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--- using-offtoa:scoreboard [2016/05/28 16:09]
mdavis
+++ using-offtoa:scoreboard [2016/05/28 16:27] (current)
mdavis
@@ Line 20: / Line 20: @@
 ====Revenues:====
-The colors indicate whether the start-up is experiencing revenues during each of the fiscal years. Here is what colors mean specifically:
+The colors indicate whether the company is experiencing revenues during each of the fiscal years. Here is what colors mean specifically:
   * Red light means zero total revenues for the fiscal year.
   * Yellow light means total revenues for the fiscal year under $1000.
@@ Line 26: / Line 26: @@
 Here are some typical sets of indicators and what they mean:
   * Red, then yellow, then constant green: Typical for a company that requires at least a year of ramp-up time before generating revenue. Ramp-up could be necessary to perform such activities as (a) research and development in order to create a product or (b) manufacturing, or %%(c)%% staffing up a sales force.
-  * All green: Typical for a company that does not require more than a year of ramp-up time before generating revenue. This is very rare among high-growth start-ups.
+  * All green: Typical for a company that does not require a year of ramp-up time before generating revenue.
   * All red: Typical for a company before you have defined its products, prices or units sold.
-  * All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party.
+  * All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party. Unlikely to attract loans. More likely an opportunity for grants and perhaps high-risk investments.
   * Green or yellow, then red: It looks like (a) the market for the company's products dried up after the 2nd year, or (b) you forgot to enter prices or units sold for the later years.
 ====Revenue Growth:====
-Colors indicate whether the start-up's revenues are growing year-over-year. Here is what colors mean specifically
+Colors indicate whether the company's revenues are growing year-over-year. Here is what colors mean specifically
   * Red light means total revenues for the fiscal year are less than or equal to the previous fiscal year.
   * Yellow light means total revenues for the fiscal year are less than 50% greater than the previous fiscal year.
@@ Line 39: / Line 39: @@
   * Green bang light means total revenues for the fiscal year are greater than 100% greater than the previous fiscal year.
 Here are some typical sets of indicators and what they mean:
-  * All greens: Typical for a start-up company.
+  * All greens: Typical for a high-growth company with a highly optimistic leader.
-  * Mostly greens, with a few yellows toward the last few years: Probably more reasonable for a healthy start-up company. Moderation of fast growth in the later years is normal.
+  * Mostly greens, with a few yellows toward the last few years: Probably more reasonable for a healthy high-growth company.
-  * Green bang, then green, then yellow: Also reasonable for a healthy start-up company. Very fast growth in first two years. Great growth for two more years. Moderation in later years.
+  * Green bang, then green, then yellow: Also reasonable for a healthy high-growth company. Very fast growth in first two years. Great growth for two more years. Moderation in later years.
   * All red: Typical for a company before you have defined its products, prices or units sold.
-  * All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party.
+  * All red: This could be acceptable for a start-up company that has no intent to generate revenues, but instead is validating a technology with the expectation of being acquired by a third party. Unlikely to attract loans. More likely an opportunity for grants or perhaps high-risk investments.
-  * All yellow: Typical for a company in which (a) you are being overly conservative in your projections, (b) your market does not need your product, %%(c)%% you need to change your marketing and sales approach, or (d) you may have a perfectly reasonable lifestyle company, but it may be difficult for you to attract investors.
+  * All yellow: Typical for a company in which (a) you are being overly conservative in your projections, (b) your market does not need your product, %%(c)%% you need to change your marketing and sales approach, or (d) you may have a perfectly reasonable lifestyle company, but it may be difficult for you to attract investors, though you may be able to attract lenders.
-  * All green bang: You might think your company is going to grow like this, but investors are not going to believe it!
+  * All green bang: You might think your company is going to grow like this, but neither investors nor lenders are going to believe it!
 ====EBITDA:====
-Colors indicate whether the start up's EBITDA (Earnings before Income Tax, Depreciation, and Amortization) as a percent of revenue is healthy. Here is what colors mean specifically:
+Colors indicate whether the company's EBITDA (Earnings before Income Tax, Depreciation, and Amortization) as a percent of revenue is healthy. Here is what colors mean specifically:
   * Red light means EBITDA/revenue for the fiscal year are less than or equal to zero.
   * Yellow light means EBITDA/revenue for the fiscal year are less than or equal to 20%.
