Three projected financial statements are shown below. As can be seen, it will be necessary to raise funding in Year 1 and again in the early part of Year 3. The management team plans to raise money from venture capital funding. Versions of the cash flow statement and balance sheet can be seen below for both scenarios where no outside funding is raised and where funding is successful. It should also be noted that it is expected no income taxes will be paid for the first 5 years of operation due to deferred tax benefits after heavy operational losses in the early years.
Sales and Revenue Assumptions
In order to provide an assessment of financial projections, it is first required to estimate revenue and sales. Again, it is expected the first year of operations will have no sales and be spent building the software platform and developing sales channels. After Year 1, revenue projections analysis begins by looking at worldwide energy storage installation expectations.
These were taken from the previous market analysis section. By Year 2, estimates assume the management team has been successful in attracting two customers and powering 0.1% of the worldwide energy storage installations with Energy Max software. This ramps up to 18 customers and a goal of powering 1% of worldwide energy storage installations in Year 5. It is expected that customers will be interested in the value propositions in order to integrate with Energy Max’s software platform, but will be slower to roll out batteries before a thorough testing and quality assurance period. Therefore, it’s likely integration revenue will
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come before per battery unit revenue, and overtime per battery revenue will grow. This can be seen from the projections below: in Year 2, per battery unit revenue is 11.4% of total revenue, but in Year 5 this grows to 19.5% of total revenue.
Table 12: Revenue expectations and pricing structure in a normal scenario
One large risk of the revenue projections is the assumption of growth in the worldwide energy storage market. If the market does not develop or grow as fast as expected it could have a significant impact on the company’s financial projections. There would obviously not be as many installations, and therefore per battery unit revenue would decrease, but it would also mean that fewer companies would be entering the battery storage market and/or existing companies would be investing less into their storage solutions unit. Revenue expectations for a situation of low growth are presented in the table below and projected financial statements can be seen for both scenarios.
Table 13: Revenue expectations under slow growth scenario
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Projected Income Statements Normal Scenario
Table 14: Projected income statement normal scenario
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Slow Growth Scenario
Table 15: Income statement under slow growth scenario
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Projected Cash Flow Statements Normal Scenario
Table 16: Projected cash flow statement normal scenario
Slow Worldwide Growth Scenario
Table 17: Projected cash flow statement slow growth scenario
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Projected Balance Sheets Normal Scenario
Table 18: Projected balance sheet normal scenario
Slow Worldwide Growth Scenario
Table 19: Projected balance sheet slow growth scenario
Outside Funding
Given the above financial statements it is clear additional financing is necessary. The management team plans to raise venture capital. A seed round of $1.5 million will be necessary in Year 1, and a following Series A round will be needed in Year 3. If successful, an updated projected cash flow statement and updated projected balance sheet is provided below for a normal scenario of growth.
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Table 20: Projected cash flow statement with two rounds of outside financing
Table 21: Projected balance sheet with two rounds of outside financing
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