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…
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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…
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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…
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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…
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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…
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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…
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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…
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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…
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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…
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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…