CHAPTER 5

Financial Plan
- is a comprehensive overview of your financial goals and the steps you need
to take to achieve them.
- gives a clear vision of the overall operating income and expenses of the
business to distinguish if the company will gain profit and will be successful in
the business world.
Financial Planning
- is the process of estimating the capital required and determining its
competition. It is the process of framing financial policies in relation to
procurement, investment and administration of funds of an enterprise.

Objectives of Financial Planning

a. Determining capital requirements-This will depend upon factors like cost
of current and fixed assets, promotional expenses and long- range planning.
Capital requirements have to be looked with both aspects: short-term and
long- term requirements.
b. Determining capital structure - The capital structure is the composition of
capital, i.e., the relative kind and proportion of capital required in the
business. This includes decisions of debt- equity ratio- both short-term and
long-term.
c. Framing financial policies with regards to cash control, lending,
borrowings, etc.
d. A finance manager ensures that the scarce financial resources are
maximally utilized in the best possible manner at least cost in order to
get maximum returns on investment.

Financial Planning
- is process of framing objectives, policies, procedures, programs and budgets
regarding the financial activities of a concern. This ensures effective and adequate
financial and investment policies.

Importance of Financial Planning

1. Adequate funds have to be ensured.
2. Financial Planning helps in ensuring a reasonable balance between outflow
and inflow of funds so that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in
companies which exercise financial planning.
4. Financial Planning helps in making growth and expansion programs which
helps in long-run survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market
trends which can be faced easily through enough funds.
6. Financial Planning helps in reducing the uncertainties which can be a
hindrance to growth of the company. This helps in ensuring stability and
profitability in concern.

Types of Investors
 1. Angel investors are individuals willing to make high-risk investments in early-
stage ventures. Typically, these individuals have had successful
entrepreneurial experience in the areas of investment they consider. They
usually are motivated by their desire to stay engaged in their past area of
success but are not willing to follow the tough lifestyle they experienced
during their entrepreneurial days.
2. Public funding agencies
a. Public funding agencies with the mandate and authority to fund
business ventures to achieve economic development, environmental,
cultural, or social policy objectives formulated by policy makers at
various levels of government are good sources of funding, particularly
at the early stages.
3. Venture capital companies
a. Venture capital firms are specifically established to invest in high-risk
ventures that offer potentially high returns. VCists (VCs) raise funds to
capitalize investment funds that they manage. Their investors entrust
them to identify investment opportunities matching specific criteria
and expectations, which govern the fund managers' investment
decisions.
4. Private equity (PE) firms
a. Private equity (PE) firms are specifically established to invest in
relatively mature ventures that have at least a modest financial or
operational track record while still offering relatively attractive terms in
an intermediate time frame (i.e., one to five years).
5. Strategic investors
a. Strategic investors are defined by their investment intentions more
than any other factors. They could be a member of any of the previous
types of investors we have discussed; however, more often they are
larger companies operating or investing in the same industry or a
complementary one or market as your venture. Very often they are not
in the business of investing in smaller ventures but may believe an
investment in your business would offer them some strategic value.
6. Banks
a. If you have reached a position to deal with banks, you have reached
financial nirvana, as banks offer the lowest costs of capital. A famous
saying goes, "A bank will only lend you money when you do not need
it."

Aside from the six types of investors, the startup community contemplated the
following options to raise a capital for your startup business based on Sarath, CP,
a digital strategist and growth hacking specialist worked for both startups & big
brands and helped them to build a strong brand presence and achieve growth.

Options To Raise A Capital For Your Startup Business Based On Sarath, CP

1. Funding your own idea:
a. This way of raising funds is the most common among startup's early
stages. Founders or the team members put their money together for
 their startup. Professional investors in the market prefer this way of
raising funds. You must have some savings or assets that would be
used for the business startup. Funding your own startup is one way of
telling your potential investors, how serious you are about this venture.
Putting your money in the project shows that you are willingly taking
the risk of putting the money that you have worked hard for at stake,
supporting your idea with the faith you have in your company.
2. Crowdfunding:
a. There are various types of crowdfunding. You have to select which one
is the best for your business such as rewards or equity- based
crowdfunding. It is an excellent way to gather funds for startups with
artistic projects or even to raise capital to finance the manufacturing of
new technology at a large scale. Any option you choose this option is
of low risk as if you want to put the product in the market and also get
funds to finance your product and make it the reality. This is also
advantageous to get feedback from the early adopters of your
prototypes.
3. Friends and Family:
a. One of the best places to raise funds is from your own house. As your
family is well aware of your talents, they will be willing to support you
regardless of what you want to do. Family and friends are the only
ones who know your potential and will be willing to give you money to
start your business. This may seem like a great way of gaining
investment partners, but everything has its drawbacks. Acquiring loans
or investment form family or friends may be advantageous to some
businesses as they have faith in your talents and your success. But for
others that require expert assistance or guidelines, angel investors are
the best way as your family might not have those experiences which
are needed.\
4. Taking A Loan:
a. Another way to get your startup financed is a business loan from the
bank. It is one way of keeping the initial control of the business in your
own hand. Taking a loan for startups might be healthy but only to
those who have full confidence that the business will prosper in the
first run without difficulties. Again, it depends on you and the type of
business you want to incorporate. But while considering the loan check
the interest rates and also if u have collateral to give. Crosscheck with
all the facts, whether you can comply with all the terms of the loan.
5. Enter Competitions:
a. For gaining publicity, you can enter competitions if you believe that
your idea is capable enough. Entering these contests will be very
helpful to you as in one hand if you win the competition, you will get a
source of finance, and on the other hand, you gain publicity for your
product and people will be waiting for it to hit the market (it acts as
advertisements). This is a low-risk option as you get your ideas out in
front of investors and if it is good, you can win the competition and get
money rewards to finance the startup of your business to succeed. If
 you are not able to make it and win the cash prize, being on that
competition acts as an advert for you and angel investors may contact
you to invest in your idea. Both ways it's a win for you.

