Chapter 4

Financial Planning for Maximizing Returns

Having a financial strategy and a plan to execute it based on the fundraising stages is mandatory for every entrepreneurial venture seriously interested in achieving a successful exit. Too often I witness start-ups with elaborate, well-thought-out plans on how to develop, produce, market, and service their product through commercial launch and beyond. However, they fully intend to proceed without formulating some form of financial strategy or plan. Financial planning, at least on a preliminary level, is necessary initially to determine whether you have a potential viable business. Conducting effective business planning requires an informed understanding of what is and is not financially feasible in regard to your venture. To execute your business plans requires money. Without securing sufficient funds on acceptable terms and in a timely manner, every other focus of your business efforts is moot. A financial plan serves as a basis to calculate an acceptable return on investment (ROI) and determine a successful exit strategy. A financial plan with well-defined financial objectives is a must.

This chapter begins with a descriptive listing of the various benefits of formulating a financial strategy and plan for your business. Then we focus on thinking strategically in devising a financial plan, including an illustrative analogy. We then turn to the areas serving as a basis for establishing financial objectives. We introduce FREEs—fundraising ...

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