Financial Budgeting for Non-finance professionals

Apply the course's seven-step framework to build a five-year plan for a delivery pizza business, including financial projections, funding needs, and investor stake.

Download the attached excel spreadsheet to illustrate the 7-step business finance framework for the pizza delivery outlet business, designed for non-finance professionals. Explore what's included in the spreadsheet.

explore the forecasting assumptions tab, identify orange assumption cells and yellow calculation cells, and outline forecasting revenues, costs, and financing across five years using the seven step business finance framework.

Explore the financial statements tab, including income statement, balance sheet, and cash flow, and learn to forecast year 1 to year 5 for the pizza delivery business.

Apply the 7 step framework to a simplified pizza delivery outlet, starting with step 1 to forecast revenue for the next five years.

Forecast revenue by multiplying price by quantity, and assess factors such as competitive prices, customer demographics, market size, market share, and marketing spend to set future prices and quantities.

Forecast revenue across five years using revenue drivers: price per pizza rising from 15 to 35, daily orders from 100 to 500, and 365 selling days.

Calculate the revenue forecast by multiplying price per pizza, orders per day, and days in the year, then convert to millions, noting Year 0 as zero and Year 1–5 rising.

Advance to step two of the budgeting framework by forecasting the costs for a pizza delivery outlet business over the next five years.

Identify and forecast the four cost categories driving business budgets: direct input costs, occupancy costs, salary costs, and marketing costs, to shape a comprehensive business plan.

Calculate the input costs for a pizza delivery outlet by itemizing base, toppings, and packaging per pizza, aggregating to total direct costs, and forecasting five years in Excel.

Forecast input costs for a pizza delivery business by modeling pizza base, toppings per pizza, and packaging costs with 2% annual growth over five years.

Compute the total input costs for the pizza delivery business by summing input costs per pizza and multiplying by annual orders, then express in USD million across five years.

Forecast rent and electricity costs per kitchen for a pizza delivery business. Multiply by the number of kitchens and use an Excel model for a five-year plan.

Analyze occupancy cost drivers for a pizza delivery business by estimating rent and electricity per kitchen, 50 pizzas per kitchen per day, and a 5% growth-driven kitchen sizing.

Calculate the five-year occupancy cost by summing monthly rent and electricity per kitchen, annualizing, multiplying by the number of kitchens, and converting to USD millions; Year 0 shows zero.

Forecast salary cost for a pizza outlet by estimating cooks, support staff, delivery personnel, and founders, assigning salaries by type, and totaling costs in an Excel spreadsheet for five years.

Identify salary cost drivers for a pizza delivery business, including cooks, support staff, delivery personnel, and founders, with year-by-year headcount and a 4% annual salary growth over five years.

Compute salary costs for cooks, support staff, delivery boys, and founders by multiplying numbers by monthly salaries, annualize (×12), convert to USD millions (÷10^6), and sum for five years.

Forecast marketing costs by choosing channels such as radio ads, print ads, and digital campaigns, then multiply planned ad counts by unit costs to estimate annual and five-year totals.

Forecast the marketing cost for a pizza delivery business by estimating radio ads, print ads, and digital campaigns, including year-by-year volumes and costs with a 10% annual cost increase.

Calculate total marketing cost with sumproduct of radio, print, and digital campaigns, convert to yearly cost in USD millions, and forecast over five years from 0.4 to 0.2 million.

Explore the third step of the business finance framework and forecast the investments needed to run any business.

Identify the two main investment drivers—fixed assets and working capital—and explain how inventory, receivables, and payables shape a pizza delivery business.

Explore how fixed assets drive a pizza delivery business by calculating total capital expenditure on equipment, accounting for depreciation over the asset's useful life.

Learn how to calculate fixed asset investment for a pizza delivery business by projecting $50,000 per kitchen with 5% annual escalation, and determine yearly new kitchens based on occupancy estimates.

Calculate yearly capital expenditure for new kitchens opening and build gross fixed assets as the cumulative total, expressed in usd million, using simple excel-like formulas.

Learn to distinguish capital expenditure from gross fixed assets and calculate depreciation over a 10-year useful life for a pizza business, with year-by-year depreciation that grows as assets accumulate.

Assess inventory drivers for a pizza business by calculating input materials stock—base, toppings, packaging—using days of input materials and daily cost, then model total inventory in Excel for five years.

Calculate the inventory component of working capital investments by determining daily input material needs. Apply a 30-day inventory assumption to run your business, aligning with the key inventory drivers.

