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  • A platform for startups and small businesses to create professional investor decks and sales presentations.

  • Get one free month by signing up at slidebean.com/youtube

  • If you're starting a business, a Financial Model is a critical tool to estimate the potential

  • of the company. How much do you plan to charge for your product? How much do you expect you'll

  • pay to acquire a customer? How much time do you need to finish development, and how much

  • will those salaries cost until you start generating revenue?

  • I see tons of pitch deck that just show a crazy hockey stick chart that is not backed

  • up by any data. They literally just came up with some numbers that looked good on a graph.

  • That's not the way it works. Investors expect you to do the math, estimate the money you

  • need to get to a milestone and provide an accurate estimate of your expenses.

  • I can't count the number of founders I've talked to that doesn't have this figured out.

  • I know because now, five years ago, when starting Slidebean, we hadn't figured it out either.

  • Hear me out on how lost we were.

  • When we launched our product, we charged $5/mo for it. And we had no idea that there was

  • NO POSSIBLE WAY to get positive unit economics on that pricing.

  • Here's what those unit economics could look like.

  • $5/mo means $60 in annual revenue, assuming nobody cancels. That means that to make some

  • money, we'd need to acquire customers for around $20 per customer- which is pretty much

  • impossible for any SaaS company.

  • We would have known this if we had a financial model. We do now, but it took us years to

  • develop and to understand, and it's now become the backbone of my work as CEO.

  • I work on that Financial Model spreadsheet 2-3 times per week, estimating future revenues, adjusting with

  • historical data, and understanding where and when we can expand our team or our growth

  • efforts.

  • Remember Slidebean runs as a profitable company, so spending our profits efficiently is crucial.

  • The sooner we know HOW much extra cash we'll have, the sooner we can deploy it, and the

  • sooner we can yield results, i.e., multiply it. In the startup world, weeks can make a

  • world of difference.

  • So the model that we use, the model that made us profitable, we are making it available

  • to the world as a free download.

  • In this video, I'm going to show you how it works.

  • There are many kinds of financial models; this one is closer to a Forecasting Model,

  • which is used for financial planning and analysis (FP&A).

  • In a nutshell, what an effective model should do is,

  • 1- Take an estimated ad/growth/marketing/sales spend.

  • 2- Estimate the revenue generated from it.

  • 3- Estimate the costs associated with generating that revenue, including team, office, server,

  • 4- And finally, give you an answer on whether this combination of variables in making the

  • company grow.

  • For early-stage startups, the model should take in the team size, the team expansion,

  • and compare it to the available cash, perhaps from a round of funding, to understand what

  • the exact company runway is.

  • If you've done your model right, you should be able to scale your team and your budget,

  • understand the revenue impact of those changes, and measure how much that will affect your

  • runway.

  • Here are the BASIC parts of a model. Parts that you will find on any Financial Model Template online.

  • First the COGS Sheet

  • That stands for Costs of Good Sold and relates to the direct costs associated with providing

  • your service.

  • For a supermarket or an eCommerce store, COGS is straightforward. It's the cost of the groceries

  • or the items sold that the company pays to the suppliers.

  • For Uber, the COGS would be the money that they pay to the drivers.

  • Most software companies use COGS for server costs and other essential tools that the platform

  • needs to be functional. In our case, tools like Intercom and Amazon Web Services are

  • part of COGS.

  • If your compare revenue to COGS, what you get is the Gross Margin: the margin your company

  • makes before accounting for the administrative expenses.

  • Let's talk about the Revenue Sheet now

  • Revenue is used to track and estimate, well, your revenue.

  • What is absolutely vital for any model is what drives your revenue. Revenue doesn't

  • just 'come.' You have to bring it in. Depending on your business, you'll need to pay to market

  • your app or pay to get leads. You might even need to pay for a sales team to close those

  • deals.

  • If, for example, your model estimates a $10,000/mo marketing budget that doesn't increase, it

  • makes no sense that your revenue grows to $10MM in year 3. That's just impossible.

  • There needs to be some correlation with reality here, and many of these benchmarks

  • you can find online

  • Some examples,

  • App installs using Facebook ads can cost a few cents in low-competition countries, and

  • $2 in competitive markets like the US.

  • There is no way to get Google Search Traffic for less than $1 per click, and most keywords

  • require bids of $5 or $6 per click.

  • An average conversion rate on a landing page could be around 25%. 50% is remarkable. More

  • than that is unrealistic.

  • As the company grows, acquiring customers with paid ads usually gets more expensive,

  • not cheaper.

  • These numbers need to be taken into account in your model. Growth and revenue don't come

  • magically.

  • Your model should show the math behind your expected cost of acquisition.

