Signed Electronically Business Plan Financial Made Easy

Signed electronically business plan financial

start up an e-commerce financial model let's take a closer look at the components of CF is ecommerce financial model it starts with the business assumptions these are the assumptions that we need to make to drive the business including the three statements the income statement balance sheet and cash flow statement as well as supporting schedules that calculate things like depreciation and debt and interest then we go on to calculate customer metrics these are very important for an e-commerce business sometimes also called unit economics from there we can calculate a business al uation and determine what we think this company is worth there are several purposes of this ecommerce financial model one is to assess the economics of the e-commerce business another is to determine if a new business idea is viable it can be used to value an online business that is determined the net present value using discounted cash flow analysis it can also be used for internal budgeting and planning purposes for an FPA team or an accounting team that needs to do their planning in terms of relevant courses that will help you build this model you can start with building a financial model in Excel then take business valuation to learn discounted cash flow analysis and then finally this ecommerce model will show you how to build every single calculation step by step let's slip over to the model now and take a closer look here we are on the cover page of the startup ecommerce financial model let's click through on the table of contents to the actual model itself this is a single worksheet model this is by far the simplest and most effective structure for the model we can easily organize it by grouping cells and having all of these different sections let's open up the entire model to take a closer look the assumptions that we start with for this e-commerce business are traffic which is the monthly visits that the site generates then there's an implied conversion rate which leads to orders the orders then contain information such as how many items per order and the order value we also have a table that models the customers and the churn rate there are expenses order fulfillment GNA costs etc that are all assumptions hard-coded in blue with all CFI models any numbers that are in blue or hard coded assumptions and anything that is in black is a formula or calculation there are some balance sheet assumptions that need to be made related to working capital capital expenditures depreciation etc and then we get into the financial statements so all of those assumptions above drive these financial statements here including an income statement a balance sheet and a cash flow statement but there are also some supporting schedules required these reporting schedules include the capital assets such as technology and property and equipment there are then depreciation schedules there's one for technology and one for property and equipment as well as a simple debt schedule here below that we get customer metrics these are the main metrics that are used in ecommerce businesses you need to know the customer acquisition cost the contribution margin for order the customer lifetime value or LTV and then the ratio of LTV to customer acquisition costs and we can also look at the payback in terms of the number of orders it takes to break even on acquiring a new customer beneath all of that we have a valuation section where we calculate the unlevered free cash flow or free cash flow to the firm calculate the net present value of the business and look at the implied evie to revenue multiple on the valuation finally as always we cap off all CFI models with charts and graphs to illustrate what the model is telling us so we can see here a breakdown of the income statement in the top left the cash flow burn rate and cash balance in the top right bottom left we have customer metrics and same on the bottom right as well so there's a quick overview of this Commerce model and what it contains let's take a closer look at some of the levers we can pull in making changes to the assumptions in this model one thing is the site traffic we may decide that this ramp up of traffic is too slow that organic search is actually going to get to much higher monthly numbers much faster that's where we could enter in these higher monthly numbers so we could just override these with new assumptions as you can see here additionally we could tweak the conversion rates if we think the conversion rates are too conservative for example that email will only be 6% maybe it could get up to 8% we can just go in and make these changes right on the fly average order value is assumed to be held flat over time but we may think that price increases are warranted and in fact we could have it ramp up significantly depending on the profile of the product and the value add that's going to be created so you would just go into the model like so and make changes to those assumptions you could also edit the markdown or discounts and the product margin in terms of cost of goods sold turnrate you could just edit in line rate here now variable expenses this is where there can be quite a bit of cost especially on paid search so here's the cost per click as you can see it's quite expensive but it could become even more expensive over time who knows maybe maybe 5 6 & 7 a click and we could see what the economics look like in that scenario we can scroll down to the income statement and have a look at the bottom line as well as the top line and see how these changes and assumptions are really impacting the business as you can see there's quite a big hockey stick at the end here where the forecast just massively ramps up and that's because we changed those assumptions so maybe that's fine we could scroll down to the valuation section as well and see what the impact is here on valuation as you can see the valuation in terms of the IDI the revenue multiple poll went up significantly B because of this enormous value that comes towards the end because we changed the assumptions so you can see how making some simple changes to the assumptions can be very useful in evaluating different scenarios for this ecommerce business