How to Use this Spreadshe
You will go through the subsequent sheets in order, with the timing shown below
Follow the instructions beside each row, and go from top to bottom, left to right
You should only change fields that are in blue (this designates the 'givens')
Do not change any of the fields that are in black - these are formulas ('driven')
What will result is your income statement (and a chart of your revenue and income)!
Overview of Components and R
Sheet Timing Components
Scenario Testing Week 1 Lay out high level scenarios to test:
Pricing and COGS Thursday
Week 2 - Pricing pricing decision compared to:
Visualizes
SG&A (Selling, General, Thursday
Week 3 - competitive of
Development pricing
customer acquistion costs for each
and
MonthAdministrative)
1 P&L Friday
Week 3 of
Compiles pricing, channels
the marketing COGS, and SG&A into the first
Year 1 P&L Friday month profit and
Week 4 Monday Builds out the 1 month loss statement
P&L into the remainder of
5 Year P&L year 1 out
Week 4 Thursday Builds by adding eachP&L
the 1 year of the
intoremaining months to
a 5 year projection
Valuation Past LaunchX allow greater intuition of financials
Multiples valuation method and DCF (discounted
cash flow) valuation method with reminder that
near-term value will be much lower
ow to Use this Spreadsheet
ew of Components and Roadmap
Inputs Key Outputs
Price and Volume High level understanding of how these
COGS
Research components listed to the left variables impact one another as input to
- Initial pricing
later projections
-- Total variable cost acquisition cost
Research of actual click through rates and conversion costs for Average customer
each marketing channel,
Pulls components continually
from previous twoadjusted based
sheets plus on actual
adds - Total year 1 SG&A costs
testing
development costs and taxes
Month 1 P&L top scenario Year 1 totals
Customer
Very returntorates
important if relevantto ensure enough year 5
try scenarios Sanity check of near-term pricing
revenue
Leverages year 1 and year 5reasonable
while maintaining profit
financials plus discount rate Chart of 5 that
Reminder year current
financials
value is based on
needing to attain traction / financials for
confidence in numbers
Financial Feasibility - Testing Scenarios: 1 2
Volume of Sales (in units / customers) 150 250
Price (per unit) $6 $4
Revenue $ 900 $ 1,000
Cost of Materials (One-time cost) $1 $1
Shipping Cost per Unit $0 $0
COGS (Cost of Goods Sold) $ 75 $ 250
Gross Profit $ 825 $ 750
Gross Margin 92% 75%
Marketing and Selling Expenses (Customer Acquisition) $50 $70
Software and Development Costs $100 $100
Legal and Accounting $10 $15
Total SG&A $ 160 $ 185
EBITDA $ 665 $ 565
3
100
$10
$ 1,000
$1
$0
$ 100
$ 900
90%
$40
$150
$10
$ 200
$ 700
Change the cells in blue to see how the cells in black change
Revenue will be driven by a combination of your number of customers (volume) and price
Cost of materials and manufacturing for a product, or the cost to run the software for each user
COGS are the costs for each unit
Gross profit is the revenue minus the COGS
Gross margin is the gross profit as a percent of revenue
Consider how much it will cost to achieve the number of customers (and how)
Consider how much it will cost to create the offering for these customers
Cost to set up the legal entity, file paperwork, and file taxes (do your homework on this)
Add additional costs as needed, then total SG&A
EBITDA is Earnings before Interest, Tax, Depreciation, and Amortization - Gross Profit minus SG&A
Benchmarks for Value-Based Pricing:
Competition Pricing:
Alpha Co $80
Beta LLC $120
Omega Inc $90
Gamma Corp $60
Competition Maximum Price: $ 120
Value Proposition Pricing:
Units of what the customer saves (example: hours of time) 5
Value of each of those units (example: $100/hr for professional) $100
Value to Customer: $ 500
Cost checking
Part 1 $36
Part 2 $10
Part 3 $6
Manufacturing $16
Shipping $4
BOM (bill of materials) $ 72
Cost to acquire a customer $26
Variable plus marketing costs: $ 98
Proposed initial pricing: $ 200
Value margin to customer: $ 300
Company margin per sale: $ 102
Notes and Suggestions
Benchmark several competitors
