Financial Consulting

Business Plan Creation

Avolusis accepts assignments for all aspects of the business plan, from creating the entire plan to assisting with single components, several of which are listed below.  Often, assignments are customized blends, jointly designed with our client.  So if you don’t see exactly what your company needs, tell us and we can oblige.

Market Assessment, Competitive Overview, Opportunity Identification, Marketing Strategy and Go-To-Market Plan

A Market Assessment, Competitive Overview, Opportunity Identification, Marketing Strategy, and Go-To-Market Plan are integral to the business plan and are described in Marketing Consulting.

Financial Model

A Financial Model evaluates the anticipated sources of income, costs, expenses, and investments related to your company over a certain time period, typically three, five, or seven years.  The model forecasts the income statement, balance sheet, and cash flow statement on a monthly, quarterly, and/or annual basis and includes a Capital Plan that details cash generation and investment as well as the financing that will be needed.

Financial Models vary vastly in complexity.  A simple model tends to rely solely on basic, top-down assumptions forecasted on an annual basis:

• Overall sales forecasted using a simple assumption about annual growth or market penetration.

• Cost of goods forecasted as a percentage of sales.

• Employee costs forecasted based on productivity (e.g. a simple assumption that a certain number of employees are required to generate a certain amount of sales per year)

• Other variable costs forecasted as a percentage of sales

• Fixed costs forecasted to rise with inflation.

More complex models provide a better representation of how your company actually works.  And a well thought out model can demonstrate to investors, bankers, partners, and potential acquirers that management has a good handle on the fundamental drivers of profitability and growth and that the company will be a going concern for many years to come.

More complex models incorporate additional bottoms-up assumptions as well as functionality to dynamically model various what-if scenarios.   They are more effective than simple models in generating insight into the impact of different market conditions, operating assumptions, and strategic plans.  Models like these are often supplemented with charts, graphs, and other visuals that help clients gain meaningful insight into the numbers.

A complex model can look like this:

• Individual revenue lines for each product and service, each dependent on customized key drivers (e.g. the economy, population trends, adoption rates for similar products, regulatory requirements, price elasticity of demand, the number of competing offerings, etc.) and their dynamics.

• Cost of goods sold forecasted as a detailed accounting of the entire supply chain including all raw materials, transportation, manufacturing methods, manufacturing facilities, and timelines.

• Sales and marketing costs modeled to incorporate a detailed accounting of all costs associated with the Marketing Plan.

• Detailed variable and fixed cost assumptions that scale with the size of the business (e.g. employee costs modeled to reflect specific roles and salaries needed to run sales, operations, and administration).

• Detailed assumptions for success-based capital expenditures.  (e.g. the number of warehouses, operations centers, fulfillment locations, etc. can be modeled to scale with sales)

Financial Analysis

Financial Analysis uses the Financial Model to analyze key metrics like Internal Rate of Return (IRR), Net Present Value (NPV), payback period, time to earnings break-even, time to cash flow positive or free cash flow positive, capitalization rate, debt coverage, cost per gross addition (i.e. CPGA also known as the cost to add new customers), customer lifetime value (CLV), and others.

Typically the deliverable includes a set of charts, graphs, and explanations to guide interpretation of the results in a format that provides meaningful insight for decision making and planning.

Valuation Analysis

A valuation analysis represents a fair price for a company based on its forecasted financials.  There are several different methods for performing a valuation.

A Liquidation Value is calculated assuming that the company closes its doors, sell its assets, and pays off all debts.  For an ongoing business (i.e. one that generates sufficient cash to cover necessary expenses and capital expenditures) Liquidation Value typically underestimates its value.  Nevertheless, since valuation analysis incorporates subjective forecasts about the future based on assumptions about which a buyer and seller may disagree, Liquidation Value can be useful for agreeing a minimum valuation.

A Multiple of Earnings valuation is calculated by multiplying the company’s earnings by an appropriate multiple.  An appropriate multiple is typically determined by considering recent sales of other companies comparable to the subject company.  In practice, multiples can range widely based upon the size of the company, stage in its lifecycle, strength of its brand, its growth trajectory, the market it’s in, the competitive landscape, and other factors like its reliance on one or more key employees as well as the current marketplace for buying and selling companies.

A Discounted Cash Flow valuation considers the company’s cash generation and earnings over a period of time.  Discounted Cash Flow valuations are often used for growth companies or companies expected to demonstrate a period of rapidly increasing sales and earnings before stabilizing and becoming comparable to other larger and established companies.

Help me choose

We’re passionate about innovation, hungry for new challenges, and eager to explore ways we can help your company.  Contact us and we’ll give you a free assessment.

At Avolusis, free assessments are not a sales pitch.   Our highest priority is understanding our clients’ needs and how we can best help.  Sometimes it’s possible to do that in a one-hour phone call, sometimes it takes a full day on site with a client – for free.  We’re passionate about solving new challenges, and we enjoy investing the time upfront to do it right.