The aim of this case study is to provide a basic theoretical understanding about financial business planning in the field of start-up companies and also for business case purposes within running ventures. In conclusion, there shall be a controversy discussion about different financial success factors and the associated risks and limits in order to persist on competition. In addition to that, there will be a transfer into a practical example to apply the theoretical knowledge. The final approach is a critical evaluation about the topics regarded.
Entrepreneurship is enjoying ever growing popularity, most likely due to the idea that it is only possible to develop the own personality through a self-determining activity. A business start-up establishes for the founder the highest degree of individual personal development and complacency. Thus, it is not surprising that especially for the younger generation this topic become more and more in the center of attention. Furthermore, independent or freelance activities may provide both personal fulfillment and an opportunity of more income.
All companies require capital, to invest in plant, machinery, inventories, accounts receivable, and all the other assets it takes to run a business. The topic finance planning has an essential importance in the context of business planning. It summarizes all textual descriptions of the business plan into clear interpretable numbers. Potential and value of a business idea has to be clearly visible and identifiable. Based on a detailed planning the capital requirements arise, which is needed to derive the necessary type of funding.
Due to the fact that most start-ups are characterized by relatively high risk of fail and a huge need of capital by the founder, which can cause an existential personal threat, a detailed and realistic finance plan is mandatory. For the existence of a start-up, it is essential to have always available and sufficient liquidity and it constitutes therefore a fundamental motive for a corporate financing.
Table of Contents
1 EXECUTIVE SUMMERY
2 RESEARCH DESIGN
2.1 Methods of Data Collection
2.1.1 Content Analysis
2.1.2 Market Research
2.1.3 Knowledge of the Industry
2.1.4 Assumptions
2.1.5 Restrictions of Data Collection
2.2 Framework of the Research
2.3 Subject of the Research
2.4 Differentiation of Central Terms
2.4.1 Central General Terms
2.4.1.1 Finance
2.4.1.2 Finance Planning
2.4.1.3 Business Plan
2.4.1.4 Business
2.4.1.5 Small and Medium-Sized Companies
2.4.1.6 Start-Up
2.4.1.7 Success Factors
2.4.2 Central Financial Terms
2.4.2.1 Income
2.4.2.2 Expenses
2.4.2.3 Assets
2.4.2.4 Earnings
2.4.2.5 Liabilities
2.4.2.6 Liquidity
2.4.2.7 Equity
2.4.2.8 Depreciation
2.4.2.9 Cash Flow
3 BASICS OF FINANCIAL PLANNING
3.1 Basic Principles
3.1.1 Requirements of Finance Planning
3.1.2 Framework of Financial Reporting and Planning
3.1.3 Selection of Legal Form
3.1.4 Start-up Funding
3.2 Information Processing
3.2.1 Determinants of Information Needs
3.2.2 Uncertainties
3.2.3 Estimations
3.2.4 Environmental Analysis
3.2.5 Industry and Competition Analysis
3.3 Financing Options
3.3.1 External Financing
3.3.2 Equity Capital
3.3.3 Mezzanine Financing
3.3.4 State Subsidies
3.3.5 Leasing, Rent and Hire Purchase
3.3.6 Inheritance
3.3.7 Alternative Finance Options
3.4 Calculation Elements
3.4.1 Market Size and Sales Revenue
3.4.2 Payroll Expense
3.4.3 Insurance Expense
3.4.4 Depreciation
3.4.5 Taxes
3.5 Methods of Valuations
3.5.1 “Stuttgarter Verfahren”
3.5.2 Multiplier Methods
3.5.3 Discounted Cash Flow Method
3.5.4 Business Ratios
3.5.5 Net Present Value
3.5.6 Valuing a Start-Up
4 FINANCIAL SUCCEESS FACTORS
4.1 Introduction
4.2 Direct Factors
4.2.1 Qualification of the Entrepreneur
4.2.2 Moral, Ethics and Honesty
4.2.3 Set of Figures
4.2.4 Cost Structure
4.2.5 Visualization of Mathematical Correlations
4.2.6 Credit Discussions
4.2.7 Flexibility
4.2.8 Risk and Back-Up
4.2.9 Consultancy and Customers Voice
4.2.10 Organizational Framework
4.2.11 Plausibility
4.2.12 Paranoia
4.3 Indirect Factors
4.3.1 Business-Case-Marketing
4.3.2 Misjudgements
4.3.3 Learning from Mistakes
4.3.4 Sustainability and Long-Term View
4.3.5 Innovativeness
4.3.6 Investment in Knowledge
4.3.7 Investment in Talented People
4.3.8 Inventive Spirit
4.3.9 Protection of Intellectual Properties
5 PRACTICAL EXAMPLE
5.1 Design of the Finance Plan
5.2 Financial Plan
5.3 Calculation Approach
5.3.1 Income
5.3.2 Expenses
5.3.3 Gross Profit
5.3.4 Financing
5.3.5 Miscellaneous
5.3.6 Ratios
5.3.7 Earnings
5.4 Analysis and Interpretation
5.4.1 Scenario and Sensitivity Analysis
5.4.2 Financial SWOT Analysis
5.4.3 Evaluation of Gathered Data
6 CRITICAL EVALUATION
7 PERSPECTIVE AND GUIDANCE
Objectives and Topics
This work aims to provide a basic theoretical understanding of financial business planning for start-ups, while examining financial success factors, associated risks, and the practical application of financial modeling. The central research objective is to investigate how professional financial planning serves as a success factor for start-up competitiveness and sustainable growth.
