UNIT 4

WEEK N° 11

INTERNATIONAL
BUSINESS PLAN

Elizabeth De La Cruz
 Units Achievement

• At the end of the unit, the student calculates

4. FORMULATION OF THE the production costs, makes forecasts of sales
FINANCIAL PLAN and project financial statements.
Do a sensitivity analysis.

WEEK 11 • THE FINANCIAL PLAN.

• Introduction

2
 ACHIEVEMENT OF THE SESSION

At the end of the session, the student will elaborate a forecast of

sales through techniques of strategy planning, showing order and

analytical skills.

TIME SUBJECT VERB CONDITION CRITERIA

UNIVERSIDAD PRIVADA
DEL NORTE
What is financial planning?

• https://www.youtube.com/watch?v=pd29VYF6e-U
 Interest

I What is the use of

planning sales?

UNIVERSIDAD PRIVADA
DEL NORTE
What is a Financial Plan?

It is a document containing the current money situation and

long-term monetary goals, as well as strategies to achieve
those goals.

A financial plan begins with a thorough evaluation of the

person’s current financial state and future expectations and
may be created independently or with the help of a
certified financial planner.
 Discovery

1. Financial Plan
Objectives:
The purpose of a financial plan is to
determine what resources will be
necessary to complete a business project,
before creating a business.

So much so, that any financial plan must

respond to:
• what is the required financing
• when it will be necessary to obtain it
• the type of financing that best suits the
purposes of the project
• who is more convenient to finance the
project.
• whether the business is viable
 Discovery Financial Plan

Investments Sources of Financing Sales projection

• Preoperative Budget • % Bank Loan •Survey: (%) Would you buy this
product ?
• Fixed asset • Amortization table •Multiply it by your target market
•Increase 20% per year

P&L Budget of cost and

• Net profit expenses
Cash Flow • Sales cost
• Operation, Marketing,
Administrative Budget

Net profit
• NPV
Financial Ratios
• IRR
Financial goals
importance

• Having a goal changes the way you look at your money.

• You’ll start to filter your daily financial decisions through the
lens of your goals.
• Having a plan will help you prioritize your spending and
investments so your business can serve your dreams. The
way you use your money today will impact the money you
have in the future.
Financial Plan goals:

• A financial goal is a target to aim for when managing

your money. It can involve saving, spending,
earning, or even investing.

• Creating a list of financial goals is vital to creating a

budget.
• When you have a clear picture of what you’re aiming
for, working towards your target is easy. That means
that your goals should be measurable, specific, and
time-oriented.
Types of Financial Goals

• Short-term goals
• Long-term goals
Short-term financial goals

• Think two to five years. Or even just a few months. This might include
things like investing in new technology or equipment to boost your
productivity and profits.
Long-term financial goals

Generally, long-term goals focus on five to ten years from now, and
beyond.
What is financial planning?

• https://www.youtube.com/watch?v=e-P8HzVCgbQ
 Discovery

Financial Plan
Establish the investments that the
1 company requires (investment Preoperative Budget amount
plan) for the start-up phase. Company constitution S/. 4,972
Notarial charges S/. 2,500
Brand in Indecopi S/. 535
Preoperative Budget Public register S/. 1,260

Operating license S/. 677

S/. 5,120
Rental guarantee S/. 5,120
Other expenses S/. 124,000
Marketing expenses S/. 50,000
Operating expenses S/. 74,000
Total S/. 134,092
Tax S/. 24,136.56
Total + Tax S/. 158,229
 Discovery

Financial Plan
Establish the investments that the
1 company requires (investment
plan) for the start-up phase.

Fixed asset amount unit quantity Total amount

Fixed asset
PC S/. 2,000.00 5 S/. 10,000
Desks S/. 500.00 5 S/. 2,500
Cellphones S/. 1,000.00 5 S/. 5,000
Printers S/. 500.00 1 S/. 500
Total S/. 18,000
Tax S/. 3,240
Total + Tax S/. 21,240
 Discovery

Financial Plan
Establish the investments that the
1 company requires (investment
plan) for the start-up phase.
Investment amount
Preoperative S/. 134,092
Fixed asset S/. 18,000
Tax S/. 27,376.56
Total S/. 179,469
Cash S/. 180,531
Total + Tax S/. 360,000
Income statements

• https://www.youtube.com/watch?v=ErHxR_Rpvko
 Discovery

Financial Plan

Determine which sources of financing are most appropriate to make the

2 investments that are required (financing plan).

In the event that external financing is chosen, the expected return must be
specified.
Partners (Co-founders)
 Discovery

Financial Plan

investment amount
Financing 60% S/. 216,000
2
Loans Share capital 40% S/. 144,000
Total 100 S/. 360,000

The debt will be financed through a bank loan, with an effective annual rate of
15% for a term of 5 years.