(keeping in mind that competition is any way that your customers are getting their need solved now)
Note in particular the maximum price of competitors
(customers with the highest demand will pay more, so you can learn from these competitors)
Value proposition pricing will be your biggest input to how you price
Consider how your customers will value your offering, and quantify that here
Leave fields like this as is - it will calculate automatically for you
The cost section will be to ensure your price covers cost, but not to price based on it
You will end up seeing that costs play a small part in your financials relative to price and customers
Note what your total BOM is relative to the competion price and value proposition (%)
Determine your expected customer acquisition cost - typically <1/3 the price to be sustainable
Note this total, which does not yet factor in other overhead (salaries, development) costs
Your pricing should 'give' some value to the customer (less than their value proposition), factor in that they may
mentally benchmark
This is relative to the competition, plus ensure
value proposition pricing,that youkeep
though coverincosts
mind the customer mental benchmark of
competitive pricing that will also influence the price
Reminder that you will need lots of margin to cover additional overhead costs like staff, softwares, legal /
accounting, office space, and more
Benchmarks for Value-Based Pricing:
Price BOM Gross Profit (each)Expected Volume Gross Profit
$150 $ 72 $ 78 30 $ 2,340
$200 $ 72 $ 128 25 $ 3,200
$250 $ 72 $ 178 20 $ 3,560
$300 $ 72 $ 228 15 $ 3,420
$350 $ 72 $ 278 10 $ 2,780
$400 $ 72 $ 328 5 $ 1,640
Notes and Suggestions
Use this tab to calculate the potential profit at several different prices
Bill of Materials is from the previous tab
Gross Profit is calculated
SG&A - Selling, General, and Administrative Cost per Click Conversion Customer Expected
Marketing Category ($) Rate Acquisition Cost Spend # of Sales
Conferences $29 $1,000 35
Partnerships $30 $600 20
Email marketing $3.40 22.5% $15 $500 33
Facebook / Instagram Ads $1.01 2.4% $43 $100 2
YouTube Ads $2.00 2.0% $100 $0 0
Google Ads $1.50 4.4% $34 $500 15
Other Social Media Ads $0.40 0.8% $53 $100 2
Infuencers Spend $2.00 0.25% $800 $0 0
...
...
...
...
...
...
...
Total $ 26 $ 2,800 107
Staff Costs
Sales people
Marketing staff
Other
Total $-
Legal, accounting, and consultants
Legal
Accounting
Consultants
Total $-
Other SG&A
Office costs
Softwares
Travel
Meals and Entertainment
Total $-
Expected % of Look up the expected click throughNotes and acquisition
rates and Suggestionscosts specific to your
Customers industry and adjust based on being an early startup (higher cost)
33% Customer Acquisition Costs calculated based on total spend and # customers
19% Offering a referral fee to partners
31%
2%
0%
14%
2%
0% Note that this is likely a cost per number of followers - ask for click rates
0% Add additional marketing channels as needed
0%
0%
0%
0%
0%
0% Determine allocation
Provides a blended of spend
average of based on expected
the customer customer
acquisition costacquisition costs
Output to 1 month and 1 year P&L will use CAC towards number of customers
These costs are inputs to first year P&L (1 month P&L assumes zero for all)
Month 1 - Income Statement
July 2023 - A % of sales July 2023 - B % of sales July 2023 - C % of sales
Units Sold 5 3 10
Avg Price $200 $200 $200
Revenues $ 1,000 $ 600 $ 2,000
Cost of Goods Sold (COGS) $72 36% $72 36% $72 36%
Gross Income $ 640 64% $ 384 64% $ 1,280 64%
Operating Expenses:
Research and Development $300 47% $200 52% $500 39%
Marketing and Selling Costs $131 13% $131 13% $131 13%
Staff Expenses $0 0% $0 0% $150 15%
Legal, Accounting, and Consulting $0 0% $0 0% $0 0%
Other SG&A $0 0% $0 0% $0 0%
EBITDA $ 209 21% $ 53 5% $ 499 50%
Depreciation and Amortization $0 0% $0 0% $0 0%
Operating Income (EBIT) $ 209 $ 53 $ 499
Tax Rate:
Income Tax 35% $ 73 7% $ 19 2% $ 175 17%
Net Income $ 136 14% $ 35 3% $ 324 32%
Notes and Suggestions
Three scenarios to be able to test and compare
How many will you have to sell to ensure you meet the target sales goal?
