CFO Project Deliverable #5: Forecast analysis
you should submit a 5-8 page paper with you final forecast analysis. This final deliverable counts for 15% of your final grade in the course. This paper serves the role of a final exam in ENTR 444. In it, you are asked to pull together your work from the previous project deliverables (especially the Revenue and Expense Forecast papers) while demonstrating application of many of the key concepts we covered in the course.
Please note: You are strongly encouraged to carefully read this guide before beginning work on this final deliverable.
| The paper should include: | |
| · Title page (not counted toward page count) · Page numbering · Clear section headings based on the requirements listed below · Citations in APA style (both in-text and via a reference page) · One-inch page margins, 12-point font, and 1.5 line spacing
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| A one-page executive summary of your venture’s opportunity and financial analysis report · Executive summary should provide a 1-page overview of the key points from the entire paper. · Note: This is NOT an introduction, but a concise, 1-page summary of the forecast analysis. It is advisable to write this last.
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| Summary of your narrative content from Stages 3 & 4, discussing the business’s a) revenue model (i.e. streams and pricing), b) expense model (i.e. operating plan and associated costs), c) startup costs, and d) your three scenarios (i.e. most likely, worst-case, best-case). · Be sure to review feedback you received on these papers and to refine their content, where needed. · Combine the narrative for the scenarios from your revenue forecast paper and your expense forecast paper. o In writing your three scenario paragraphs, aim to maintain a consistent structure that explains: a) The assumptions that are being adjusted (At least two assumptions must be adjusted between scenarios – One should be a revenue model assumption, and one should be an expense model assumption) b) Rationale for why these assumptions were selected to be adjusted to examine different potential outcomes of the business c) Outcomes for each scenario in terms of annual revenues and earnings before taxes for Years 1-3 o These scenario paragraphs should include specific, annual numbers that are reflected by and consistent with your spreadsheets.
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| Choose ONE of these:
Note: You may address more than one of these three options for extra credit (i.e. full credit for one extra would be 5% on the final paper grade; full credit for doing all three would earn 10% on the final paper grade.) | Breakeven analysis – Present and discuss breakeven analysis in terms of survival revenue and units sold. · This section should illustrate and discuss an EBDAT/Survival breakeven for the venture. In addition to demonstrating breakeven revenue data, you should explain what this means in terms of the number of products/services that must be sold to achieve this level of revenue. (See Ch. 4) Breakeven should take all startup costs into account and accurately characterize variable and fixed costs for the business. |
| Ratio analysis – Present and discuss trend analyses on at least one measure of each of the following: profitability/efficiency, liquidity, leverage, and cash-burn. · You should compare each of the four ratios you select from Y1 to Y2 and from Y2 to Y3. Keep your analysis at an annual (vs. monthly) level. (See Ch. 5) · In addition to presenting the numbers, you should accurately explain what they mean. | |
| Valuation estimates based on your revenue and expense forecasts. · While you are only asked to forecast three years of financials for Golfgamez, you should use these three years’ data to estimate present value for the venture based on a DCF valuation. You can assume that Y3 is your stepping stone year. Because the venture is in the development stage, you should assume a venture discount rate of 50% for Years 1 & 2 and a terminal discount rate of 20%. You should determine and explain the perpetual growth rate of your venture. (See Ch. 10) · For full credit, you must illustrate how you calculated your DCF valuation estimate and explain what this means for the percent of equity MacTavish would need to exchange for the financial capital needed to launch and support the venture’s early operations.
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| Identification sources of funding you recommend pursuing. Be sure to explain why each source identified is appropriate based on evidence from course materials. · Using the Additional Funds Needed from your “most likely” scenario (i.e. row 67 from the Year1, Year 2, and Year 3 spreadsheet tabs), explain the amount and timing of external financing that will be required to execute the business plan as you have envisioned it. · Discuss at least three funding options that are available to MacTavish based on external financing options presented in the course (e.g. Ch 12, 13). This discussion should explain what each of these sources is, not just name them. · As CFO, discuss your recommendation for the funding source MacTavish should prioritize. You should explain why this source of funding makes the most sense for Golfgamez. While there is no “right” answer here, your explanation should demonstrate that you have an accurate understanding of the various sources of financial capital available to entrepreneurs and are able to apply this understanding to an entrepreneurial context. | |
| An appendix featuring your assumption sheet (counts toward page count) · All of the assumptions in your financial projections should be listed in a single location in your paper. (A bulleted list is required.) In listing the assumptions for your financial model, the idea is to explain any of the numbers you manually entered into your financial model. · Some of the numbers (i.e. projected annual market share) will be guesstimates (for this project’s sake), so you can simply state: “We project market share of 5% by the end of Y1” and this is adequate. Other numbers (i.e. size of the total market) should be based on research and should be explained as such. Again, these should be presented as a simple, bulleted list. · Note: These assumptions, as they are presented, should comprise your “most likely” scenario. Then you’ll select at least two of these to adjust upward/downward to develop your best and worst-case scenarios.
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| An appendix including three fully developed, month-by-month revenue and expense forecasts representing your three scenarios in spreadsheet form for three years. (Note, this is the same appendix from Stage 4, updated as needed. Again, this appendix does not count toward the page requirement.) · This should be submitted as three Excel files (i.e. “Modified Cornwall Template”), as you did with Deliverable #4. Please be sure to label each file for the scenario it represents (i.e. most likely, best case, worst case).
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| One additional extra credit opportunity for this paper: A third appendix featuring annual (i.e., not monthly) pro forma financial statements (i.e. income statements, balance sheets, and statements of cash flows) that summarize and are consistent with your monthly forecasts for each of the three scenarios. (If full credit is earned, worth 10% extra credit for the final paper grade). · These should be entered in table form into the end of the Word file with your paper and do not count toward your page count. | |
Grading on this final paper:
- In this final deliverable, whetheryou address each of the requirements of the paper counts for 50% of the paper’s grade, while how well you address these requirements (i.e. through demonstration of accurate understanding of key concepts from the course and maintaining consistency in the story that is told) will comprise the other 50% of the grade.
- Papers earning the highest scores will tell a convincing, cohesive and consistent story with their numbers and between their numbers and their narrative. The numbers you present in the paper should be based on the numbers in your model. A reader should be able to have the spreadsheet open on one screen, the paper on another, and see a coherent story being told between the two.