@@ Line 55: / Line 55: @@
   * Green bang light means EBITDA/revenue for the fiscal year are greater than 50%.
 Here are some typical sets of indicators and what they mean:
-  * Red, then yellow, then green: Typical for a healthy start up company. Most companies take 1 to 3 years before they become profitable because some volume of sales is required to offset the inevitable fixed costs of doing business.
+  * Red, then yellow, then green: Typical for a healthy high-growth company. Most companies take 1 to 3 years before they become profitable because some volume of sales is required to offset the inevitable fixed costs of doing business.
-  * Any green bang: Companies with EBITDAs greater than 50% are extremely rare. Investors will raise questions to verify that this is really possible.
+  * Any green bang: Companies with EBITDAs greater than 50% are extremely rare. Respectable investors and lenders should raise questions to verify that this is really possible.
-  * Green or yellow in 1st year: This is highly suspicious. Very rarely is a start-up company profitable starting in the first year (except in very rare niche industries such as Government contracting).
   * All red: Typical for a company before you have defined its products, prices or units sold.
   * All red: Your company could have a big problem; it never achieves enough revenue to compensate for the expenses it incurs. Use the analysis tools of <php>echo $conf['comp_name'];</php> to solve the problem.
   * Red, then yellow or green, then red: The company started off well, but then your expenses got out of control. Use the analysis tools of <php>echo $conf['comp_name'];</php> to solve the problem.
-Retained Earnings:
-Colors indicate whether the start-up has retained earnings or accumulated deficit to date. Here is what colors mean specifically:
+====Retained Earnings:====
+Colors indicate whether the company has retained earnings or accumulated deficit to date. Here is what colors mean specifically:
   * Red light means that at fiscal year end, the sum of this and all previous years' earnings after tax is negative.
   * Green light means that at fiscal year end, the sum of this and all previous years' earnings after tax is positive.
 Here are some typical sets of indicators and what they mean:
-  * Red for a few years, then green: Typical for a healthy start-up company. Retained earnings will lag profitability by 1-2 years.
+  * Red for a few years, then green: Typical for a healthy high-growth company. Retained earnings will lag profitability by 1-2 years.
-  * All green: This is highly suspicious. Very rarely is a start-up company profitable starting in its first year.
   * All red: Typical for a company before you have defined its products, prices or units sold.
-  * All red: This could be acceptable for a start-up company that has no intent of ever being profitable, but instead is validating a technology with the expectation of being acquired by a third party.
+  * All red: This could be acceptable for a company that has no intent of ever being profitable, but instead is validating a technology with the expectation of being acquired by a third party.
 ====Gross Margins (aka Gross Profit):====
-Colors indicate whether the start-up's products have healthy gross margins. Here is what colors mean specifically:
+Colors indicate whether the company's products have healthy gross margins. Here is what colors mean specifically:
   * Green light means gross profit/revenues for the fiscal year is within 20 percentage points (plus or minus) of industry averages
   * Yellow light means gross profit/revenue for the fiscal year is less than 20 percentage points below industry averages.
@@ Line 79: / Line 79: @@
   * Green bang light means gross profit/revenue for the fiscal year is more than 20 percentage points above industry averages.
 Here are some typical sets of indicators and what they mean:
-  * All green: Typical of most start-ups.
+  * All green: Typical of most companies.
   * Red, then yellow, then green: In some industries, it might take a year or two for a company to obtain volumes necessary to achieve healthy gross margins.
   * Yellow, then green: In some industries, it might take a year or two for a company to obtain volumes necessary to achieve positive gross margins.
   * All red, then yellow: This company is struggling. It is doubtful that it will be able to achieve enough gross profit with its current assumptions to cover its fixed costs of doing business. Use the analysis tools of <php>echo $conf['comp_name'];</php> to solve the problem.
-  * Any green bang: You will have to understand why you believe you can achieve better efficiencies than the competition and be able to explain this to investors. Otherwise, they will not believe you.
+  * Any green bang: You will have to understand why you believe you can achieve better efficiencies than the competition and be able to explain this to investors and lenders. Otherwise, they will not believe you.
 ====Current Ratio:====
-Colors indicate whether the start-up can cover its short-term debt payments. Here is what colors mean specifically:
+Colors indicate whether the company can cover its short-term debt payments. Here is what colors mean specifically:
   * Red light means current ratio at the end of the fiscal year is less than or equal to 0.