Price gets pulled in from the revenue tab
Revenue is calculated
Initial COGS (cost of goods sold) is pulled from pricing tab - update the BOM there
Gross income is calculated (revenue minus variable costs)
Input how much you will spend in the first month on prototyping
Marketing and selling costs get pulled from the SG&A tab (CAC * customers)
EBITDA is calculated and is earnings before interest, tax, depreciation, and amortization
If you expect to purchase assets such as computers or manufacturing equipment,
you will be able to depreciate / amortize
Finally, taxes get removed before you get to your final net income
Though you do not get taxed if your pre-tax income is negative
Note that the far right column has "% of sales" benchmarks for reference
to build intuition about these proportions, plus compare to industry benchmarks
Year 1 - Income Statement Scenario from Month 1: C
July 2023 August 2023September 2October 202November 2 December 20% of sales
New Customers 10 10 15 15 30 30
Previous Customers 9 9 13 13 26
% Returning Customers 90% 85% 85% 85% 85%
Total Customers 10 19 24 28 43 56
Avg Price $200 $200 $200 $200 $200 $200
Revenues $ 2,000 $ 3,800 $ 4,700 $ 5,550 $ 8,550 $ 11,100
Cost of Goods Sold (COGS) $72 $72 $70 $70 $70 $70 35%
Gross Income $ 1,280 $ 2,432 $ 3,059 $ 3,612 $ 5,564 $ 7,224 65%
Operating Expenses:
Research and Development $500 $ 500 $1,000 $1,000 $1,000 $1,000 14%
Marketing and Selling Costs $131 $131 $196 $196 $393 $393 4%
Staff Expenses $150 $150 $150 $150 $150 $150 3%
Legal, Accounting, and Consulting $- $500 $375 $375 $0 $0 4%
Other SG&A $- $0 $0 $0 $0 $0 0%
EBITDA $ 499 $ 1,151 $ 1,337 $ 1,891 $ 4,022 $ 5,681 41%
Depreciation and Amortization $0 $0 $0 $0 $0 $0 0%
Operating Income (EBIT) $ 499 $ 1,151 $ 1,337 $ 1,891 $ 4,022 $ 5,681 41%
Tax Rate:
Income Tax 35% $ 5,103 14%
Net Income $ (351) $ 301 $ 487 $ 1,040 $ 3,171 $ 4,831 27%
Financial Projection
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
45108 August September October November December
2023 2023 2023 2023 2023
0.2
0.1
0
45108 August September October November December
2023 2023 2023 2023 2023
Notes and Suggestions
Month 1 figures are pulled from the 1 Month P&L
Consider the balance of realistic numbers with ambitious enough growth
If you will not have any 'returning customers' then delete rows 10-12
If you have a subscription business, keep in mind that not all customers will return
Initial price pulls from the previous page (colored black since you should not change it)
Revenue is calculated / pulled from revenue tab
Note: variable costs will likely reduce over time due to volume purchasing power
Gross income is calculated (revenue minus variable costs)
Input how much you will spend on developing your offering, iterating, and updates
Project additional marketing and sales based on initial customer acquisition costs
Determine if you will need to hire / pay any staff for aspects of selling or marketing
Your startup will likely have legal costs to set up your entity, plus consider additional to include
EBITDA is calculated and is earnings before interest, tax, depreciation, and amortization
Note that taxes will be based on the full year versus on each month
Next - look below - you have a chart of your revenue and profits!
