Building a financial Projection for Innovator Founder Visa

The Innovator Founder Visa, launched in April 2023 as the successor to the Innovator and Startup Visas, provides a three-year pathway for promising entrepreneurs to establish their businesses in the UK. Securing this visa requires an endorsement letter from official endorsing bodies like Envestors. Our detailed blog, "Envestors Endorsing Process: How to Obtain Innovator Founder Visa Endorsement Letter" guides you through this critical process. 

Key Parts of the Financial

Envestors requires submissions in their specified financial projection format, focusing on a 3 year forecast across key metrics:

• Employee Number
• Customer Number
• Sales
• Direct Cost
• Gross Profit 
• Gross Profit Margin
• Salaries
• Other Overheads
• Total Overheads
• EBITDA

Apart from the financial statement, they will also ask you to provide:

• Capital requirements areas
• Capital requirements Total

Employee Number

Project the number of employees you aim to hire over the next three years, showcasing your business's anticipated growth and ability to scale. Try setting up a dedicated tab in your financial plans just for mapping out your hiring strategy. Pop in the expected salaries, jot down each role with its duties, and don't forget to sketch out when you plan to bring these new faces on board. It's like creating a blueprint for your team's future!

Customer Number

Let's talk about your future customer numbers. It's super important because it shows how well you're expected to dive into the market and boost your revenue. Think of it as painting a picture of your growth story, but you'll need to base it on some solid ground. Our advice? Set aside a unique tab for those crucial customer number crunches. Lean into metrics like customer acquisition cost and marketing spend to keep things realistic. It's like laying down the tracks for your business journey. 

Sales

With a solid estimate of your customer numbers in hand, calculating sales becomes more straightforward—typically, it's the customer count multiplied by the intended sales price. For multiple revenue streams, ensure you calculate sales for each separately.

Direct Cost

Direct costs are the expenses directly tied to the production or delivery of your product or service. These costs vary proportionally with the volume of production or sales, meaning they increase as you produce more and decrease when you produce less. Understanding and managing direct costs is crucial because they directly affect your gross profit and pricing strategy. Here’s a deeper dive into a few examples of what encompasses direct costs:

• Materials and Supplies: This includes the raw materials required to create your product. For a software company, this might be the server costs; for a restaurant, it's the ingredients for the dishes.
• Labor Costs: Specifically, this refers to the wages of employees directly involved in the manufacturing or service delivery process. It doesn't include salaries of administrative or sales staff but focuses on those who directly contribute to production, such as factory workers or service personnel.
• Manufacturing Overheads: These are the costs associated with the production process that are not directly traceable to individual products but are necessary for the production to happen, such as the maintenance of machinery and equipment, utilities for the production site, and quality control testing.
• Shipping and Handling: If your business model involves delivering products to customers, the costs for shipping, handling, and packaging would also be considered direct costs as they are directly linked to the sale of products.
• Software Licenses for Product Development: If you're in the tech field, creating an app or software, you might need to buy licenses for special software or tools. Think of this like needing a special, fancy ingredient for a signature dish that you can't make without it.

Gross Profits

This is the money you make from selling your products or services minus the direct costs of producing them: Salas revenue - direct costs

It's a snapshot of how efficiently you're turning raw materials into profitable products. High gross profit means you're doing a great job of managing production costs or commanding premium prices. It's like throwing that banquet and managing to keep food costs low while still delivering a feast that has everyone raving (and paying!)

Salaries

Once you've set up the dedicated tab for employee information, summing up the intended salaries for each position is straightforward. It's crucial, however, to ensure these figures are realistic and fair. Cross-reference with industry benchmarks to confirm your salaries meet or exceed the minimum standards. This step is like doing a soundcheck before a big concert—you want to make sure everything is perfectly tuned to hit the right notes with your team and stay in harmony with industry expectations.

Other Overheads

Other overheads encompass all the non-direct costs that are necessary to run your business but don't directly contribute to the production of goods or services. Think of them as the backstage crew of a theater production. They're not the stars of the show, but without them, the performance wouldn't go on. Here’s a closer look:

• Utilities: Just like keeping the lights on and the water running in a theater, utilities for your business premises (electricity, water, gas) are essential for day-to-day operations.
• Rent: This is the cost of leasing the space where your business operates, similar to renting a venue for a series of performances.
• Marketing and Advertising: These costs are akin to promoting your show. It's how you attract an audience (customers) through various channels like online ads, social media, and print materials.
• Administrative Expenses: Think of these as the cost of managing the theater’s office - from supplies to software subscriptions. They support the business's administrative functions.
• Insurance: Just as a theater needs insurance to protect against damages or accidents, your business needs coverage to mitigate risks.
• Professional Fees: These are the fees for services provided by external professionals, like accountants or lawyers, similar to hiring a director or a script consultant for a play.

Total Overheads

The total overheads here is simply Salaries + Other Overheads.

Understanding your overheads helps identify areas where you can reduce costs or improve efficiency. It's akin to optimizing the production budget without compromising the quality of the performance. Your total overheads influence how you price your products or services. They ensure you cover all operational costs and still make a profit, much like ticket pricing strategies that account for all the expenses of staging a play while ensuring profitability.

EBITDA

EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, is like the scoreboard showing the core performance of a business, stripping away the external factors to focus on the game itself. If you have all the previous number ready, this is simply Gross Profit - Total Overheads. 

It's crucial to note that Envestors evaluates more than just a positive EBITDA; they're keenly interested in seeing a trend of steady growth over time. This consistent increase signals not only the company's current operational efficiency but also its potential for sustainable expansion and long-term success. A growing EBITDA suggests a business that's not just surviving but thriving, adapting, and scaling up—key qualities that Envestors look for in a viable and promising venture.

Capital Requirement Areas

This refers to the specific areas within your business that will require funding to launch or grow. It's about pinpointing where exactly your investment dollars need to go to set your business up for success. These areas should directly align with your financial projections, especially focusing on the capital requirements for Year 1. A few common areas include

• Product Development: Costs associated with research, design, and development of your product or service.
• Inventory: Funds needed to purchase initial stock or raw materials necessary for starting your business.
• Equipment: Capital needed for purchasing or leasing equipment vital for your operations.
• Marketing and Sales: Investment in marketing campaigns, sales materials, and promotional activities to attract customers.
• Operational Expenses: Pre-operational expenses like rent, utilities, and salaries before the business starts generating revenue.
• Technology: Costs for software, hardware, or IT infrastructure that your business will rely on.

How Salmo Can Help

At Salmo, we're all about rolling up our sleeves and getting right into the heart of your business model. Think of us as your financial co-pilots; we're here to listen closely, understand the unique beat of your business, and help you navigate the skies of financial planning.

Here’s how we do it: We start with a deep dive into the nuts and bolts of your venture, because we know that getting the full picture is key. Then, we will spend hours digging into crucial metrics like market size and customer acquisition cost relevant to your specific industry, ensuring every figure we jot down is as sharp as a tack.

But we don't stop there. We will build a five-year financial projection with:

• Employee Hiring Plan: We'll craft a hiring timeline, pinpointing key roles and defining each new hire's responsibilities.
• Customer Growth: Expect a tailored customer growth forecast, leveraging industry benchmarks for customer acquisition costs against your marketing investment.
• Envestor-Formatted Financial Projection: We'll fine-tune your financial projections to align perfectly with Envestors' criteria, ensuring your figures resonate.

Let our experts take care of the nitty-gritty details while you concentrate on turning your dream into reality!