Finance for Geeks (Tue Nov 21, lecture 22)

Homework due for today

Legend: :Participation :Early :PDF

  1. Read Paul Graham on Growth

  2. Read and learn how to design good spreadsheets. Even if you think you know how, read both of these: How to use a spreadsheet to create a simple budget and Good Spreadsheet Design. Do all the examples in Google Sheets. Deliverable: Submit the url of the google sheet with your work from the two pages. Don’t forget to make accessible by all
  3. Show off your knowledge of two important ideas in spreadsheets. Create a small, but meaninful example of the use of absolute and relative references, as well as a small but meaningful example of the user of the =VLOOKUP function. Deliverable: Submit the url of the google sheet with your work. Don’t forget to make accessible by all
  4. Teams: Meet for at least 2 hours per week! Continue working on Stage 3 of Term Project Outline. Continue refining your product, getting more feedback and supporting information and preparing your Term Project Final Deliverables

Money

  • Life blood of a business are resources
  • You consume resources and you generate value
  • Remember Gazintas > Gazoutas

Very basic financial modeling

  • Basic terms
    • Costs
    • Revenues
    • Profits
  • Core calculation:
    • Profits = Revenues - Costs
  • Types of costs
    • Fixed
    • Variable
    • Division is not always clear cut
  • Fixed Costs
    • Cost you have to get to the first ‘thing’
    • First release? First sale? First Orange Juice Sold?
    • Rent
    • Communications
  • Variable Costs
    • Marketing expenses
    • Salaries
    • Raw Materials
  • Independent variables
    • Units sold?
    • Units manuctured?
    • Number of employees?
    • Number of customers?
    • Target new customers per month

‘Programming’

  • Learn to be very comfortable with a spreadsheet
  • Google Sheets is fine, excel is fancier

Basic Example Financial Model

  • Lemonade Stand 2.0
    • 1 stand, staffed by 2 kids
    • Three sizes of lemonade, S, M, L
  • What are all the sources of revenue?
  • What are all the costs?
  • Lets lay it out in excel

More complicated example

More realistic template

Key Points

  • Developing a plan that balances capital/time/milestones
  • Deciding what need to do now, and what can be deferred
  • Defining your financing milestones
  • Determining how much capital to raise for your first milestone
  • Insuring you position yourself for the next financing, ideally at a step-up

Relevant Reading

Next Class