learn more about:
Financial plan
What is a Business Roadmap?
A business road map should show the execution & strategy planning for your business. It complements the business plan by bringing it to life. The roadmap blows out what needs to happen when it needs to happen and who needs to do it.
With a business roadmap, it becomes crystal clear how various roles, tasks, and responsibilities come together. When well constructed with thoughtful and thorough consideration, a roadmap lays out everything required to turn a business plan into reality. Stakeholders and individual contributors alike should be able to get the full picture.
1. Starting: Set your long term and short term goals
To begin creating your roadmap, start with setting your long-term goals for the business. What do you want to achieve in the next 3 to 5 years?
These long-term goals will help shape your business roadmap — if an activity doesn’t play a role in helping you reach a long-term goal, then it doesn’t deserve a place in the roadmap today.
Long Term Goals can be associated with:
​
-
Revenue: The simplest to explain but the hardest to achieve, e.g. increasing profits or revenue by a certain percentage within a defined time.
-
Growth: Expand the company through new employees, resources or other key measures.
-
Service and reputation: Improve the quality of your services, leading to increased customer satisfaction or customer retention.
-
Social: Increasingly, businesses are setting long-term goals to give back to society or the environment.
-
Impact: For social enterprises, you can also set a long-term goal based on the environmental impact that you want to achieve.
​
​
With the context set by your long-term goals, you may start to work backwards and identify what you need to do in the near future in order to reach those goals. Short-term goals are ideal milestones or destinations for your roadmap. It should ideally help you keep track of the progress of your business in relation to your long-term goals and will change as you pivot your business idea or business model.
Remember, the best short term goals are SMART:
​
-
Specific: They should be targeted and highly detailed, so they can be easily understood.
-
Measurable: Set a metric that can be continually reviewed. This will prove progress is being made.
-
Action-oriented: Specify what actions need to be taken and when.
-
Realistic: Goals should be challenging but achievable. Make your goals realistic by reflecting on your past performance.
-
Time-specific: Look ahead and set a hard deadline to keep things on track.
2. Identify key steps on your roadmap
Now for the exciting part — the first steps of building your roadmap:
1. Look at your goals and consider what major steps will be required to achieve them.
3. Place these steps into order and consider whether you will have the resources required (such as people and time) to complete them. Make sure you can defend why the steps should be completed in this order.
2. Annotate each of those steps with a brief high-level description.
4. Critique your roadmap — is this realistic? If conditions change, can your roadmap adapt?
3. Prioritize using a business roadmap
The spatial limitations of a roadmap will most likely force you to prioritize your goals and tasks. This is a good test for you to start narrowing down what’s really important to you and locate the core essence of your business. Not only that, but no team has unlimited resources. In creating a business roadmap, you will be forced to prioritize and rank the importance of different tasks.
There are many different approaches to prioritizing a roadmap, but the most quantitative and scientific way is to use a "prioritization matrix" or "weighted scoring model". This is a proven and field-tested framework, used by companies like Nike, Shell, and The Washington Post. It will identify key risks and help your roadmap be as focused and successful as possible.
Place weights on how much you value revenue, cost and strategic fit. Then for each item, you may start scoring them on how much revenue they would generate, how much costs they might save or well they fit in your overarching firm strategy. Multiply each score to their weights and add to get the total value. The higher the value, the more it should be your priority.
TEMPLATE:
The Financial Projection and Key Metrics section of the business plan is perhaps by far the most inaccessible part for anyone without any business or accounting experience. As such, we will try our best to walk you through the basics and provide you with templates, video tutorials, and additional live lectures to narrow down this knowledge gap.
What do you need?
This section can be separated into two subsections: (1) Financial Projections and (2) Key Metrics.
Financial projections & key metrics
1) Financial Projections
For (1) Financial Projections,, you need to give us a rough idea of the revenue, costs, and growth expectations for your business. The financial projection consists of two parts. First you need to create a model in excel. Here, you should include expected costs and revenue and create a graphical projection showing your business’s “expected” progress for the next five years. In the first 2 years, we want to see quarterly projections and for year 3-5, we want to see yearly projections.
