Finance Case Study For Tech Startup Video.01
Finance Case Study For Tech Startup Video.01
Instructions: create a financial model for the following business, layout metrics to track performance, and discuss risks / op
M1 M2 M3 M4 M5
Users
Starting 3,100 3,100 3,500 3,951 4,461
Churn Rate 2.10% 2.10% 2.10% 2.10%
Churned (65) (74) (83) (94)
Growth Rate 15.00% 15.00% 15.00% 15.00%
New 465 525 593 669
Total Net Users 3,100 3,500 3,951 4,461 5,036
Operating Expenses
Salaries $ 28,333 $ 28,333 $ 28,333 $ 35,417 $ 35,417
Benefits, Taxes, Etc. 7,083 7,083 7,083 8,854 8,854
Marketing Expenses 60,000 64,302 61,245 68,070 75,706
Consultants 7,083 7,083 7,083 8,854 8,854
Miscellaneous 10,000 10,000 10,000 10,000 10,000
Total OPEX $ 112,500 $ 116,802 $ 113,745 $ 131,195 $ 138,831
Opportunities
Spend more on marketing - grow faster given that our efficiency is so high, we can tolerate a much higher CAC to accelerat
Try to create usage-based feature to increase revenue / user.
Cross sell other products via affiliate partnerships (instead of building them ourselves).
If we slow growth down to 5% we become instantly profitable => powerful level in emergencies.
What changes can we make to our product to reduce churn?
Start enterprise sales team to sell top-down into larger companies and push our average customers / company up more qu
Risks
Churn, we have to rebuild our customer base completely from scratch every 3-4 years at a 25% annual churn, we could run
Churn can go much higer than 2.1%, 5% would mean we lose 60% of our customers in a year.
CAC can always spike if we are heavily dependent on paid advertising.
Recommendations
Layout vision of getting to over 100K paying users (17K companies), which would get us to $15MM ARR in 3 years (15X rev
Use increased efficiency in OPEX to re-invest in marketing.
Allow CAC to rise and burn multiple to go as high as 1, scaling much more quickly than this model.
Launch 1 month free trial to increase customer acquisition / leads.
Launch referral program with multi-month discounts for both parties.
Hire enterprise sales team to sell top down.
Identify the largest non-english speaking market to begin selling into, and localize product for it.
Continue to tap venture markets to fund CAC as long as conditions allow.
From the $15MM ARR target, try to double the business annual for 3 consecutive year to hit $120MM ARR and IPO.
rmance, and discuss risks / opportunities / recommendations.
of product-market fit.
com/craft-ventures/the-burn-multiple-51a7e43cb200
5% annual churn, we could run out of TAM (addressable market) to sell into.
$ 1,000,000
$ 579,105 $ 470,875 $ 366,857 $ 1,257,229 $ 1,142,958 $ 1,035,827 $ 924,903
$ 851 $ 846 $ 841 $ 836 $ 831 $ 826 $ 821