Run your business on real numbers

01 What is actually being read

Five questions. Market, competitors and operations are read only after these have been found and reconciled with each other.

1. 1How much, and for what. The amount, purpose and term on page one, with a sources and uses table mapped to the asset classes the program funds, and supplier quotes behind the equipment lines.
2. 2What repays it. Debt service coverage in every year, a first year built month by month, cash that never goes below zero, and an operating line that stays inside its limit.
3. 3What if it goes wrong. A downside with its breaking point named: revenue can fall by a stated percentage before coverage reaches the covenant, with labour and rent held where they are.
4. 4How much of your own money. Your share of the project cost, commonly ten to twenty percent, and where it comes from.
5. 5Who you are. Management written so a first business is answered with transferable experience, rather than left for the analyst to notice on their own.

If coverage is not stated in the document, the analyst works it out from your own P&L and loan schedule. At that point it is their number, arrived at without your explanation attached.

02 The order of work

• The model is built first, and the plan is written around it. Text written ahead of the figures has to be bent to fit them afterwards, and a credit desk can see where it was bent.
• Every driver carries its source. Prices against local comparables, wage rates against the provincial floor and the local market, rent per square foot, equipment capacity from the specification, inflation from institutional consensus with its date. You confirm that sheet before any text exists.
• Stress comes before strategy. Coverage is tested and the downside taken to its breaking point while the document is still an empty file. A weakness found here becomes a mitigant; found later, it becomes a rewrite.
• Nothing is retyped. Summary tables are generated from the model or checked against it by script, because a number that exists in two places eventually disagrees with itself.

03 What gets calculated every time

Whether the engagement asks for it or not, and each defined once so the same word never means two different totals later in the document.

04 What the document contains

Seventeen parts. Seven of them – methodology, assumptions, unit economics, operating costs, capital expenditure, working capital and the projections themselves – can only be written about one business, because they set out its own drivers, costs and payment habits. Those are the parts a template never has, and the ones that carry a plan through the second round of questions.

• Front half: summary with the ask on page one, company, products and pricing, operations with capacity measured against peak demand, market with every figure cited, named competitors, marketing with budget attached.
• Financial half: methodology and glossary, assumptions by source, cost from the unit upward, operating expenses, capital expenditure with a roll-forward that ties to the balance sheet, working capital, then the three statements with coverage, sensitivity, downside and break-even.
• Close: funding request with security and equity source, a risk register where each risk names its mitigant and where it sits in the model, and appendices carrying the monthly first year, the amortization schedule, quotes, lease and numbered references.

05 The checks before it reaches you

Every item was once somebody's error, in a published sample or in one of our own drafts. That is the only reason a checklist is worth keeping.

• The P&L adds down line by line in every year, and every roll-forward closes into the balance sheet.
• Sources equal uses, percentages reach one hundred, and the loan box takes its payment, interest and term from a single set of inputs.
• Headline coverage reads the same in the summary, the projections and the funding request, and debt service includes every facility rather than only the term loan.
• Break-even is labelled EBITDA or cash, and the break-even month is not confused with the cash-positive month.
• Receivable days match how customers in this business actually pay. Prices, wages and costs carry inflation – five flat years is the signature of a template.
• Margins sit inside the industry benchmark or the difference is explained, and whether the owners pay themselves is stated with its effect on coverage.
• No placeholder figures and no unnamed sources. Every market claim carries a numbered endnote to a real source with its year.
• The weakness an analyst would find is named first, with its mitigant, rather than left for them to discover.

06 What we will not do

• We will not move a figure because it came out unwelcome. The model is our independent opinion, and a signature that can be moved on request is worth nothing at the committee that reads it.
• We are not paid to produce a yes. A no that arrives from us, before the application, is cheaper than the same no from the bank three weeks later.
• We will not quietly build a lighter version. Where an engagement is scoped to hold costs on industry benchmarks instead of building them from your own inputs, we say so in writing: that version is a management tool and will not hold up under a credit officer.
• We do not hand your file to a stranger. Overflow work goes to former KPMG colleagues under non-disclosure, one of the two of us reviews everything before it leaves, and your file never goes to somebody working in your industry.