I'm constantly exploring layers of E-commerce and Marketing through the lens of Market Trends and Consumer Psychology.
Here’s listing a preferred order in which you can build a financial model in Excel. 1/ Know the Benchmark Objectives of your Industry: (i) At what revenue multiples are your competitors getting valued (ii) At what EBITDA multiples are the industry leaders or mature businesses getting valued (iii) How will certain operational metrics like # of users or regulatory license or a B2B deal worth X ARR will increase your multiple or value (iv) Try and set your yearly targets (v) Define ideal LTV/CAC as per industry benchmarks 2/ User Acquisition & Marketing Channels: (i) List out each distribution channel - digital ads, influencer marketing, organic growth, B2B2C partnerships (ii) Define the conversion metrics and funnel for each channel (iii) Know the industry click through rates (CTRs), Return on Ad Spend (ROAS), etc (iv) Finally calculate the Customer Acquisition Cost (CAC) and Blended CAC for all channels 3/ Revenue: (i) Define different revenue streams / subscription packages and pricing for each (ii) Define target % of total users who shall subscribe to each such offering (iii) Estimate growth rates (iv) Estimate churn rate, retention, and upselling/cross-selling potential 4/ Other Variable Costs & Contribution Margin: (i) Material Costs (ii) Shipping, Logistics, RTO, Server charges (depending on business model) (iii) Calculate Contribution Margin (which should be positive on a unit economics level) 5/ Fixed Costs (i) Define Manpower Costs with no. of people, expected salaries, recruitment costs (ii) Estimate admin costs of utilities, tech development, product testing, subscriptions 6/ Cash Flow Dashboard (i) Compile the output from all the above sheets into a Dashboard sheet that gives your North Star Metrics (ii) Show quarterly Gross Burn, and Net Burn after Projected Revenue (iii) Then get to the valuation exercise.
