7/30/2019 DCFI Revenues Van Pelt http://slidepdf.com/reader/full/dcfi-revenues-van-pelt 1/13 Or, what you need to know to convert your sexy, exciting, can’t - help-but-lead-to-world-dominance product vision into an actual company The Financial Perspective on Starting a Business
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Run rate: A metric as of a point in time extrapolated to an annual
future rateExample: you have annual revenue of $1m in 2012, $400k of which
was in December.
Revenue run rate is $4.8m/year ($400k/mo for 12 months)
What the business should do next year based on mostrecent period results
Different from projections which assume additional changesover the course of the coming year (e.g. adding more salespeople, additional customers, etc.)
Burn or burn rate How much cash your business is consuming
Can be used in combination with run rateExample: you used $500k of cash in 2012 and $75k in December.
•Software as a Service (SAAS) - ex.Salesforce •Service as a Service - ex. Shopify •Content as a Service - ex: Spotify, Netflix •Infrastructure/Platform As A Service - ex.AWS •Freemium SAAS - ex. Dropbox •Donations - ex. Wikipedia •Sampling - ex Birchbox •Membership Services - ex Amazon Prime •Support and Maintenance - ex 10gen,Red Hat •Paywall - ex. NYTimes •Voice and video-conferencing - ex.Uberconference Peer to Peer •Peer-to-Peer Lending - ex. Lending Club, •Peer-to-Peer Gambling - ex. BetFair •Peer-to-peer buying - ex Etsy •Peer-to-peer insurance/home/car - ex(??) •Peer-to-peer computing (CrasPlanstorage, or SETI@home) •Peer-to-peer service - ex. MechanicalTurk, TaskRabbit •Peer-to-peer Mobile WiFi/Tethering - ex
Gaming •Freemium - Free to play w/ virtualcurrency - ex. Zynga •Subscription- ex. World ofWarcraft •Premium - ex. xBox games •DLC - (Downloadable Content) -ex. Call of Duty •Ad Supported - ex -addictinggames.com
Your model is only as good as your revenue projections Build a model based on business drivers and ratios not
the line items in your financial statements
Thoroughly analyze the items that matter . . . Bad: Revenue will increase 20% next year
Better: we will add 1 sales person in March and one in July. Salesproductivity ramp-up pattern is 0% in months 1 & 2, 20% month 3, 50%month 4. On average, a fully productive sales person will close x dealsper month worth an average of $y, subject to monthly seasonality
percentages as defined.
. . . And use quick approximations for those that don’t Example: come up with an overall facilities rate per employee rather
than separately estimating office supplies, network, phone cost, etc.
Phase II – Validate business model $5k initial order size, $22k variable cost of customer
acquisition--Good long term business but not scalable
Brought down cost of customer acquisition to $10k Sales tools: Webex meetings vs. on-site visits Implementation tools: Installers, AV surveys, documentation
Increased average initial order to $10k 3 for 2 program—get 3 classrooms for the price of 2
85% of customers bought the bundle
Variable cost now = initial revenue
Secured commitment for $3m/year from investors tocover fixed costs (development, conferences, etc.)