1. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Managing and Forecasting Cash Flow The most exciting cash-flow session you’ll ever experience or your money back.* *Good thing it’s a free event.

2. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Welcome! Thank you for joining us at the 5th annual Denver Startup Week — biggest and best in the nation Wanna tweet? Use #DENStartupWeek and @P2Binvestor WiFi: Try P2Bi with password Welcome2P2B! Download the template here now: bit.ly/cashflow_dswbit.ly/cashflow_dsw We’ll provide some hands-on help right after. Feel free to stay. Ground rules for session: No yawning

3. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 3 Krista Morgan @krismtl | @P2Binvestor kmorgan@P2Bi.com Drew Lyon www.FocusedEnergy.work Drew@FocusedEnergy.work

4. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Let’s get started

5. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor What’s so great about a cash-flow forecast? Cash is more important than your revenue and monthly financials Your BOD will spend WAY more time on your cash-flow forecast than financials It’s a tool that helps you make faster and more informed decisions The answer is surprisingly easy when you don’t have the money Use for short-term and long-term planning Most fundraising rounds are predicated on cash burn 5

6. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Start with a short-term cash forecast 13-week rolling forecast (keep it updated) Helps plan your operations KEEP IT SIMPLE - start with the big things and go from there Know your current cash position Ensure your books are in order Be precise but not to the penny Use logical categories 6

7. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Cash Flow Template Overview Accounts Receivable List your clients and expected payments Pipeline can be added if you want (Enter the amount in the green section, and copy and paste the value under the correct date) Payroll Expense Linked to the “Headcount Budget” tab - enter the names, annual pay rate, and start date Payroll taxes are set at 13%, just change the formula in the cell Accounts Payable A/P line is linked to the “A/P Detail” tab - copy and paste the report from your account ERP into the tab and put a date next to the A/P line to time sequence the payment into the cash flow Note Payment Add any debt repayments here Capital Expenditures Add any CapEx expenses here Operating Expenses Values that are forecasted on the P&L Forecast by Week tab Use the P&L by Week Actuals as a reference point for the timing of payments and input them in the P&L Forecast tab You will then paste the values from the P&L Forecast into the cash flow – check to make sure your timing matches up with the weeks of each forecasted month Use the “T&E Budget” tab to forecast your travel expenses P&L by Week Actual (Notated) Use this tab to help understand how to forecast your Revenues, COGS, and Operating Expenses

8. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor There’s a difference between Revenue and Cash Cash is related to your contract and payment terms - it is NOT the same as revenues 8 Example SaaS Contract $10,000 Annual License Revenues earned ratably - even over the annual term Payment Schedule: 100% upfront Your Invoicing Terms: Due Upon Receipt Client Payment Terms: Net 90 Example Services Contract $100,000 Service Contract Revenues earned upon deliverables basis over 6 months Payment Schedule: 75% upfront; 25% upon completion Invoicing Terms: Net 30 Client Payment Terms: Net 60

9. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 9 Cash flow = $ Received vs. $ Paid Out Good bookkeeping is paramount

10. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 10 Cash flow forecast example

11. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Fundraising is predicated on long-term cash forecasts 12-18-month rolling forecast Used for fundraising and strategic planning Usually based on hiring plans and revenue projections Start with where you are currently Less detailed and precise Use logical categories 11

12. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Cash is hard to predict at every stage of growth Early-stage companies: Why you’re forecasting cash, what investors need to know, numbers you need to have ready, and do you need a CFO now? Early-revenue companies: MVP in market, non-predictable revenue, expenses easy to accumulate Growth stage companies: Predictable revenue, but lots of other challenges to manage 12

13. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor What is the cash gap? 13 The 'cash gap' is the time between cash going out & cash coming back in. Inventory Payables (A/P)Receivables (A/R) Cash Gap Days 3060110 You purchase inventory – A/P increases You pay your suppliers – cash goes out You ship product – A/R increases You receive payment – cash comes in

14. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 14 Personal finance Grants / Friends & Family Concept & product development IntroductionGrowthMaturityDecline Sales & Profit Time Crowd- funding Seed capital Angel Investment Strategic Investment PO Financing Factoring Venture Capital Inventory Financing Receivable s Financing Private Equity Bank debt Exit Revenue Cash flow Profit Business funding lifecycle

15. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Good cash management and sound funding strategy 15 Speed is a strategy.

16. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 16 Are you focused on growing quickly to get to an exit path? Growth rate matters in valuation for exit Do you want to be your own boss and build a company for the long term? Bootstrapping vs equity Passion vs. scale

17. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 17 P2Binvestor | Closing the Cash Gap | Financing Smart Growth 4.5% monthly growth rate > $10M revenue run rate > $30M valuation 6.5% monthly growth rate > $23M revenue run rate > $70M valuation $100K monthly revenue The earlier you grow, the more impact it has later

18. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Cash flow financing helps, especially when bootstrapping Receivables financing: Smooth cash flow from lumpy payers Purchase order financing: Help with those big orders Inventory financing: Leverage your assets Revenue-based financing: Lump sum based on trailing revenue Merchant cash financing: Credit card payment advances Asset-backed lines of credit: Working capital based on company assets 18

19. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Different industries have unique cash flow challenges Manufacturing // Distribution: Managing inventory and cash flows can be a tough balance; Perishable inventory is difficult to manage - can you reduce your inventory exposure? SaaS: Great MRR, but money comes in over time; How does that impact your growth plans? Services: Large service contracts can mean heavy upfront spend and a long lead time to receive payment; How will your vendors respond? Infrastructure // Development: How long will governments take to pay? Are there political risks you need to consider? Construction: How will retainage affect your cash balance? Will your final payout be delayed because another vendor didn’t perform? 19

20. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Case Study: SaaS company cash flow Steadily growing SaaS company with predictable revenue of $300K/month. Trying to increase sales by offsetting a typical large up-front fee that makes it harder to onboard customers quickly. Wanted to test a three-month offset of the fee. Took out a line of credit based on contractual monthly revenue to borrow against the next three months to continue to keep up expenses while testing the offset of the up front fee. Sales are up. 20

21. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Payment terms matter Pricing strategy When will you require customers to pay you? Will you take up-front fees? Will you make it easy for them to leave? What is your return policy? 21

22. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Getting Creative with Cash Flow A/P management Personal / business card management Ask your investors / be transparent Talk to your staff openly and honestly 22

23. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Good CEOs (not just CFOs) always know ●The month, if not the day, you will run out of cash ●Current monthly burn rate ●Max cash burn before you become profitable ●Max cash burn for the next 18 months based on growth ●Current payroll

24. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Tips for Success Keep it simple! Avoid analysis paralysis Regular maintenance is critical (helps when it’s linked to hiring) 24

25. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor 25 OUTSOURCED ACCOUNTING & FINANCE SOLUTIONS We manage any and all aspects of your company’s accounting and finance with efficient and affordable service built on trust and integrity. ●Financial Leadership ●Strategic Insight ●Systems Implementations ●Financial Modeling ●Transactional Accounting ●Dashboard and Metric Reporting ●Analytics Drew Lyon Managing Partner (303) 501-3499 Drew@FocusedEnergy.work www.FocusedEnergy.work

26. We’d like to fund your brains out. 1120 Lincoln St Ste 100 Denver, CO 80203 720.361.1500 P2Bi.com | hello@p2bi.com twitter.com/p2binvestor facebook.com/p2binvestor

27. FOCUSED ENERGY Denver Startup Week 2016 @P2Binvestor Q & A Ask us anything! We’ll provide some hands-on help next. Feel free to stay. Send an email to hello@p2bi.com for a free consultation about a line of credit from P2Binvestor (you must be B2B, have $500,000 min in revenue) Send an email to Drew@FocusedEnergy.work to sign up for a free session with Focused Energy