   * Yellow light means current ratio at the end of the fiscal year is less than or equal to 1.
   * Green light means current ratio at the end of the fiscal year is greater than 1.\\
 Here are some typical sets of indicators and what they mean:
-  * Yellow, then green: Typical of a start-up company. It might take a year or two for a company to stabilize.
+  * Yellow, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company to stabilize.
   * All green: This is also possible (envious, but possible).
   * Never turns green: This company is struggling to stay afloat. Use the analysis tools of <php>echo $conf['comp_name'];</php> to solve the problem.
@@ Line 98: / Line 98: @@
 ====Net Working Capital:====
-Colors also indicate whether the start-up can cover its short-term debt payments. Here is what colors mean specifically:
+Colors also indicate whether the company can cover its short-term debt payments. Here is what colors mean specifically:
   * Red light means net working capital (NWC)/revenue at the end of the fiscal year is less than or equal to 0.
   * Yellow light means NWC/revenue at the end of the fiscal year is less than or equal to .1 .
@@ Line 104: / Line 104: @@
   * Green bang light means NWC/revenue at the end of the fiscal year is greater than .25 .
 Here are some typical sets of indicators and what they mean:
-  * Red, then yellow, then green: Typical of a start-up company. It might take a year or two for a company to stabilize.
+  * Red, then yellow, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company to stabilize.
   * All green: This is also possible (envious, but possible).
   * Green, then green bang: This company is holding on to too much cash. Ideally, the cash should be reinvested in the company. Otherwise it could be used for dividends or for repurchasing stock or repaying loans.
@@ Line 118: / Line 118: @@
 ====Net Cash from Operations:====
-Colors indicate whether the start-up's business is generating cash. Here is what colors mean specifically:
+Colors indicate whether the company's business is generating cash. Here is what colors mean specifically:
   * Red light means the net cash generated from operations (NCGFO) for the fiscal year is less than or equal to 0.
   * Green light means NCGFO / revenue for the fiscal year is greater than -0.
 Here are some typical sets of indicators and what they mean:
-  * Red, then green: Typical of a start-up company. It might take a year or two for a company's business to generate cash. Until then, cash is generated from loans and/or investments.
+  * Red, then green: Typical of a start-up company or a company making a major change to its direction. It might take a year or two for a company's business to generate cash. Until then, cash is generated from loans and/or investments.
   * All red: This company's core business never generates cash. Use the analysis tools of <php>echo $conf['comp_name'];</php> to solve the problem.
-  * All red: This could be acceptable for a start-up company that has no intent of ever generating cash from selling product, but instead is validating a technology with the expectation of being acquired by a third party.
+  * All red: This could be acceptable for a start-up company that has no intent of ever generating cash from selling product, but instead is validating a technology with the expectation of being acquired by a third party. No chance of attracting loans. It might be a good candidate for grants or perhaps high-risk investments.
 ====Net Cash at End of Year:====
-Colors indicate whether the start-up has cash at the end of the fiscal year. Here is what colors mean specifically:
+Colors indicate whether the company has cash at the end of the fiscal year. Here is what colors mean specifically:
   * Red light means the cash at the end of year is less than or equal to 0.
   * Yellow light means cash at the end of year / revenue for the fiscal year is less than or equal to .2 .
@@ Line 149: / Line 149: @@
 Here are some typical sets of indicators and what they mean:
   * Last few years red: If your company is expecting to attract outside investors, it will need a lot of work using the <php>echo $conf['comp_name'];</php> problem solving tools. At this point, it is highly unlikely that it will attract investors. It also might indicate that you (the entrepreneur) are being greedy.
-  * All red: If this is a lifestyle company, you might not care if it attracts investors.
+  * All red: If this is a lifestyle company, you might not care if it attracts investors. You still might be able to attract loans.
-  * Last few years yellow: This could be an attractive investment for some investors, but only if they have strategic or personal interests.
+  * Last few years yellow: This could be an attractive investment for some investors, but only if they have strategic or personal interests. You will certainly not have difficulty attracting lenders assuming you have collateral and/or a good financial history.
   * Last few years green: This could be a very attractive investment for some investors. It shows a nice IRR for all investors if the liquidity event occurs after the company matures.
   * All red or yellow, with one year green. This is a very strange situation, but it means you should set your planned liquidity event to occur during the green year.

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