Additionally, you should also include some written information in your financial projection. Here, we want to know what your “assumptions are based on” and we want to see what kind of efforts have been made to make your projection as realistic as possible. When looking at your growth projections for instance, you need to explain how you came up with the growth rate (how fast your company is growing). How are you acquiring your customers? How do you retain returning customers? The rate of acquisition needs to be balanced out in your costs as well. If your brand awareness is increasing quickly through online advertising or social media influencer advertising, this needs to be reflected within your cost structure accordingly.
Financial projections are rarely ever “accurate”. As your business grows and progresses, there will be many changes and pivots that will change your cost, revenue, and growth. However, they are very useful in helping you guide yourself and keep your company on track of its long term goals. What is important in this section is to show us the way in which you approach financial projections and your self-awareness in making assumptions.
2) Key Metrics
The second subsection in this chapter is “Key Metrics”. Here, we want you to outline in more detail, what “success” looks like to you and how you will measure that. In the Financial Projection section, you should have provided us a brief overview of your expectations for your financial goals. In this section, we want to learn about your metrics in relation to the environment. What kind of environmental impact are you trying to make with your social enterprise and how will you be able to measure this 6-month,1-year, 5-years down the line? Ideally, this will be helpful in keeping your business on track and
help you make pivotal decisions in the future.
Overview of the Financial Section
Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates. But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future.
What this means, says Berry, is that you summarize and aggregate more than you might with accounting, which deals more in detail. "You don't have to imagine all future asset purchases with hypothetical dates and hypothetical depreciation schedules to estimate future depreciation," he says. "You can just guess based on past results. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales."
If there is a rule of thumb when filling in the numbers in the financial section of your business plan, it's this: Be realistic. "There is a tremendous problem with the hockey-stick forecast" that projects growth as steady until it shoots up like the end of a hockey stick, Berry says. "They really aren't credible." Berry, who acts as an angel investor with the Willamette Angel Conference, says that while a startling growth trajectory is something that would-be investors would love to see, it's most often not a believable growth forecast.
The way you come up with a credible financial section for your business plan is to demonstrate that it's realistic. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue. "It's not exactly data, because you're still guessing the future. But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. "Nobody wins by overly optimistic or overly pessimistic forecasts."
Financial Projection
Requirements and Help
In the interest of time, we are allowing participants to just work on the income statement (also known as a P&L), focusing instead on providing us with a detailed tour of their expected revenue and expected costs. What this means is that participants will not be required to submit a balance sheet or a dedicated cash flow statement.
For participants who have little or no background in accounting or business, worry not. We will have a video tutorial outlining how to work with our spreadsheet template. Additionally, we will also have a basic revenue modeling live lecture + Q&A with a financial modelling expert.
There are 10 tabs in our spreadsheet which can be broken down into the following sections:
​
1) Introduction
2) Teams & Salaries
3) Settings
4) Projections
5) Revenue
6) COGS (Costs of Goods Sold)
7) SG&A (Selling, General, and Administrative expenses)
8) FS-Annual
9) FS-Month
10) Charts & KPIs
​
​
1) Introduction
The Introduction tab gives a brief description of what each tab signifies as well as the general encoding of this excel template. For people who are not as familiar with excel, the way that excel works is that there are two general ways of putting in information to each “cell” (the block that corresponds with 1 column and 1 row). You can either manually change something, by clicking on the block and changing the value or the name of it or you can encode it. The encoding can start from something very easy (like summing a particular row) to something much more complex (VBA coding).
For this template, please only CHANGE cells that are encoded in blue. Everything that is in black is being drawn or calculated from other places within the 10 tabs. This encoding is very important, because changing something that is encoded black may mess up many other parts of your sheet without you knowing!
2) Settings
The settings tab outlines general settings for this model including your company name, currency (for this competition it should be in Thai Baht or THB), the model start date when your business will begin, and initial cash balance (5 million baht).
