Preparing a business plan is advised to all companies regardless of their size and market presence – startups as well as established mature companies.

Business planning allows you to increase the chances of success in the market, ensure further growth and development of the company.

The purpose of preparing a business plan can vary, but most often it is related to:

• Expanding the product / service portfolio
• New market penetration
• The launch of a new project
• Reorganization and revitalization of the company
• Collecting sources of financing (debt, equity, grants)

Well-prepared business plan discloses the feasibility of the business idea and foresees its success. Growth and development of business ideas also depend heavily on strategy, therefore development of the business model has to be approached carefully and in line with guidelines provided by experts.

The role of the consultant in the process of business plan preparation could be simply to provide a feedback regarding the quality of the business idea, or also to connect stakeholders such as potential customers, partners and investors, provide strategic business guidance, link technical and business knowledge and look for opportunities to develop new ideas.

It is wrong to think that a business plan in any way inhibits or restricts creativity and flexibility. It is strongly recommended solely due to the fact that prior to realization of a business idea one has to check its viability and get acquainted with the path and the obstacles that have to be overcome.

Elements of a good business plan:

• Analysis of the environment
• Market research
• Organisation
• Product/service plan
• Research and development
• Human resources
• Timeline
• Key risks and problems

Mandatory components of the business plan, connecting the above mentioned elements, refer to financial projections and scenarios of success. Together they form a realistic assessment of the business idea potential based on the business and its risks. Well prepared financial projections relate to future returns, required investments in working capital and fixed assets and the extent of non-monetary categories.

Based on the financial projections bankers and various other funds decide whether to support a business idea and thus provide sufficient sources of funding for its success.

Contact us for the counseling program and engagement proposal!

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Normally company receives equity financing in several rounds in order to motivate management and decrease the underlying investment risks.

If a company is worth 60 units (pre-money valuation) and an investor makes the investment of 20 units, the new, post-money valuation of the company amounts to 80 units. The ownership share gained in exchange for a new investment thus amounts to 25%.

In case of start-ups, the value estimation is due to high risk somehow vaguer. Therefore angel investors and venture capitals often offer certain investment amount for a particular ownership share based on their experiences and insights. Let’s say 25% for the investment of 20 units. However, by doing so, they have implicitly set the post-money valuation of the company to 80 units and pre-money valuation to 60 units.

This basic example illustrates the general concept. However, in reality the calculation of post-money valuation is more complicated due to convertible loans, in-the-money warrants and in-the-money employee stock option plans (ESOP).

In fact, the pre-money and post-money valuation should derive from the calculation of price per share multiplied by the total number of shares. Therefore, one has to consider the number of shares on a fully diluted and fully converted basis.

If the value per share increases compared to the previous round, then the investment is called an upround. It eventually means that the pre-money valuation is higher than the post-money valuation of the previous round. For the vice-versa case industry practitioners use a term downround.

The post Pre-money & Post-money valuation appeared first on Consilue.

Normally company receives equity financing in several rounds in order to motivate management and decrease the underlying investment risks.

If a company is worth 60 units (pre-money valuation) and an investor makes the investment of 20 units, the new, post-money valuation of the company amounts to 80 units. The ownership share gained in exchange for a new investment thus amounts to 25%.

In case of start-ups, the value estimation is due to high risk somehow vaguer. Therefore angel investors and venture capitals often offer certain investment amount for a particular ownership share based on their experiences and insights. Let’s say 25% for the investment of 20 units. However, by doing so, they have implicitly set the post-money valuation of the company to 80 units and pre-money valuation to 60 units.

This basic example illustrates the general concept. However, in reality the calculation of post-money valuation is more complicated due to convertible loans, in-the-money warrants and in-the-money employee stock option plans (ESOP).

In fact, the pre-money and post-money valuation should derive from the calculation of price per share multiplied by the total number of shares. Therefore, one has to consider the number of shares on a fully diluted and fully converted basis.

If the value per share increases compared to the previous round, then the investment is called an upround. It eventually means that the pre-money valuation is higher than the post-money valuation of the previous round. For the vice-versa case industry practitioners use a term downround.

The post Pre-money & Post-money valuation appeared first on Consilue.