The importance of contribution margin accounting

The importance of contribution margin accounting Contribution margin accounting is a crucial tool for analyzing the coverage of a company's fixed costs. It describes the difference between sales and variable costs and provides information about how much money is available per product unit to cover the fixed costs. Why is calculating the contribution margin important? Contribution margin accounting makes it possible to divide the various cost items into three groups: fixed costs such as rent, variable costs such as materials, and sales. The contribution margin shows how much money is still available to cover the fixed costs after deducting the variable costs. For an economically healthy company, it is crucial that an attractive profit remains after the fixed costs have been covered. A solid contribution margin accounting is therefore an important element in showing a potential investor that the business plan is plausible and promising. What is a contribution margin target? The contribution margin target is a term that is used primarily in marketing. It describes sales targets for various products that are formulated depending on the variable costs. These targets can also be presented as part of financial planning. A company with just one product usually aims to increase sales of this product in order to achieve a higher contribution margin. Companies with multiple products should aim to sell as many profitable products as possible, while less profitable products can be positioned as prestige products, for example. Conclusion When calculating the contribution margin, we cannot simply roll any numbers that please us. We have to look at the operational framework and think from the bottom up, i.e. from the operational business into the strategic planning. This is the only way we can calculate a realistic contribution margin and convince banks or partners that our planning will also hold up when implemented. 

Family offices: discreet investors with a long-term perspective

Cash flow analysis in the business plan: The key to liquidity Thorough bottom-up planning that includes operational planning elements is crucial to the success of a company. An essential tool here is the cash flow statement, which makes the company's liquidity transparent in the business plan. What is cash flow and why is it important? Cash flow is the amount of cash that flows into or out of a company while it carries out its operating, investing and financing activities. It is the most important planning variable in operations because it ensures the company's liquidity. How do you calculate cash flow? Cash flow is made up of three main components: Cash flow from operating activities: This cash flow measures the amount of cash generated by the company's regular business operations. It includes income and expenses from the sale of goods or services, as well as all operating costs. Cash flow from investing activities: This cash flow concerns the funds used to buy or sell long-term assets such as plants, equipment or real estate. Cash flow from financing activities: This cash flow refers to the funds generated by raising debt or equity, paying off debt or paying dividends. What is Free Cash Flow to the Firm (FCFF)? Free cash flow to the firm is the amount of cash remaining after deducting operating expenses, capital expenditures, and borrowing costs. It is an important metric for valuing a company and is often used in discounted cash flow valuation methods. Why is cash flow important for valuing companies? Valuation of companies is often based on discounted cash flow statements, which calculate the value of a company based on its future cash flows. The cash flow statement provides the data basis for these calculations and allows investors to determine the value of a company. Which liquidity ratios are important? Two important liquidity ratios from financial theory are the current ratio and the quick ratio. The current ratio measures a company's ability to cover short-term liabilities with short-term assets, while the quick ratio is a stricter version of this and only takes liquid assets into account. Conclusion The cash flow statement is an important tool for business planning and evaluation. It allows entrepreneurs to analyze their liquidity and ensure that they have enough cash to maintain their operations. Thorough bottom-up planning and consideration of operational planning elements are crucial for creating a meaningful cash flow statement in the business plan.

Family offices: discreet investors with a long-term perspective

Family Offices: Discreet Investors with a Long-Term Perspective Family offices are a special type of investor that often operates in secret but plays a significant role in the financial market. In this blog article, we take a look at family offices: who they are, what they do, how to find them, and why they are attractive to companies. What are family offices? Family offices are private wealth management companies that manage and invest the assets of wealthy families. They act as professional investment managers to preserve, grow, and protect family wealth across generations. What do family offices do? The primary role of family offices is to manage and invest their families' assets. This includes: Asset management: Family offices take responsibility for managing the family's wealth, including diversifying assets, mitigating risk, and maximizing returns. Making investments: Family offices invest their families' assets in a variety of asset classes, including stocks, bonds, real estate, private equity, hedge funds, and alternative investments. They aim for long-term returns and broad diversification. Financial planning: Family offices help the family develop and implement long-term financial goals and strategies, including tax planning, succession planning, and philanthropic activities. Who are family offices? Family offices are set up by wealthy families or single high-net-worth individuals to professionally manage their wealth. These families often have significant wealth built up over generations. How do you find family offices? Family offices are known for their discretion and privacy, so they are often difficult to find. However, there are a few ways companies can identify potential family offices: Industry events: Family offices occasionally attend industry events, conferences, and networking events. This can be an opportunity to meet them in person and network. Specialized service providers: There are specialized service providers and consultants who specialize in family offices and can help companies identify and approach potential family offices. Industry associations: Some industry associations and organizations offer databases or member directories that list family offices. This can be a source to find potential investors. Personal recommendations: Personal recommendations and networks can also be a way to find family offices. Through personal contacts and relationships, companies may be able to gain access to family offices. Why are family offices attractive to companies? Family offices offer companies an attractive financing opportunity due to their long-term perspective, flexibility and focus on sustainable investments. They are often willing to invest in companies that have long-term growth potential and a clear value creation strategy. Conclusion Family offices are a unique type of investor that play an important role in the financial market. They offer companies an attractive financing opportunity and can help promote long-term growth and success. Although they often operate in secret, there are ways to identify and find potential family offices.