- Theoretical foundations of financial planning and business valuation
- Methods for addressing uncertainties and financial modeling
- Analysis of diverse financing options for start-ups
- Identification of critical success factors in financial management
- Practical implementation of a business financial plan through a specific industry example
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3.1.1 Requirements of Finance Planning
In the context of finance planning it is essential to be always aware of substantial financial data of the business operations. However, within a start-up company a sophisticated financial statement is not necessary due to the vague nature of made assumptions. Nevertheless, minimum requirements have to be fulfilled such as statements about estimated revenues and profit, needed financial resources within what timeframe and on which assumptions the forecast is stated. Therefore, a profit and loss statement, a balance sheet and a break-even analysis for at least the next five years are required. The data shall refer if appropriate to each quarter of the first year and after that annually (cf. ETH Zürich, et al., 2016, p. 143). Due to the finance-intensive nature of the viewed start-up LEAT in the machine engineering industry an annually 5-year examination has been chosen without a detailed view into the first year because of the less informative first year.
In addition to that the finance plan should be transparent, coherent, equipped with reliable data, a reasonableness should be granted as well as an existing authenticity to the addressee (cf. Lutz & Bussler, 2010, pp. 142 - 143).
The general overall goal of financial management, which financial business planning is all about, is to maximize the market value of the existing owners’ equity. With this in mind it doesn’t matter what the organizational form is, due to the fact that good financial decisions increase the market value of the owners’ equity, and poor financial decisions decrease it. The entrepreneur tries to serves best to the business by identifying goods and services that add value to the firm because they are desired and valued in the free marketplace (cf. Hillier, Ross, Westerfield, Jaffe, & Jordan, 2016, pp. 9 - 10).
Summary of Chapters
BASICS OF FINANCIAL PLANNING: This chapter outlines the foundational principles of financial planning, focusing on the necessary requirements, information processing, and the critical importance of realistic assumptions for start-up success.
FINANCIAL SUCCEESS FACTORS: This section details direct and indirect success factors, including entrepreneurial qualifications, moral standards, cost structures, and long-term strategic orientations, which collectively impact financial performance.
PRACTICAL EXAMPLE: This chapter applies the previously discussed theoretical concepts to the start-up LEAT, providing detailed calculations for income, expenses, financing models, and sensitivity analyses.
CRITICAL EVALUATION: The final evaluation reflects on the study's findings, highlighting the necessity of ongoing management, the role of financial controlling, and the challenges start-ups face within the current regulatory environment.
Keywords
Financial Planning, Start-up, Business Plan, Liquidity, Capital Requirements, Investment, Success Factors, Sensitivity Analysis, Machine Engineering, Financial Valuation, Cash Flow, Risk Management, Profitability, Entrepreneurship, Funding.
Frequently Asked Questions
What is the core focus of this publication?
The publication focuses on the essential role of financial business planning in ensuring the success and long-term viability of start-up companies.
What are the primary themes covered in the study?
Key themes include theoretical frameworks for financial reporting, various financing options, methods of business valuation, and identified success factors that drive competitive performance.
What is the primary research goal?
The goal is to provide a solid theoretical understanding of financial planning and to demonstrate its practical application using the example of a machine engineering start-up called LEAT.
Which scientific methods are employed?
The research methodology includes a detailed literature content analysis, industry-specific market research, and the creation of a practical financial case study involving scenario and sensitivity analyses.
What is addressed in the main body of the text?
The main part covers the fundamental principles of finance, strategies for financing, calculation of essential elements like payroll and taxes, and the analysis of financial performance indicators.
Which keywords best characterize this work?
Key terms include Financial Planning, Start-up, Cash Flow, Business Valuation, and Competitive Success Factors.
Why is the "Stuttgarter Verfahren" valuation method considered limiting for start-ups?
It is limiting because it relies heavily on historical data and stable economic trends, which are typically absent or highly volatile during a company's pre-founding and early start-up phases.
How does the author propose managing uncertainties in financial projections?
The author suggests using qualitative correction procedures and quantitative methods, such as scenario and sensitivity analyses, to rate the probability of risks and evaluate the impact of changing assumptions.
What makes the start-up "LEAT" a relevant case study for this work?
LEAT is a start-up in the machine engineering sector, which represents a finance-intensive industry, making it an ideal subject for demonstrating complex capital requirements and long-term planning needs.
- Citar trabajo
- Patrick Lukasiak (Autor), 2019, Financial business planning as a success factor on competition, Múnich, GRIN Verlag, https://www.grin.com/document/471480