Chapter 6
Business Plan
- is a document that summarizes the operational and financial objectives of a
business and contains the detailed plans and budgets showing how the
objectives are to be realized. It is the road map to the success of your
business. For anyone starting a business, it's a vital first step.

Importance of a Business Plan

Four Reasons Why You Need a Business Plan?
1. To raise money for your business
a. Potential investors or lenders want a written business plan before they
give you money. A mere description of your business concept is not
enough. Instead, ensure you have a thorough business and financial
plan that demonstrates the likelihood of success and how much you
will need for your business to take off. Raising money for your business
is sometimes difficult to take into consideration because nowadays,
people or investors do not trust right away to entrepreneurs or
technopreneurs. However, there are investors who are willing to take
the risk and interested to take part on the business.
2. To make sound decisions
a. As a technopreneur, having a business plan helps you to define and
focus on your business ideas and business strategies. You not only
concentrate on financial matters, but also on management issues,
human resource planning, technology and creating value for your
customer. Having a business needs concentration for the company to
achieve their goals and objectives whereas they are committed to be
hands-on in all the aspects of the management and the business itself.
The business plan is a blueprint of achieving future plans and
ambitions to be successful.
3. To help you identify potential weaknesses
a. Having a business plan helps you to identify potential pitfalls in your
idea. You can also share the plan with others who can give you their
opinions and advice. Identify experts and professionals who are at a
position to give you invaluable advice, and share your plan with them.
Business plan should emphasize the use of SWOT (Strengths,
Weaknesses, Opportunities, Threats) Analysis to distinguish what the
company should improve and develop to stay in the competition and to
continue the business for a long- term involvement. There are business
 advisers that could give suggestions on how to remain in the business
world.
4. To communicate your ideas with stakeholders
a. A business plan is a communication tool that you can use to secure
investment capital from financial institutions or lenders. It can also be
used to convince people to work for your enterprise, to secure credit
from suppliers, and to attract potential customers. The business plan is
one of the significant tool or factors that the technopreneur should
have because through the documents presented to the investors, they
will have an idea of whether they will earn profit on the business or
not. This is a tool to convey what the technopreneur wanted to
accentuate for the investors.

Benefits of a business plan that has excerpt from Tim Berry for Small
Business Administration's Industry Word blog:
1. See the whole business. Business planning done right connects the dots in
your business so you get a better picture of the whole. Strategy is supposed
to relate to tactics with strategic alignment. Does that show up in your plan?
Do your sales connect to your sales and marketing expenses? Are your
products right for your target market? Are you covering costs including long-
term fixed costs, product development, and working capital needs as well?
Take a step back and look at the larger picture.
2. Strategic Focus. Startups and small business need to focus on their special
identities, their target markets, and their products or services tailored to
match. They have to identify who will use and who will be the prospective
buyers of the products or services. From then, technopreneurs can initiate
the possible strategies to satisfy the customers or clients.
3. Set priorities. You can't do everything. Business planning helps you keep
track of the right things, and the most important things. Allocate your time,
effort, and resources strategically. Setting priorities is important because it is
how your business will stay in the competition. Technopreneurs should
foresee the future opportunities and should create their 5-10 years strategic
plan.
4. Manage change. With good planning process you regularly review
assumptions, track progress, and catch new developments so you can adjust.
Plan vs. actual analysis is a dashboard, and adjusting the plan is steering. The
organization should manage change as clients change of mind is continuous.
Sometimes, change can make the business more productive and basically
improved to gratify their customers.
5. Develop accountability. Good planning process sets expectations and tracks
results. It's a tool for regular review of what's expected and what happened.
Good work shows up. Disappointments show up too. A well-run monthly plan
review with plan vs. actual included becomes an impromptu review of tasks
and accomplishments.
6. Manage cash. Good business planning connects the dots in cash flow.
Sometimes just watching profits is enough. But when sales on account,
physical products, purchasing assets, or repaying debts are involved, cash
 flow takes planning and management. Profitable businesses suffer when
slow-paying clients or too much inventory constipate cash flow. A plan helps
you see the problem and adjust to it.
7. Strategic alignment. Does your day-to-day work fit with your main business
tactics? Do those tactics match your strategy? If so, you have strategic
alignment. If not, the business planning will bring up the hidden mismatches.
For example, if you run a gourmet restaurant that has a drive-through
window, you're out of alignment.
8. Milestones. Good business planning sets milestones you can work towards.
These are key goals you want to achieve, like reaching a defined sales level,
hiring that sales manager, or opening the new location. We're human. We
work better when we have visible goals we can work towards,
9. Metrics. Put your performance indicators and numbers to track into a
business plan where you can see them monthly in the plan review meeting.
Figure out the numbers that matter. Sales and expenses usually do, but there
are also calls, trips, seminars, web traffic, conversion rates, returns, and so
forth. Use your business planning to define and track the key metrics.
Metrics is applicable to keep track the monthly performance of the
company or organization so that they will be able to distinguish if their
performance meets their prior objectives.