The world of business angels: support for start-ups

The World of Business Angels: Support for Start-ups There is a special group of investors who are not only interested in the financial growth of a start-up, but also in the personal development and success of the founder. These investors are called business angels and play an important role in promoting innovation and supporting promising company founders. But who are these business angels, what do they do and how can you find them? What are business angels? Business angels are private investors who use their own capital to invest in promising start-ups or early-stage companies. They are often former entrepreneurs or executives who have extensive experience and networks in specific industries. In addition to financial support, they also offer their expertise, experience and contacts to promote the success of the company. What do business angels do? Business angels support start-ups in many ways: Financial support: Business angels invest capital in start-ups to help them finance business ideas, product development, market launches and other operational costs. Advice and mentoring: They offer founders valuable advice based on their own experience and knowledge in entrepreneurship, management, marketing, finance and more. They often act as mentors and help founders make strategic decisions and overcome challenges. Networks and contacts: Business angels often bring a wide network of contacts that gives start-ups access to potential customers, partners, suppliers and other resources. They open doors to new business opportunities and help companies build relationships in the industry. Exchange of experience: Through regular meetings and workshops, business angels enable founders to exchange experiences and best practices with other entrepreneurs and experts. How to find business angels? There are several ways to find business angels: Networks and events: Networking events, conferences, seminars and entrepreneur groups are good ways to meet and network with business angels in person. Online platforms: There are special online platforms and networks that connect start-ups and business angels. These platforms allow founders to present their business ideas and find potential investors. Angel investor associations: Some countries have special associations and organizations for business angels that help founders find potential investors and learn about the latest developments in the field of angel investing. Referrals: Personal recommendations from other entrepreneurs, mentors, investors or professionals can also be helpful in finding business angels who have an interest in certain industries or business areas. Conclusion Business angels play a crucial role in fostering innovation and supporting promising startups. They not only invest capital but also offer valuable resources such as experience, expertise and contacts. If you have a promising startup and are looking for financial support and mentorship, consider finding and connecting with business angels.

Private equity investors: the driving force behind corporate growth

Private Equity Investors: The Driving Force Behind Company Growth Private equity investors play a significant role in the financial market, particularly in supporting and growing companies. In this blog post, we will take a closer look at the world of private equity investors: who they are, what they do, what their investment focus is and how to find them. Who are private equity investors? Private equity investors are professional investors or investment firms that invest capital in unlisted companies. These investors aim to increase the growth and profitability of companies by providing them with financing to implement strategic initiatives, make operational improvements or restructure the company. What do private equity investors do? The main job of private equity investors is to invest capital in companies to support and develop them. Their activities include: Making investments: Private equity investors invest capital in companies by acquiring shares or participations. These investments can take various forms, including equity investments, convertible bonds or debt financing. Value enhancement: Private equity investors work closely with the management of the companies to identify and implement value enhancement initiatives. These can include measures to increase sales, reduce costs, improve operational efficiency, develop markets or make acquisitions. Restructuring: In some cases, private equity investors can restructure companies to improve their profitability and position them for a successful future. This can include restructuring the business operations, optimizing the capital structure or reorienting the business strategy. Exit strategy: After a period of growth and value enhancement, private equity investors often look for an exit strategy to realize their investment. This can be done by selling the company to a strategic buyer, an initial public offering (IPO) or a sale to another investor. What is the focus of investments? Private equity investors usually focus on companies with high growth potential and solid management. They look for companies that operate in stable and growing industries and have a differentiated product offering, strong market positions or innovative technologies. In addition, private equity investors value a clear growth strategy, a robust business model, sustainable profitability and a strong governance structure. They are looking for companies that have a clear vision and are willing to take advantage of growth opportunities together with investors. How do you find private equity investors? There are various ways to find private equity investors: Networking: Networking events, conferences and industry events are good opportunities to meet private equity investors in person and make contacts. Consultants and investment banks: Consultants and investment banks that specialize in private equity can help companies identify potential investors and advise them on approaching and negotiating investments. We at Sqaured Away are able to help you approach private equity investors! Online platforms: There are specialized online platforms and networks that connect companies and private equity investors. These platforms enable companies to present their business ideas and find potential investors. Direct approach: Companies can also approach private equity investors directly and present their business idea. However, this requires careful research and preparation to identify the right investors and convince them of the attractiveness of the company. Conclusion Private equity investors play an important role in the financing and development of companies. They not only provide capital, but also strategic support, expertise and networks to help companies grow and increase their value. If you are a company with growth potential and are looking for financing and support, you should consider finding and networking with private equity investors.