  • and measure if that math was accurate at the end of the month when you get the actual results.

  • This is absolutely

  • key. I can't stress it enough.

  • Next up is the SG&A sheet.

  • Pretty much every expense that does not classify as COGS goes into the SG&A sheet.

  • That's Sales, General and Administrative Examples.

  • That includes payroll, marketing costs, travel, office expenses, rent, accounting, consultants...

  • Again, it's imperative to connect these to your revenue estimations. On a SaaS platform

  • (software subscription), you could say that you'll need to hire a support agent for every

  • 1,000 active customers on the platform.

  • Because the more customers you have the bigger your support organization

  • and your Customer Success organization needs to be.

  • So, you can connect the number of active users on your revenue sheet, to the number of employees

  • on your SG&A sheet. This lets you estimate your margins in the future.

  • You can also connect the number of team members to the size of your office, and therefore,

  • rent. Or, you can compare the number of employees the number of seats you'll need on your CRM.

  • It's those connections that let you be very accurate about your growth expectations and

  • your company expenses. I challenge myself every month so that my projected SG&A at the

  • the end of the month actually matches our bank accounts.

  • Last but not least is the working capital and CAPEX.

  • This sheet is meant for assets owned by the company. If the company buys a car, that car

  • is not an expense; it's an asset.

  • The car affects your cash flow, yes, because you no longer have that cash available in

  • the bank, but the asset should be logged in the model. The number of assets a company

  • has an impact on its valuation, or, for example, if the company goes bankrupt and needs to

  • liquidate them.

  • Desks, computers, and other machines are often assets and not expenses, and these are to

  • be logged on this sheet.

  • While most software companies don't need to pay a lot of attention to this section, eCommerce

  • platforms do. Working Capital is critical for them because they might need to pay suppliers

  • before they collect sales revenue.

  • All I've done for our template is to implement an automatic laptop buying system. So, every

  • time the number of employees increases, the model estimates that you'll need to buy a

  • new computer for them.

  • You can, of course, add other purchases of your own.

  • All of this stuff gets consolidated on your Monthly Financial Statement sheet. These sheets

  • provide you a summary of your gross margin, net income per month, cash in the bank, and

  • so on. Taxes are also automatically estimated here.

  • All this stuff gets consolidated on the Annual Sheet, and that's where you have your official

  • growth estimations.

  • Now I added a few sheets of my own, let me tell you about those.

  • This sheet lets you automatically estimate future hires without having to dig directly

  • on the SG&A sheet.

  • You may, for example, define your dev team, how often do you expect to hire new team members,

  • and how often do you plan to adjust their salary.

  • It's designed with employee categories in mind, so you shouldn't add each employee by

  • name, instead, classify your team in each one of these buckets.

  • Make sure you use company cost for their salary, not actual salary paid out to them. In other

  • words, include your payroll costs here, so that you don't have to deal with those on

  • a separate line.

  • Now, this is where the magic happens. Programming all these formulas in is hard. You need some

  • excel skills to do it, as well as time, and founders don't have a whole lot of that.

  • So I've worked on creating some pre-built financial models for SaaS, e-commerce, and

  • ad-based businesses (like a blog or a social network). They already have all the formulas

  • programmed in, so all you need to do is add your pricing, your own team scaling plan,

  • and voliá.

  • The clean model is free, and you can download a copy of these pre-made templates for just

  • $79. Also, if you need help programming in a more complex business model, our team can

  • help.

  • All templates are available at slidebean.com/financial

  • Alright, end of commercial-

  • The KPIs Sheet

  • I've also added charts and a KPI sheet that lets you visually check the results of the

  • model, as well as giving you some critical insights like an estimate of the capital you

  • need to raise. Whether you can reach profitability in the projected five years, the model includes.

  • Some important announcements!

  • If you didn't know, we have a Discord Server around our Youtube channels. You can join

  • completely free and join a 1-hour Q&A we do after each video launches. Hosted by yours

  • truly. We'll also create a Financial Model channel so you can exchange ideas with the

  • rest of the community.

  • A giveaway. The first 100 people to purchase any of our SaaS/eCommerce/Ad-Based financial

  • models will also get a free, 1-year Slidebean plan so you can put those impressive numbers

  • into a solid investor deck. So, $79 for our built model, plus a Slidebean plan. Can't

  • get better than this.

  • Last but not least, I want a Youtube plaque. The team wants a Youtube plaque, and we don't

  • get to buy one. We just need to reach 100,000 subscribers, and if you haven't done so, this

  • would be the right time to do it.

  • That's all for today. See you next week!

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B1 US model revenue sheet estimate financial company

Financial Modeling 101: Tutorial and Template

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    吉川友章 posted on 2020/07/15
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