Calculate inventory holding by multiplying the days of input material by the daily average input cost (total input cost divided by 365) and propagate the formula across future years.

Calculate the total receivables for the pizza delivery business by multiplying the days of customer credit by the average sales per day, demonstrating working capital insight in an Excel spreadsheet.

Analyze accounts receivables by assuming zero credit days, so a pizza delivery business collects payment upfront before delivery.

Calculate accounts receivable by linking days of customer credit with the average daily sale, defined as total sales divided by 365, noting zero receivable when no credit is given.

Calculate payables for the pizza delivery business by multiplying vendor credit days by the average daily input costs, and project this in an Excel model for five years.

Calculate accounts payable using a 10-day vendor credit assumption for all future years across budgeting periods. Apply these drivers consistently to project cash requirements and supplier payments.

Calculate accounts payable by multiplying vendor credit days by the average daily input cost (total input costs divided by 365) to project future payables, including year 0.

Calculate working capital by adding inventory and accounts receivable, minus accounts payable, and apply the formula across years to project future needs for the pizza delivery business.

Explore step 4 of the business finance framework. Assess your own financing sources to fund the business plan.

Assess existing financing sources before external capital, especially at the initial stage, including founder's own capital from personal savings and short- or long-term loans from friends and family.

Assess founder financing by detailing an initial 0.2 million equity, 0.5 million short-term loan repaid in year 1, and 0.5 million long-term loan repaid in year 4.

Compute the drivers of interest cost by multiplying the rate by short-term and long-term loan amounts, then summing, using an Excel pizza delivery example.

Learn how to compute interest costs on short-term and long-term loans by tracking year-end outstanding balances, applying 5% and 10% rates, and incorporating new borrowings and repayments.

Compute yearly interest by applying short-term and long-term loan rates to opening balances; end-of-year balances become the next year's opening balances, with year 0 interest equal to zero.

Explore the fifth step of the business finance framework by preparing the income statement and balance sheet for a pizza delivery business over the next five years.

Explore how to construct the income statement, from revenue through earnings before interest and taxes, to net profit, and connect it with a forecasted balance sheet for pizza delivery business.

Link forecast revenue to the income statement for years 0–5, with year 0 non-operational, and copy the formula to ramp revenue from 0.5 to 6.4 million dollars by year 5.

Link input costs and the occupancy, salary, marketing, and depreciation costs from forecasting assumptions to populate the income statement, then compute gross profit and profits before interest and taxes.

Calculate profits before interest and taxes (PBIT) by subtracting total indirect costs from gross profits, showing losses in years 1–3 and profitability in year 4 or 5, aiding investor negotiations.

Populate the interest costs on the income statement by referencing the forecasting assumptions tab, then copy the formula across years to subtract them from profits before interest and taxes.

Calculate profits before taxes by subtracting the interest cost from profits before interest and tax, then apply a 30% tax only when PBT is positive.

Forecast profits after taxes for a pizza delivery business by modeling taxes during losses and profits, compute profits before taxes, and project five years of income to show eventual profitability.

Learn how a balance sheet records a business's assets, liabilities, and equity as of year-end, with examples like cash, receivables, inventory, and debts.

Apply practical cash flow and forecasting techniques to populate current assets on the balance sheet for a five-year pizza delivery business, focusing on cash, accounts receivables, and inventory.

Compute the closing balance of fixed assets from year 0 to year 5, showing how to determine the end-of-year fixed asset investments for each year.

Calculate the fixed assets balance at year end by starting with the beginning balance, adding capital expenditure, and subtracting depreciation to determine the closing balance of long-term assets.

Learn to compute the fixed assets balance at the end of each year in Excel, combining beginning balance, year 1 capital expenditure from forecasting assumptions, and depreciation.

Calculate total assets by summing cash in hand, accounts receivables, inventory, and net fixed assets. Use the formula in cell D27, copy across to end-of-year totals, and populate balance sheet.

Populate the current liabilities on the balance sheet by linking short term debt and accounts payable from the forecasting assumptions tab, extending year 0 to future years.

A practical walk-through for populating long-term debt on the balance sheet using forecasting assumptions, copying formulas, and understanding shareholder equity capital.

Calculate the shareholders' equity at year end by starting with the beginning-of-year equity (last year's end), adding new equity contributions, and adjusting for profit or loss (pizza delivery business example).