Period
Periodo InitialInicial
Saldo balance Interest
Interés Amortization
Amortización Payment
Pago Final balance
Saldo Final
1 S/. 216,000 S/. 32,400 S/. 32,036 S/. 64,436 S/. 183,964
2 S/. 183,964 S/. 27,595 S/. 36,842 S/. 64,436 S/. 147,122
3 S/. 147,122 S/. 22,068 S/. 42,368 S/. 64,436 S/. 104,754
4 S/. 104,754 S/. 15,713 S/. 48,723 S/. 64,436 S/. 56,031
5 S/. 56,031 S/. 8,405 S/. 56,031 S/. 64,436 S/. -
What is a Balance Sheet?

• https://www.youtube.com/watch?v=ixCPM5HznRU
 Discovery

Financial Plan

3 Sales projection

A sales forecast is the process of

estimating future sales.

Predictions can be based on

existing data and comparisons
across the industry and on
economic trends.
They are vital to make business
decisions that improve business
performance.
 Discovery

Financial Plan

3 Sales projection purpose

• Change in sales teams • Analyze price changes:

• Production planning
• Opening of new locations special discounts or
• Inventory planning
• Development of new promotions
distribution channels
 Discovery

Financial Plan

3 Methods of Sales Forecasting

Market capacity: Total number of units that the market can consume.

It is based on the needs of

consumers and the industry.

For example, the age of a consumer

is related to their needs for food,
clothing and social implications.

And if we know how many people

there are in a certain age group.
 Discovery

Financial Plan

3 Methods of Sales Forecasting

Customer surveys
Its main objective is to know the position and opinion of customers in relation to the
product in order to determine the probability of demand.

If the clients are institutional (companies), they are asked about their purchasing plans
and their projected purchasing behavior.
*It takes a large number of respondents to be able to generalize certain results.

Would you buy this product / service? *

 Discovery

Financial Plan

3 Sales projection

Growth factor per year

Year 1 Year 2 Year 3 Year 4 Year 5

Growth curve 20% 40% 60% 80% 100%
Understanding the Cash flow

• https://www.youtube.com/watch?v=FA0ACIOzbWc
 Discovery

Financial Plan

4 Budget of costs and expenses

Operations Marketing
Sales cost
budget budget

Administrative
Payroll
budget
 Discovery

Financial Plan

4 Budget of costs and expenses

Expense made by the company to produce

Sales Cost (in total) the products it sells or services
provided

Industrial company Comercial company

▪ the cost of the raw materials that we ▪ used materials
have used to manufacture or produce ▪ workforce
said product ▪ fixed expenses (rent, salaries, etc.)
▪ the cost of storing the products
▪ direct and indirect labor costs
▪ paperwork costs (in the case of
imported materials)
▪ depreciation of products
▪ product transportation costs
▪ the taxes that apply in each case
 Discovery

Financial Plan

4 Budget of costs and expenses

• Office / Factory Maintenance

Operations • Platform maintenance
budget • Machine maintenance
 Discovery

Financial Plan

4 Budget of costs and expenses

• Advertising expenses
Marketing • Public representation expenses
budget • Loyalty strategies
• Marketing payroll
 Discovery

Financial Plan

4 Budget of costs and expenses

• Local rental services

Administrative • Water and electricity costs
budget • Telephone expenses
• Office supplies
• Payroll
 Discovery
Financial Plan

6 Income statement (P&L - profit and loss)

Year 1 Year 2 Year 3 Year 4 Year 5

Sales S/. 561,547 S/. 999,453 S/. 1,597,386 S/. 2,249,179 S/. 2,921,568
Cost Sales S/. -155,146 S/. -258,164 S/. -402,738 S/. -558,467 S/. -726,011
Gross Profit S/. 406,401 S/. 741,289 S/. 1,194,648 S/. 1,690,712 S/. 2,195,557
Operating expenses S/. -90,357 S/. -93,294 S/. -96,326 S/. -99,457 S/. -102,689
Marketing expenses S/. -334,894 S/. -372,844 S/. -401,044 S/. -418,164 S/. -416,130
Administrative expenses S/. -90,220 S/. -93,152 S/. -96,180 S/. -99,305 S/. -102,533
Depreciation S/. -4,525 S/. -4,525 S/. -4,525 S/. -4,525 S/. -250
Operating profit S/. -113,595 S/. 177,474 S/. 596,573 S/. 1,069,261 S/. 1,573,955
Financial expenses S/. -32,400 S/. -27,595 S/. -22,068 S/. -15,713 S/. -8,405
Profit before tax S/. -145,995 S/. 149,879 S/. 574,505 S/. 1,053,548 S/. 1,565,550
Tax S/. -44,964 S/. -172,352 S/. -316,064 S/. -469,665
Net profit S/. -145,995 S/. 104,915 S/. 402,153 S/. 737,484 S/. 1,095,885
 Discovery
Financial Plan

7 Cash Flow
It starts from the profits after taxes, the depreciation obtained from the income
statement is recovered and the amortization of the loan requested from the bank
is discounted.
As the financial flow is negative the first year, enough cash is needed to be able to
pay the obligations during that year until the flow is regularized.
 Discovery
Financial Plan

8 Project profit

Estimate the opportunity cost

Compare it against the NPV and IRR based on

the projected cash flow information.

