Sriram Chidambaram

“Business idea is fantastic and we like what you are doing and we would like to get more details of your startup”, says the investors Your financial plan should strengthen the confidence you built with the investors so far. Investor Analysts will be able to figure out trends you have historically and what you are proposing. Your numbers should clearly define value proposition. Your reflections of the past should derive your future. Value proposition in your financial plan can be easily explained through growth patterns, break even points at various levels and change in margins. Incorporating actual performance and how the existing strategy has worked before you scale further is critical to increase credibility.

“Finance without strategy is just numbers, and strategy without finance is just dreaming” This statement is of phenomenal for your finances Don’t create a financial plan just because you need present something to the investors. Don’t create financial plan to show desired funding requirement. Investors will be able you assess the knowledge you have about intricacies of your business by looking at your financial plan.. Revenue plan should align with your growth strategy, costs should reflect operational strategy and operational strategy.. Assumptions reflect the sensitivity your plan will have various key levers you have in business be it inside out or outside.. Don’t let your financial plan detail your investor conversations

Many entrepreneurs esp at an early ask me when the environment is so dynamic why do budget ? Whilst I agree on the POV, budget or annual operating plan will give you a clear goal in the near term. Once the goal is fixed, its important to create a rolling forecast which considers where you stand against at in the following order : 1. Sales/Revenue - Current order book or Confirmed revenue , current funnel in place, revenue gap and expected funnel to be built up 2. What are your current costs and hence the baseline costs and what costs are expected to increase as you do revenue booking. Have a clear way of capturing your incremental p&l. Additional costs being incurred for new revenue 3. Look at the cashflow on a fortnight basis

Optimising cashflow is seldom implemented at startups There are many levers you have under your control which can have a direct impact on improving your cash flows : Your cashflow gets optimised if your incoming streams accelerate and outgoing streams decelerate Inflows can be accelerated by - giving discount to collect early - using banks to discount bills - prefer better credit period to better pricing - striking deals faster Outflows can be decelerated by - controlling discretionary expenses - avoiding stacking up unwanted inventory - conscious in hiring for growth - working with ur suppliers for better credit period Know your working capital cycle and manage it well Incremental inflows > incremental outflows

Cash reserve for your startup is always a killer subject to discuss and analyse. You need to have a great maturity to find the right balance between being conservative and aggressive at the same time. It’s lot to do with market and timing you are in. At early stages of the startup it’s even critical find the right balances as you need to have funds to move milestones. More funds being raised means more dilution. Don’t always wait for equity to build reserves, find alternative sources such as grants to build products, government loans supporting startups etc. Ideal range of cash reserves should be anywhere between 6-12 months. For a deep tech or new tech it can go upto 2 years. What ever be the logic, be smart in negotiating deal

It’s crucial for founders to know their burn rate: I come across many entrepreneurs struggling to understand their burn rate. Gross burn rate is different from net burn rate Burn rate definition changes basis the industry or segment you are working in. Burn rate can further be categorised and explained in many ways - burn you need to do operate and sustain your organisation until it breaks even - burn you need to accelerate growth of your revenue levels - burn you need to do to enter into new markets Burn rate should always be analysed and forecasted as it’s a dynamic indicator on how you run and manage the organisation. Burn rate doesn’t need to be always for the current revenue stream. You gotta precisely explain to anyone.