Overview

Quantitative Business Model

In this guide, we show you how a Quantitative Business Model can be created, from a few simple statements and assumptions about the future growth of a business.

Revenue

Here, the company concerned is a simple subscription business, that earns revenue from new and on-going customers, from three different products. There is however a natural churn rate to subscribed customers.

Costs

After considering revenue, the various costs are modelled and forecast. Such costs include: Marketing, Support, Development Staff, Legal, Rent, and other Running Costs.

Three Statement Model

From the revenue and cost data, we then build an integrated will three-statement P&L, Balance Sheet, and Cash Flow model.

Investment Returns

Once we have the full model, we then try to value the business based on an estimate of its profits after 5 years. We also calculate what the Money-on-Money Returns might be to an early stage investor.

Template

Though we won’t run through every formula or explain every detail of how the workbook is constructed, the full template can be downloaded at the end of this guide.

Click ahead to find out more!