Financial assumptions
Step 1: Sales
12/09/2013
Azèle Mathieu
Rodolphe d’Udekem d’Acoz
Business & Finance Advisors @ BEA
Step 1: Sales
2
Sales?
What?
cfr. Value
Proposition
When? How much? Price?
Cfr. Revenue
streams
How?
Cfr.
Channels
Step 1: Sales – How much?
• Total Addressable Market (TAM)
– Bottom-up from primary market research
– Validate top down: E...
Step 1: Sales – How much?
TAM
4
TAM: 750M€
Identified similar
customers: 40
Initial 10 customers
potential: 15M€
Life Scie...
5
(a) 1 million people 1.000.000
(b) restaurant 2.000
(c) restaurant / 1 million people 2.000
(d) 25% target (25-40) 25%
(...
6
2013 2014 2015
Sales Volume
Number of sales
representatives
0 1 3
Number of restaurants 100 300 900
Daily Orders per res...
Step 1: Sales – Price?
• Pricing of alternative solutions
• How much is the customer ready/willing to pay?
Quantified val...
8
MBA BP 2013 – Business Planning (for
entrepreneurial ventures) INTEGRATIVE
COURSE - 6.0 ECTS
Step 1: Sales – Price?
Quan...
Step 1: Sales – How?
9
• Sales map process
– Sales channels:
• Direct?
• Indirect?
– Impact on the cost of customer acquis...
Step 1: Sales – How?
10
Alpha C
11
Target
Calls
Meetings
First sale
€?
Step 1: Sales – How?
Cost of Customer Acquisition
12
Month 1 Month 2 Month 3 Month 4 Month 5
# calls/day 10 10 10 10 10
# days 10 10 10 10 10
# calls/month 100 100 100 100 ...
• How much resources (time, €, HR) does it require?
• Includes unsuccessful prospects
• To be taken into account in your P...
Step 1: Sales – How?
COCA & Life time value of an acquired customer
• Cost of Customer Acquisition (COCA)
• Life time valu...
• Lifetime value of a gym member who spends €20 every
month for 3 years?
• €20 X 12 months X 3 years = €720 in total reven...
• Rule of thumb*
• Depending on the industry and the period
16
LTVOAC > 2 COCA
Step 1: Sales – How?
Link between LTVOAC & ...
Step 1: Sales
• Probably one of the most important parameters … and
certainly the most difficult to estimate !!
• Consider...
Step 1: Sales
• Gross sales or Net sales (e.g. after commission, bad debts…)
• Consider the initial volumes and the growth...
Step 1: Sales
• The sales data should be based on tangible elements and
hypothesis directly linked to the business plan
• ...
L’Agence Bruxelloise pour l’Entreprise peut vous
aider pour le lancement et le développement de
votre projet d’entreprise,...
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Starting with your financial plan

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Starting with the financials is far from being the cup of thee of entrepreneurs. However, it may be easier than you thought! Ask yourself key questions regarding the sales generation. It will help you to challenge your business model and at the same time to fill in main items of your financial plan. Good luck!

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Starting with your financial plan

