales, operating expense, interest expense and income. Project them forward and give historical information for them so that one can see at a glance where the company has been and where it is going:

 

 

Rs. 000's	Prior Year Actual	Last Year Actual	This Year Projected	Next Year Projected	In Two Years Projected
Net revenues	100	400	1000	4000	10000
Cost of sales	100	200	500	2500	6500
Operating expenses	100	100	200	400	800
Interest expenses	100	100	100	200	300
Net income	(200)	--	200	900	2400
Current assets	20	40	400	1400	4300
Machinery, equipment	100	400	600	1000	1000
Land and building	--	--	--	--	--
Other assets	10	10	10	10	10
Current liabilities	20	240	100	400	1000
Long-term debts	100	400	400	600	--
Equity	10	(190)	510	1410	4310

 

Ratio Analysis

In this section you should take the net revenue, cost of sale, operating expenses, interest expense and net income and compute them as percentages. That is, use 100 per cent for net sales, then calculate cost of sales as a percentage of sales, and so on. Place these percentages in columnar form so that one can see the percentage ratio. For example:

Percentage Ratios	Prior Year Actual	Last Year Actual	This Year Projected	Next Year Projected	In Two Years Projected
Net revenues	100	100	100	100	100
Cost of sales	100	50	50	63	65
Operating expenses	--	25	20	10	8
Interest expenses	--	25	10	4	3
Net income	--	--	20	23	24

 

Results of operation

Discuss the results of operation and projections: Why have the results increased or declined? Tell why they will go up in the future. Discuss why the percentages might change and mention any momentous events such as the year a new product was introduced or the year in the future when you will have large research and development expenditures. In other words, you need to explain the numbers that you set out in the preceding section and mention the attached financial and projections which you are about to discuss in the next section of the proposal.

 

Financial conditions

In this section you should discuss in detail the current balance sheet. Describe liquidity of the company. Tell why there are significant increases in certain items such as accounts receivable, accounts payable and so on.

 

Contingent liabilities

Describe the company's contingent liabilities such as an non-funded pension plan, or a lawsuit from a company contending that one of its former employees working for you has brought corporate secrets with him.

 

Financial projections

This should consist of the annual financial projections for the next five years, as well as a detailed monthly cash flow statement for the next twelve months. Anyone looking at the situation should be able to determine precisely the cash flow situation. The cash flow statement should show the inflow of this financing as cash inflow.

These statements should be attached to the business proposal and should be marked Exhibit #2 - Financial Projections and Exhibit #3 - Cash Flow. Full details should be given of all withdrawals by the promoters, and will be charged to the company as expenses such as salaries, vehicle expenses, entertainment expenses, etc.