Venture Capital Investors: The Drivers of Innovation

Venture Capital Investors: The Drivers of Innovation In the world of entrepreneurship, venture capital investors play a crucial role in financing and scaling start-ups. But who are these investors, what do they do and how can founders find them? In this blog article, we will take a closer look at the topic of venture capital. What are venture capital investors? Venture capital investors are professional investors who invest capital in promising start-ups and high-growth companies. In return for their investment, they receive shares in the company, often in the form of equity or convertible bonds. Venture capital investors are often specialized investment firms or funds that focus on specific industries or technologies. What do venture capital investors do? The main task of venture capital investors is to support and promote start-ups in their growth phase. They offer not only financial resources, but also strategic support, expertise and access to a wide network of contacts. The main activities of venture capital investors include: Financial support: Venture capital investors provide capital to start-ups to finance their growth and expansion. They often invest in early stages of the company when traditional sources of funding may not be available. Strategic advice: Venture capital investors provide founders with strategic support and advice in various areas such as product development, market entry strategies, business model optimization and more. They often bring extensive experience and expertise in entrepreneurship, management and technology. Network and contacts: Venture capital investors bring a wide network of contacts from the industry, including potential customers, partners, suppliers and other investors. They help the start-ups build relationships and open doors to new business opportunities and resources. Operational support: Some venture capital investors also provide operational support by giving the start-ups access to professionals and resources in areas such as marketing, sales, human resources, legal and finance. How do you find venture capital investors? There are several ways to find venture capital investors: Internet / direct outreach: Founders can also directly approach venture capital firms and funds that invest in their industry or technology. They can present their business idea and ask for an investment. We can help you with direct outreach and provide you with advice. Networking: Networking events, conferences, meetups and industry events are good ways to meet and network with venture capital investors in person. Online platforms: There are specialized online platforms and networks that connect startups and venture capital investors. These platforms allow founders to present their business ideas and find potential investors. Conclusion Venture capital investors play a crucial role in fostering innovation and supporting promising startups. They not only invest capital, but also provide strategic support, expertise and access to a wide network of contacts. If you have a promising startup and are looking for financial support and advice, you should consider finding and networking with venture capital investors.

The world of business angels: support for start-ups

The World of Business Angels: Support for Start-ups In the world of entrepreneurship, there is a special group of investors who are not only interested in the financial growth of a start-up, but also in the personal development and success of the founder. These investors are called business angels and play an important role in promoting innovation and supporting promising company founders. But who are these business angels, what do they do and how can you find them? What are business angels? Business angels are private investors who use their own capital to invest in promising start-ups or early-stage companies. They are often former entrepreneurs or executives who have extensive experience and networks in specific industries. In addition to financial support, they also offer their expertise, experience and contacts to promote the success of the company. What do business angels do? Business angels support start-ups in many ways: Financial support: Business angels invest capital in start-ups to help them finance business ideas, product development, market launches and other operational costs. Advice and mentoring: They offer founders valuable advice based on their own experience and knowledge in entrepreneurship, management, marketing, finance and more. They often act as mentors and help founders make strategic decisions and overcome challenges. Networks and contacts: Business angels often bring a wide network of contacts that gives start-ups access to potential customers, partners, suppliers and other resources. They open doors to new business opportunities and help companies build relationships in the industry. Exchange of experience: Through regular meetings and workshops, business angels enable founders to exchange experiences and best practices with other entrepreneurs and experts. How to find business angels? There are several ways to find business angels: Networks and events: Networking events, conferences, seminars and entrepreneur groups are good ways to meet and network with business angels in person. Online platforms: There are special online platforms and networks that connect start-ups and business angels. These platforms allow founders to present their business ideas and find potential investors. Angel investor associations: Some countries have special associations and organizations for business angels that help founders find potential investors and learn about the latest developments in the field of angel investing. Referrals: Personal recommendations from other entrepreneurs, mentors, investors or professionals can also be helpful in finding business angels who have an interest in certain industries or business areas. Conclusion Business angels play a crucial role in fostering innovation and supporting promising startups. They not only invest capital but also offer valuable resources such as experience, expertise and contacts. If you have a promising startup and are looking for financial support and mentorship, consider finding and connecting with business angels.