5 Year Income Statement
2023 2024 2025 2026 2027 % of sales
New Customers 179 2,000 6,000 12,000 20,000
Previous Customers 152 1,600 4,500 8,400
% Returning Customers 85% 80% 75% 70%
Total Customers 179 2,152 7,600 16,500 28,400
Avg Price $200 $190 $180 $175 $160
Revenues $ 35,700 $ 380,000 $ 1,080,000 $ 2,100,000 $ 3,200,000
Cost of Goods Sold (COGS) $70 $68 $66 $66 $63 39%
Gross Income $ 23,171 $ 262,510 $ 866,704 $ 1,799,160 $ 2,764,399 61%
Operating Expenses:
Research and Development $5,000 $ 53,221 $ 151,261 $ 294,118 $ 448,179 14%
Marketing and Selling Costs $1,440 $16,939 $53,359 $112,053 $196,093 6%
Staff Expenses $900 $100,000 $250,000 $450,000 $750,000 23%
Legal, Accounting, and Consulting $ 1,250 $10,000 $20,000 $40,000 $40,000 1%
Other SG&A $- $10,000 $25,000 $40,000 $60,000 2%
EBITDA $ 14,581 $ 72,350 $ 367,085 $ 862,989 $ 1,270,127 40%
Depreciation and Amortization $0 $2,000 $4,000 $8,000 $8,000 0%
Operating Income (EBIT) $ 14,581 $ 70,350 $ 363,085 $ 854,989 $ 1,262,127 39%
Tax Rate:
Income Tax 35% $ 5,103 $ 24,622 $ 127,080 $ 299,246 $ 441,744 14%
Net Income $ 9,478 $ 45,727 $ 236,005 $ 555,743 $ 820,383 26%
Financial Projection
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2023 2024 2025 2026 2027
0.2
0.1
0
2023 2024 2025 2026 2027
Notes and Suggestions
Year 1 figures are pulled from the 1 Year P&L
Develop a conservative, aggressive, and realistic scenario (copying this sheet)
Churn rate will increase over time, meaning the % returning customers will decline
Pricing will reduce over time since earliest customers are highest willingness to pay
Target should be ~$3-$10M in 5 years
Note: variable costs will likely reduce over time due to volume purchasing power
Gross income is calculated (revenue minus variable costs)
Determine additional R&D investment and benchmark for the industry
Customer acquisition costs will increase on a per customer basis over time
Determine potential hires and associated employment costs (typically 20-35% of revenue)
Build in costs for legal and accounting plus other filing fees each year
Sanity check the % of sales for each category for your industry
Next - look below - you have a chart of your revenue and profits!
Multiples Method Note: this does NOT mean you are worth this much!
A better valuation method for your current stage is what is called "opportunity cost" valuation:
An investor would only consider you worth what it would cost to pay someone else to get to where you are
Revenue EBITDA
Year 1 EBITDA (need to have high confidence in this $35,700 $14,581
Industry Multiples Lookup sources of the revenue and EBITDA multiples
[industry / source] 2.4 10.2 for your industry
[industry / source] 1.8 12.4
[industry / source] 2.0 8.5
Average 2.1 10.4
Multiplier Valuation Method: $73,780 $151,157
Discounted Cash Flow Model Note: this does NOT mean you are worth this much!
Investors rarely use this method, and tend to use either multiples (above) and/or understanding the 'opportunity cos
A better valuation method for your current stage is what is called "opportunity cost" valuation:
An investor would only consider you worth what it would cost to pay someone else to get to where you are
First Five Years After Year 5 (Going Concern Principle)
Discount Rate: 12% Discount Rate: 12%
1 2 3 4 5 Growth Rate: 3%
Year 1 Year 2 Year 3 Year 4 Year 5 Value in Perpetuity =
EBITDA: $ 14,581 $ 72,350 $ 367,085 $ 862,989 $ 1,270,127
Discount Factor: 0.893 0.797 0.712 0.636 0.567
5 Year Present Value:
Present Value: $ 13,019 $ 57,677 $ 261,284 $ 548,445 $ 720,704 Value in Perpetuity:
Discounted Cash Flow
Method - Present Value of
the Company:
Discounted Cash Flow
Note that this is NOT your actual value Method - Present Value of
the Company:
to get to where you are
e revenue and EBITDA multiples
derstanding the 'opportunity cost'
to get to where you are
oncern Principle)
Year 5 EBITDA
(Discount Rate - Growth Rate)
$1,601,129
$8,007,824
$9,608,953
$9,608,953
