The Financial Model serves two functions for a startup: 1) budget your revenues and expenses , 3) validate your business model and 2) to pitch your business to investors. By…

Let’s take a closer look at all the inputs needed for a financial model. Essentially, we need to think about our specific business model and what expenses we will incur…

Isn’t it the case that revenue is essentially price times quantity times a growth rate and hence should be rather easy to be determined!? Not at all! Revenue doesn’t just…

The Customer Acquisition Cost (CAC) is the cost to acquire an average customer. If it is significantly lower than how much money you can earn from one customer (Life Time…

The Life Time Value is a prediction how much gross profit a company can generate from an average customer. It essentially applies a perpetuity formula to the gross profit per…

A financial model aims to predict a business’ future performance and, in the case of a startup, understand whether a business makes sense to start at all. This includes a…

As previously described, unit economics and deriving revenue and expense assumptions form the core of a financial model. To be able to predict the three main financial statements (the income…

Startup Valuation is the art of figuring out how much a company should be worth. The emphasize lies on “should”. The actual price of any asset is of course how much a…

The Discounted Cash Flow Method predicts a startup’s value by discounting all of its predicted cash flows by a discount rate that is meant to compensate for its riskiness. For…

The terminal value can best be understood as the expected sales price of your company at the end of the fast growth period. It is either calculated with a perpetuity…