Calculate shareholder equity across years starting with the founder's initial equity funding in year 0. If equity becomes negative, plan external financing after preparing a cash flow statement.

Compute liabilities and equity by adding short term debt, accounts payable, long term debt, and shareholder equity; then outline cash balance and external equity funding for the pizza delivery business.

Move to step 6 of the business finance framework to estimate the funding gap in the business plan and quantify how much external funding you need to raise from investors.

Project a five-year cash flow statement for a pizza delivery business, covering operations, investment, and financing and contrasting positive and negative cash flow in stable versus growing firms.

Learn the rule of thumb for preparing a cash flow statement by using a template to track inflows and subtract outflows for any business.

calculate the cash flow from operations for a pizza delivery business by starting with net profit and adding back depreciation, with year-0 linkage to the income statement.

Learn to convert net profit to cash from operations by adding back interest cost and increases in accounts payable, with a practical Excel-style calculation across years.

Learn to calculate cash flow from operations by subtracting increases in accounts receivable and inventory from net profit, using year 1 receivables as E21 minus D21.

Calculate cash flow from operations across all years by summing relevant line items, copying formulas, and noting negative cash flow in early years and positive once the business matures.

Calculate the cash flow from investing by treating capital expenditure as a year-by-year cash outflow. Link forecasted capex to the cash flow statement and record it as negative values.

Calculate the cash flow from financing by tracking the founder equity contribution and inflows from short-term and long-term debt, linking forecasting assumptions to populate the cash flow statement.

Link interest from income statement to the cash flow from financing as a cash outflow, subtract it, and populate short term and long term debt repayments from forecasting assumptions tab.

Calculate the cash flow from financing by summing cash inflows from founders' equity contributions and loans, and subtracting financing payments, with external equity funding noted for later.

Calculate the total cash flow during the year by adding cash flow from operations, investing, and financing. Early years show negative cash flow as operations incur losses, indicating cash burn.

discover how to determine yearly funding needs from a cash flow statement to sustain a business with negative cash flows from external investors.

Assess opening and ending cash balances, detect cash gaps, and calculate the external equity needed to fund negative cash flows and achieve zero year-end balance.

The 5-year equity funding plan requires about 1.3 million from external investors, with 0.6m raised in year 2 and 0.2m in year 3, and no further injections in years 4–5.

Link the year-end cash in hand to the balance sheet, and add external equity funding to keep assets equal to liabilities plus equity across years.

Explore step 7 of the business finance framework, calculating the fair value of your business and the equity to offer investors for funding, illustrated with a pizza delivery example.

Explore two core business valuation approaches: a pure negotiation-based method for early-stage, pre-revenue firms, and a methodical calculation-based approach for growth and mature businesses.

Estimate the 1.35 million funding and the equity share you will offer, balancing founder and investor interests. Compute the business value from the negotiated 25% stake, 5.4 million.

Apply a methodical valuation using cash flows based and exit multiple approaches to a pizza delivery business, calculating free cash flows to equity, exit value, and investor returns.

Calculate free cash flows to equity (fcfe) using cash flow from operations, cash flow from investment, and cash flow to debt holders in a pizza delivery business in Excel.

Calculate the free cash flow to equity for the next five years by summing cash flow from operations, cash flow from investing, and net debt inflows minus debt repayments.

Calculate the exit value or terminal value by applying a 15x price-to-earnings multiple to year five earnings to estimate the business value around 18.3 million, noting other multiples possible.

Combine free cash flows to equity with exit or terminal value for total cash flows to equity. Year 5 would be 19.5 million.

Estimate the equity investors' return expectation to value the company, using a typical target around 30%. Negotiate this expected return with investors for your own business.

Calculate the pre-money valuation by discounting five years of total cash flow to equity at the investors' ROI using the NPV formula in Excel.

Calculate the post-money valuation by adding the total funding needed from external investors to the pre-money valuation, yielding 5.6 million.

Calculate the equity percentage to offer investors using a post-money valuation and the 1.35 million funding, guided by cash flow and exit value methods for a logical negotiation starting point.

Offer your valuable feedback on the course so far to help thousands of students worldwide and improve this financial budgeting course through Skillfin Learning.

Discover how to craft a 3–5 year business plan for investors by forecasting revenues, costs, capital investments, own financing, cash flow, and valuation through a 7-step business finance framework.

At the end of this module, we invite your valuable feedback to improve the financial budgeting for non-finance professionals course and help thousands of students worldwide learn better.