Objective
To ensure that start-up founders understand:
- the importance of finance
- their full range of start-up costs
- sources of finance and the differences between them
- how to draw up a cash flow forecast
- some of the common pitfalls made by start-up founders when putting a cash flow forecast together
Overview
This is an introductory sessions to start-up finance for those interested in developing a start-up venture for the first time. The session begins by exploring the importance of finance and reminding founders that they must understand finance within the context of their start-up. We then consider start-ups costs and sources of finance before undertaking an activity to learn how to put a cash flow forecast together.
Activity
This activityâŚ.
This is a 2 hour session broken down into the following sections:
5 mins: Introduction to the session
10 mins: The importance of finance â ask the group why they think finance is so important then go through slides, highlighting any additional points they may have missed. End this section by reminding them as start-up founders they cannot simply hide from finance (no matter how tempting that might be).
5 mins: Show how the session will help them with the bottom two sections of the Business Model Canvas. Play them the following video to explain how finance impacts on the business model:
15 mins: Start-up cost activity (completed in founder teams). Given them a sheet which asks them to identify their start-up costs and estimate potential costs. Then ask them to review their list and think about how they can bootstrap (i.e. how could they obtain the resources they need as cheaply as possible).
15 mins: talk through different sources of finance (family and friends, loans, angel investors, venture capitalists, crowd funding, grants and prizes, and revenue from customers). Share key insights about how the pros and cons of each and why not to assume all investors are seeking the same opportunities when investing in start-ups. We also consider when is the right time to try to raise finance.
5 mins: Break
5 mins: Explain that as a new venture you donât need to cover just your start-ups costs. Once you launch you also need to finance the growth of your business and ensure that your business model stacks up. Introduce the concept of âcash runwayâ.
5 mins: Introduce the cash flow forecast as a tool. Talk through the importance of financial forecasting.
10 mins: Explain how to put a cash flow forecast together. This includes calculating sales and costs, also explain the impact that payment terms can have on cash flow.
25 mins: Cash Flow Forecast activity. Use a case study based activity that requires participants to draw up a cash flow forecast.
10 mins: Talk through examples of common pitfalls that start-up founders make when putting cash flow forecasts together. Examples include; not showing how growth will impact on both sales and costs, approaching the figures as guesswork and not linked them to your plans for your start-up, and not leaving room for contingency plans.
10 minutes: overview of a simple cash flow forecast tool for the founders to use to test assumptions and explore alternative approaches. Close the session.
Skill Development
This session encourages participants to reflect on their approach to their start-up ventures from a financial perspective. This is in particular relation to the amount of finance they require and where to seek this. The session then aims to increase participantsâ understand of cash flow forecasting and equipping them with the skills and knowledge to put together a basic cash flow forecast for their start-up. Using the case study activity we can assess this understand during the session and participants also have the opportunity to review the cash flow forecasts theyâve created for their own ventures with our business adviser at a later date.
Resources
- Pens
- Worksheets
- Case study
- See slides and supporting materials
Engaging Stakeholders in Student Enterprise
References
Kauffman Founders School: The Art of Startup Finance videos (