3) Teams and Salaries
The second tab is dedicated towards letting you map out your team and keep track of the changes in your variable cost as your team grows. For this tab, you can change the name of the positions labeled in blue. And You can change their yearly salary. Their monthly salary will subsequently be calculated and adjusted automatically based on this. Note here that we have created a column called “expense category.” Which will help you classify how much capital you are dedicating to different aspects of your business. We have created three basic aspects including “Operations, Marketing, and R&D”. This is really important in showing us that you have put in some thoughts to your financial model. Your projected growth and assumptions in each category should ideally match how much you are spending which will be reflected through these categories. For instance, if you are growing quickly, then it should be reflected in here that you are spending a lot of money on developing a highly-experienced marketing team. Similarly, if you are saying that you want to develop a highly sophisticated application or create products, your company should also be spending some capital on hiring a large R&D team.
If you would like to add more categories, you can go to: Data → data validation → List of items. However you don’t have to do this unless you necessarily need to.
When creating a position, you can also customize their date of “first hire”. For instance, if you are expecting to hire a marketing person into your company after 6 months of starting your business, then you can set their “first hire”date to 6 months after your business has started.
In this sheet, you can also model the growth of your team by estimating how often you will be hiring more people with the same role. For instance, if you are creating a marketing team, it is unlikely that you will hire 5 marketing associates all at once. If you are aiming to make 3 hires every year, you can add that into columns “N” and “O”. You can also limit the number of people you want for this particular row. So once you hit 5 marketing associates, there will be no more extra hires and costs associated with hiring more employees.
Lastly, you budget for your team’s increases in salary as they continue to work for you. It is currently set at 5%, but you may change this based on your industry’s standard behavior.
4) Projections
The fourth tab is where you’ll be dedicating most of your time. It will act as a control panel for your projection. The idea here is for you to add your revenue growth formula and variables for your expenses here and then connect it to their respective tabs. You can add different variables here.
​
Starting with the revenue section, there are two main things that you should be thinking about here:
1) Monthly Revenue
2) Monthly Revenue Growth
​
1) Both of these will come from some sort of informed assumption, which you yourself will have to find some evidence to help support your own case. For instance, if you are estimating your “monthly revenue (in the first month)” to come from just 10-20 clients using your service, how will you be able to ensure that you can secure those first few clients? Some assumptions that you may use to help calculate monthly revenue:
-
Traffic Potential (Market Potential)
-
Leads
-
Conversion
-
Average Revenue Per Sale
-
% Repeat Customer
​
For more details on how to use these assumptions to create a growth projection, you can watch this video in English. Alternatively, we have also written a brief explanation below:
Video: https://www.youtube.com/watch?v=jFiPjaa7mBI&t=294s
​
​
​
2) For monthly revenue growth, you should create a set of “justifiable assumptions”. Make this specific and make sure that it is reflected elsewhere in your business plan, especially in your expenses. Some leading questions for you to start thinking about useful assumptions would be, how will people hear about your company?
-
Channel 1,2,3 (Paid advertising, word of mouth, influencer marketing)
-
Leads
-
Conversion for each (note that, conversion rate will differ with channel)
​
At this juncture, you can make your model more or less realistic by adding more conditions/assumptions. The channel of word of mouth, for instance, can be assumed to have virtually no cost and is based directly on your current number of users. If you want to make this more complex, you can even split your users into two or three types based on their loyalty. Whereas some of your core users (those who have remained with you for at least a certain amount of time) may turn to become champions for your brand, newer customers may be more hesitant to recommend you to others.
Similarly, growth that results directly from “paid advertising” or “influencer marketing” should realistically be tied to some financial investments reflected in your costs elsewhere. So if you spend more money on advertising in the first 6 months after launch, but cut it out entirely, thereafter, we should be able to see the sudden stop of growth FROM these paid acquisition channels. Here, you may also add a variable “costs (that you incur) per signup” variable
​
5) Revenue
The fifth tab is dedicated to breaking down different sources of revenue. Here, there are 4 dedicated blocks. Use 1 bock per each type of revenue source or 1 block per business model. For example, the first block can be all of the different types of revenue that is generated via a subscription model. Then in the second block, you can add in revenue coming from advertising, so on and so forth.