  1. 1. Financial assumptions Step 1: Sales 12/09/2013 Azèle Mathieu Rodolphe d’Udekem d’Acoz Business & Finance Advisors @ BEA
  2. 2. Step 1: Sales 2 Sales? What? cfr. Value Proposition When? How much? Price? Cfr. Revenue streams How? Cfr. Channels
  3. 3. Step 1: Sales – How much? • Total Addressable Market (TAM) – Bottom-up from primary market research – Validate top down: Economy > Industry > Market > Segment > … > Your business • Market share? – Top-down : TAM x market share – Bottom-up : Resources x ‘Usage’ (preferred approach) Combine both approaches • Growth rate? • One-off/recurring/bundled sales? 3
  4. 4. Step 1: Sales – How much? TAM 4 TAM: 750M€ Identified similar customers: 40 Initial 10 customers potential: 15M€ Life Sciences Devices: 350B€ FCM: 1,5B€
  5. 5. 5 (a) 1 million people 1.000.000 (b) restaurant 2.000 (c) restaurant / 1 million people 2.000 (d) 25% target (25-40) 25% (e) 2 orders per month 2 (f) orders / months 500.000 (a x d x e) (g) orders / month / shoes shop 250 (f / b) (h) order average 25 € (i) margin 12% (j) Tageted market share 30% (k) Targeted orders / month / shoes shop 75 (g x j) Can you really make it? Step 1: Sales – How much? Top down approach
  6. 6. 6 2013 2014 2015 Sales Volume Number of sales representatives 0 1 3 Number of restaurants 100 300 900 Daily Orders per restaurant (Orders) 3 3 3 Total Daily Orders (Orders) 300 900 2.700 Total Monthly Orders (Orders) 9.000 27.000 81.000 Total Annual Orders (Orders) 109.500 328.500 985.500 Will they achieve it? Still profitable? Step 1: Sales – How much? Bottom up approach: what can you really achieve?
  7. 7. Step 1: Sales – Price? • Pricing of alternative solutions • How much is the customer ready/willing to pay? Quantified value proposition • Price: – Not too low – Not too high – Coherent • Evolution of the selling prices? 7
  8. 8. 8 MBA BP 2013 – Business Planning (for entrepreneurial ventures) INTEGRATIVE COURSE - 6.0 ECTS Step 1: Sales – Price? Quantified value proposition
  9. 9. Step 1: Sales – How? 9 • Sales map process – Sales channels: • Direct? • Indirect? – Impact on the cost of customer acquisition (COCA)
  10. 10. Step 1: Sales – How? 10 Alpha C
  11. 11. 11 Target Calls Meetings First sale €? Step 1: Sales – How? Cost of Customer Acquisition
  12. 12. 12 Month 1 Month 2 Month 3 Month 4 Month 5 # calls/day 10 10 10 10 10 # days 10 10 10 10 10 # calls/month 100 100 100 100 100 % met persons 20% 20% 20% 20% 20% # met persons 20 20 20 20 20 % acquired customers 10% 10% 10% 10% 10% acquired customers 0 2 2 2 2 time to close a deal 1 month customer base 0 2 4 6 8 churn rate 25% customer leaving 0 0 1 1,5 2 net customer base 0 2 3 4,5 6 Step 1: Sales – How? Cost of Customer Acquisition (COCA)
  13. 13. • How much resources (time, €, HR) does it require? • Includes unsuccessful prospects • To be taken into account in your P&L, CF • Essential step for your sales assumptions • Choice of channel financially sustainable? 13 Step 1: Sales – How? COCA
  14. 14. Step 1: Sales – How? COCA & Life time value of an acquired customer • Cost of Customer Acquisition (COCA) • Life time value of an acquired customer (LTVOAC) Compute Monitor over time Impact on: ‒ Business model (VP, distribution channel,…) ‒ Cost structure ‒ Pricing decisions 14 COCA = Sales & Marketing Costs / Customers LTVOAC = revenue over life time x gross margin
  15. 15. • Lifetime value of a gym member who spends €20 every month for 3 years? • €20 X 12 months X 3 years = €720 in total revenue (or €240 per year) Allowable acquisition cost? How to optimize LTVOAC? Discount while managing CF … 15 Step 1: Sales – Price? LTVOAC: example Source: www.entrepreneur.com
  16. 16. • Rule of thumb* • Depending on the industry and the period 16 LTVOAC > 2 COCA Step 1: Sales – How? Link between LTVOAC & COCA (a) order average 25 € (b) margin 12% (c) targeted orders / month / restaurant 75 (d) Restaurant Acquisition Cost € 500 (e) Restaurant Lifetime value (5 years) € 13.500 (a) x (b) x (c) x 12 x 5
  17. 17. Step 1: Sales • Probably one of the most important parameters … and certainly the most difficult to estimate !! • Consider different (sub)categories of products and/or services • Consider the volume of units (products/services) sold and the respective selling prices • Outputs – Per product (category) – Per client / market / segment – Per channel – Combine ? 17
  18. 18. Step 1: Sales • Gross sales or Net sales (e.g. after commission, bad debts…) • Consider the initial volumes and the growth rates for each line of products/services without forgetting potential seasonality and potential evolution of the selling prices • Do not forget potential delays and lower (initial) volumes & growth rates than expected ! • Consider the sales without VAT (unless you do not recuperate it !) 18
  19. 19. Step 1: Sales • The sales data should be based on tangible elements and hypothesis directly linked to the business plan • In no circumstances should the volume of sales be based on the costs … « spontaneous sales creation » in order to achieve break even or benefit on paper does not help and could possibly endanger your credibility in the eyes of third parties • To keep in mind: – User friendliness, avoid too much items – Internal logic : price, discount, cost of sales, payment conditions… & cycle 19
  20. 20. L’Agence Bruxelloise pour l’Entreprise peut vous aider pour le lancement et le développement de votre projet d’entreprise, et notamment pour son financement, via ses différents canaux d’information, via ses conseillers et via son réseau de partenaires. ABE – Agence Bruxelloise pour l’Entreprise Tour & Taxis, Avenue du Port 86C, 1000 Bruxelles Tél: via le n°régional d’aide à l’entreprenariat : le 1819 www.abe.irisnet.be - www.entreprendreabruxelles.be www.ecosubsibru.be – www.monstarterkit.be – www.brutrade.be info@1819.be - info@abe.irisnet.be AGENCE BRUXELLOISE POUR L’ENTREPRISE

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