1/ Highlights from three days of Financial Modeling #bootcamp at the Nest for #founders and #startups - a #thread
@TheNestiO
@jehan_ara
@akashshaikh
@faizansiddiqi
@TalhaIzhar
2/ Fixed costs are not evil.
They are a part of scaling up or building intellectual property. Great if you could keep them low at the beginning but you can't avoid them if you need to scale
3/ Cyclical and seasonal changes in revenues require you to build a monthly financial model.
Build an annual model going forward 3-5 years. Then build a short and sweet 12 month model.
Building both will keep you honest.
4/ A good financial model should make founders ask useful and interesting questions.
Questions that should open doors for future growth, higher profitability, efficient operations trimming, unprofitable lines and strategy.
5/ All models are wrong. Some models are more useful than others.
Enough said.
6/ Do you know where your contribution margin is this evening?
What is your average cost, all expenses included, of processing a single order, a single transaction, a single customer.
When you take that out of your average ticket size, how much is left?
7/ Where is your break even?
With what's left, how many orders do you need a day, a week, a month to cover all your expenses?
How does number change, month to month, season to season?
8/ Income leakage
When you take your margin and multiply it by your processed orders to-date, does the number tie in with your financials?
If it doesn't, why not?
Trace and close the sources of income leakage.
You would be surprised at what's behind the leak
9/ Adding resources and payback
When you add an expensive resource or asset, how is he, she or it is going to pay you back? What does the repayment plan look like?
New laptop, delivery truck, head of engineering or color printer?
Do the payback period math
10/ You can't go from $10,000 to in revenue in 12 months on your first rodeo
Separate thread later.
Organization that does $ million in revenues is different from one that does $10k.
The transformation takes / needs time.
Can't fast track it. Recipe for indigestion
11/ Monthly / Annualized financial projections
Annual first. Then circle back and do monthly. Then reconcile. Then repeat till you find a version that works.
Process 10,000 orders next 12 months.
Is 834 orders a month.
209 orders a week.
42 order per week day.
Really?
12/ How many sales reps you need?
To generate / process 42 orders per day?
How many support queries would 834 orders generate?
What do you need to onboard 10,000 customers?
Its not just a number.
You need processes and filters in place to parse/digest/monetize volume
13/ Build models for founders not investors
Cheaper to build and test businesses in #Excel rather than real life (than you @alinawab)
Try out the math in Excel. Tweak it, fix it, hack it. Then deploy in real life.
14/ Before you price it you value it
Can you numerically quantify value you are delivering to your customers (thank you @BillAulet)
If you can, charge a percentage - welcome to value school
If you can't you will forever be stuck in the #costplus world
15/ Notes from #Financial Modeling #bootcamp for #founders and #startups - a thread
@jehan_ara
@TheNestiO
@akashshaikh
@TalhaIzhar
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