6) COGS
The COGS or Cost of Goods Sold tab, estimates the direct costs that are associated with providing your service. This will include all the tools that you will need for your business to operate as well as costs that arise from your product and can be divisible by the quantity of products that you sell. If you are purchasing and selling items like a standard middle-man business or store front, you will want to include the cost of goods that you purchase here. This will be able to help you calculate your gross margin later on.
7) SG&A
In the 7th tab is SG&A or Selling, General, and Administrative expenses which are costs that are not directly associated with creating or selling 1 unit of goods. This includes things like payroll (pulled directly from your teams tab), marketing & growth, advisory services, rent, and more. Notice that everything in payroll is black. This is,because the data is being drawn directly from your teams and salaries tab.
​
SG&A may include the costs of advertising your brand. In the Marketing and Growth section, on this tab, we have provided you with a few options. Make sure that whatever you estimate also reflects the assumptions that you are making on your customer acquisition. For example, if you are going to gain “100,000” users by the end of the year, you need to show that you are dedicating some amount of money to create this traction either through marketing campaigns or something else. You can also look at advisory and professional services, in case you want to outsource parts of your operations.
NOTE: You don’t need to fill in all the details for your expenses, because not all businesses will have the same expense. Please fill in JUST the expenses that are important to your business.
8) FS-Annual
This is your projected annual financial statements. The way this excel sheet has been programmed is that it will automatically calculate this tab for you as you add more information into the other tabs. This is the tab that we will want to look at for Y2-Y5, but you do not need to directly work with this tab.
9) FS-Month
Similar to tab 7, this tab is your monthly financial statements. No changes should be made in this tab, but we want to see the output from this tab on all data within Y1.
10) Charts & KPs
Lastly, the charts and KPIs will also be produced automatically. This will show us, graphically, the growth of your business based on the balance between your projected revenue and costs.
Financial Projection Basics
The Wrong Way to Do Projections
(Top Down Approach)
$ 100M Spent on Fast Food in (City)
100 Restaurants
Projection - $ 1M in Sales (1% of Market Share)
​
Starbucks Generates $1M per Store
We can do At least Half as Well
Projection - $500,000 in Sales
The Right Way to Do Projections
(Bottom Up Approach)
Creating Assumptions:
-
Traffic Potential
-
Leads
-
Conversion
-
Average Revenue Per Day
-
% Repeat Customers
​
​
To create a more realistic financial projection, you should start with creating a set of “justifiable assumptions”. While different business models require different assumptions, the basic rule is that you should try to use some variation of what we have here. Start with “traffic potential” or the “market potential”. If you’re a website, you can start with the traffic that passes through you. If you’re a gas-station, this might be the number of cars that go through that road in a day. If you’re a website, this number might associate much closer to key-words that coincide with your product, service, or business.
​
From there, you can move on to a lead. This is the percentage of people who take “interest” in your product. For a website, this would be entering your website or webpage and for a store, this would be someone coming into your store.
​
The percentage of these leads that turn into “customers” will be your conversion (rate). If a hundred people browse your store everyday, but only 1-2 people buy your clothes, then your conversion rate will be at just 1-2%. Similarly, if your website has a daily traffic of 2,000 unique visitors, but you have only closed just 1-2 sales, your conversion rate will be 0.1-0.2%. The conversion rate and how this is will depend on your industry, your pricing, and how well your solution matches with your target audience. If you are pitching an idea that fits a huge population (18-22 year/old female), for instance, a believable conversion rate would be something that is very low unless you have some back-up data for us to provide. However, if your target audience is highly focused (like an existing and dedicated fan base of a k-pop star), then you might be able to estimate a much higher conversion rate.
​
Average Revenue per sale will be the amount that you expect each customer will spend on your service per interaction.
​
Lastly, the % Repeat customers or “retention rate” will be what percentage of people will continually return to use your service or buy your product. This group of people or this retention rate should reflect the specificity of your solution to a certain group of customers. If you are serving a niche market who has no other solution to turn to and you are dedicated to improving your solution for their problems, then you may be able to have a relatively high retention rate.
Excel Financial Modeling Tutorial (+ free download)
SaaS Modeling
Financial Projection Tutorial