Calculate the relevant financial ratios for

investors for each year.

Finally, carry out a sensitivity analysis to know

the profitability of the project
 Discovery
Financial Plan

8 Project profit

1. Opportunity cost of capital (Cok)

The opportunity cost of capital (COK) is that

which those interested in investing in a project
or company demand as the minimum
profitability for their participation.
 Discovery
Financial Plan

8 Project profit

1. Opportunity cost of capital (Cok)

Cok = rf + (rm-rf)*beta
where:
Rf → Risk-free rate
Rm → Financing interest rate
Beta → Beta factor according to sector.

In this simulation:
• A risk-free rate of 2.5% was considered
• Financing interest rate is the one used in the bank loan of 15%
• Beta factor is 1.13, considering the software - Internet sector (Damodaran)
• Cok = 16.63%
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html
WACC

• https://www.youtube.com/watch?v=Wz6Dwbp2XiI
 Discovery
Financial Plan

8 Project profit

Weighted average cost of capital (WACC)

WACC = Ke* E/(E+D) + Kd*(1-t)*D/(E+D)

Where:
Ke → Cost of equity (estimated with the Cok calculation).
Kd → Financing interest rate
E → Own funds
D → Financial debt
t → Tax rate

WACC = 14.03%.
 Discovery
Financial Plan

u8 Project profit

2. Calculation of NPV and IRR

Based on the results of the projected cash flow and the opportunity cost, the NPV
and IRR were prepared.

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Profit stream S/. 561,547 S/. 999,453 S/. 1,597,386 S/. 2,249,179 S/. 2,921,568 Sales
Flow of expenses S/. -144,000 S/. -675,142 S/. -866,943 S/. -1,173,165 S/. -1,495,982 S/. -1,817,278 Cost, expense
Financial final flow S/. -144,000 S/. -113,595 S/. 132,510 S/. 424,221 S/. 753,197 S/. 1,104,290
Accumulated flow S/. -144,000 S/. -257,595 S/. -125,085 S/. 299,136 S/. 1,052,333 S/. 2,156,623
COK WACC
NPV S/. 893,825.12 S/. 1,019,612.97
IRR 89.2%
ROI

• https://www.youtube.com/watch?v=O-wq-C-52NY
 Discovery
Financial Plan
8 Project profit

2. Calculation of NPV and IRR

The NPV of the project is S/893 thousand. The

internal rate of return (IRR) is 89.2%, which
exceeds the opportunity cost of the shareholders
(16.63%), so it can be said that the project will be
profitable. The payback period is 2.488 years, so
the investment begins to recover from the second
year.

IRR > opportunity cost of the shareholders COK

Break even point

• https://www.youtube.com/watch?v=TtTWj8R4woQ
 Discovery

Financial Plan

Calculate the equilibrium point of the company, that is, the point from which the
9 company will begin to be profitable (to generate profits)
With all these data captured on paper, the viability of a business project (viability
plan) can already be seen.
 Discovery

Financial Plan

9
Equilibrium Point

Year 1 Year 2 Year 3 Year 4 Year 5 Total

fixed cost S/. 552,397 S/. 591,409 S/. 620,143 S/. 637,164 S/. 630,007 S/. 3,031,120
unit variable cost S/. 8.27 S/. 8.27 S/. 8.27 S/. 8.27 S/. 8.27 S/. 8.27
average selling price S/. 29.94 S/. 29.94 S/. 29.94 S/. 29.94 S/. 29.94 S/. 29.94
equilibrium point (units) 25494 27294 28620 29406 29075 139889
equilibrium point (amount) S/. 763,277 S/. 817,183 S/. 856,885 S/. 880,405 S/. 870,515 S/. 4,188,265
 Experience

Elaborate

Your company's initial Financial Plan:

1. Create the Income statement
2. Establish Cash Flow
3. Calculate COK, WAAC
4. Calculate NPV and IRR
Bibliography

• Marketing and Sales – Successful Peacekeeping, Herausgegeben von

Carsten Rennhak & Gerd Nufer
• Dirección de Marketing – Lambin
• La cadena de valor . IE Business School
• https://repository.eia.edu.co/bitstream/11190/2116/1/IsazaMariana
_2014_PropuestaDistribucionPlanta.pdf

UNIVERSIDAD
PRIVADA DEL NORTE