Break Even Point: The importance of sound bottom-up planning

Break-even point: The importance of sound bottom-up planning When planning a company, it is essential to determine the break-even point in order to check the profitability of the business idea. The break-even point is the point at which revenues cover costs and therefore neither profit nor loss is generated. This calculation is crucial to understand how much revenue must be generated for the company to survive. Why is bottom-up planning crucial? It is not enough to simply "roll the dice" and roughly estimate the break-even point. Rather, it is important to carry out sound bottom-up planning in order to develop a deep understanding of the operating business and its dynamics. All relevant cost factors should be taken into account in order to enable a realistic assessment of the break-even point. Calculating the break-even point turnover: In addition to including the entrepreneurial expenses (wage costs, production costs, etc.), calculating the break-even point requires taking into account various factors that are often forgotten, including: Amount of private living expenses Income tax repayments By comparing these expenses with the planned income, the break-even point can be determined. This calculation provides answers to important questions, such as: How high is the turnover that is needed to cover the fixed costs (maybe also your private fixed costs!)? How many products must at least be produced and sold to cover the fixed costs? The importance of the break-even calculation in the business plan: The break-even point is a decisive criterion for the profitability of a business idea. It is important for both the entrepreneur and potential investors to present this calculation clearly and plausibly in the business plan. Well-founded bottom-up planning makes it possible to realistically assess the profitability of the company and to identify potential risks at an early stage. Conclusion: Bottom-up planning is a crucial step in determining the break-even point and the profitability of a company. A thorough analysis of all relevant cost factors is essential to enable a realistic assessment of the break-even point and to identify potential risks at an early stage. By presenting a clear and plausible calculation in the business plan, entrepreneurs and investors can jointly assess the profitability of the business idea and make well-founded decisions.

Why is a professional financial plan crucial to the success of my business?

Why is a professional financial plan crucial to the success of my company? In the world of entrepreneurship, a solid financial plan is an indispensable tool that can make the difference between success and failure. A professionally prepared financial plan fulfills two essential functions: the operational function and the use for financing or capital increases. But why is a financial plan so crucial to the success of a company? Operational function of a financial plan A financial plan is not just a document for external investors or financial institutions; it also serves internally as an important control tool for management. By creating a financial model, clearly defined assumptions are made about the future development of the company. These assumptions serve as a basis for setting operational goals and monitoring the company's performance. Every financial model contains key performance indicators (KPIs) in the output, such as sales, which can be used to measure the company's performance and ensure that it stays on track. Financing needs and capital increases A professional financial plan becomes particularly important when it comes to securing financing or capital increases. Investors and banks always want to understand how a company will develop in the future and what assumptions underlie these forecasts. A detailed financial model provides this information and offers a clear insight into the company's financial health and future viability. It serves as the basis for decision-making and plays a key role in gaining the trust of potential investors. Necessity even for established companies Even for companies that are already established, a financial plan remains crucial. Such a plan makes it possible to present and vary the company's future development on the basis of clearly defined assumptions. By simulating different scenarios, the effects of potential changes in the operational business on the financial result can be analyzed and assessed. Individuality and uniqueness Another important aspect is that every business plan and financial model is unique and should be individually tailored to the needs and characteristics of the respective company. A professionally created financial model takes into account the company's specific drivers, such as sales and cost assumptions, and shows the connection between these factors. In addition, the results are presented in a clear and attractive manner to enable clear strategic and operational financial planning. Conclusion A professional financial plan is an indispensable tool for the success of every company. It not only serves as a control tool for management, but is also crucial for securing financing and capital increases. Even established companies should not do without an up-to-date and well-thought-out financial plan in order to plan their future development and identify potential opportunities. An individually designed financial plan provides the basis for successful strategic and operational financial planning and makes a significant contribution to securing the long-term competitiveness and profitability of the company.