Financial Modeling · Pro-forma statements

Anyone have any good financial model templates for a multi-sided market?

Mark Morris

November 7th, 2013

I've created a bunch of different pro-forma statements and feel like they all suck.

More specifically, I'm looking for a good financial model template for a "Yelp" type model.  Where users are free (i.e. estimate Cost per user, viral growth) and local  businesses join on a freemium model but pay for subscriptions and highly targeted marketing (i.e. estimating the value of user to a business).  Obviously there are a lot more details that are filled in, but if anyone knows of some good templates, it would be much appreciated.

Rob G

November 7th, 2013

Mark;  this is likely not the answer you want to hear, but its my experience that you have to customize financial models so much that you are better off starting from scratch yourself.  Even the model from my first startup was not usable for subsequent companies. Maybe its just me, but i really like to have a handle on all the assumptions behind all the number and especially the income and expense numbers (including personnel plans, compensation assumptions, sales costs, operations, etc.) and how tweaking them affects the bottom line.  I find that a bottom up model is required - the idea of top down is just too broad and if i can't really believe in the numbers then how can i convince an investor, co-founder, employee, or customer to believe?   Top down is "the market is XX gizilion $$ and if we just capture 5% then YYY".   bottom up means you start with each sale and the income and expenses that relate to that sale.  Make assumptions about your personnel models and how much they can realistically deliver in a given timeframe with a new product, shoestring budget, unknown company, etc. Then detail out all of your expenses (operating and capital).  build the model so you can play with the basic assumptions and graph the results - 'what if' modeling.  i like to do weekly buckets for the first 6-12 months then monthly buckets over a 4-5 year horizon...knowing that without current, proven data points it is all speculation, but it allows you to see the effects of every assumption and combination of assumptions.  It is an exercise that will not only force you to really look at all the variables and understand them yourself, but the results are a fantastic way to show your potential cofounders, board members, prospective employees, investors and even customers that you know your sh#t and that your assumptions will stand up to scrutiny.  the last person you want to fool is yourself.  i can't over emphasize how valuable this process and the results are.  It is our operating bible.  We don't make any signifiant decisions without first running the numbers through our model.  feel free to message me and i can provide a copy of our model so you have an idea of what variables to consider if you think it will help. 

Rob G

November 7th, 2013

i tend to leave the balance sheet and income statement up to the been counter.  That is really live operational stuff anyway. The model should show you a cash position (retained earnings) each week/month (assumes cash basis not accrual basis unless you will have receivable).  for now you need to focus on revenue, expense, cash flow and all the assumptions that feed into them.  depending on what you are doing the personnel and sales/marketing assumptions and related expenses will be critical.

Preetha Ram CEO and CoFounder, OpenStudy

November 7th, 2013

I concur with Rob's advice.  However, it does help to have a template with the bazillion formulae you are going to need to generate the cash-flow, balance sheet etc.

I would go for the middle path.  Start with a template that is sort of where you need to be, and then you work the numbers yourself.  You have to know each number, the assumptions that you are making and how it plays out.

Having said that, I am still looking for a template to adapt to my model!  

Dhruv Vasishtha Product Management at Medidata Solutions

November 7th, 2013

I have a suuuuper basic sanitized financial model I put together for a company similar to your market environment if you want to use that as a starting point?  - Sent from Mailbox for iPhone

Mark Morris

November 8th, 2013

All,

Thank you all for your help! 

@Rob I  can't agree more with a bottoms up approach and I'm not really concerned with the income statement, balance sheet, etc.  As I mentioned I've tried to create some of these bottoms up statements based on some different assumptions, but they always seem to get out of hand. It might be more of a fundamental problem with how to make certain assumptions (i.e. estimated per user cost, network effects, value of CPM to businesses).  I'm not sure if I'm trying to make it to complex or not complicated enough.  Part of the problem I believe is that I'm in a very niche market and my user acquisition strategies will not be from typical google ads, facebook ads etc., but more of a "campus rep" approach.  We are going to be launch our beta come January and our metrics will hopefully start filling in some of the gaps.  However, we have some interested angels who suggest we start trying to raise now, which obviously requires good pro-forma statements. 

Sorry for all the details, but I didn't know if there were some basic assumptions that are sort of industry standard, especially in a multi-sided market place. So as Preetha mentioned I was thinking that seeing some examples or templates that others have used would might be a good starting point. 

With that said, I'll send you a separate message, if you still wouldn't mind sharing your model.

@Dhruv I'll also send you a message, thanks again for all your help.

If anyone else has any thoughts or suggestions on multi-sided market financial models, please feel free to chime in. 

Best,

Mark 

Rob G

November 8th, 2013

It is complex by nature and your model should provide granularity down to each sale, each type of employee (i.e. salary and benefits for an inside sales rep, Jr. Dev, Dev mgr. etc.), etc.  i've not reviewed other's models, but to give you an idea, our model is an excel spread sheet with 29 tabs that cover the gamut from basic market data to detailed demographic data to the cost of health insurance for each type of employee to competitor's pricing, to the cost to print materials to the cost to send a text message. Get granular on each important component - i like to have each component (personnel cost, hosting costs, etc.) in a separate tab and then consolidate into 1 or 2 key summary tabs. 

Anonymous

November 9th, 2013

Mark, did you get any responses? I'd love to see this too if you found anything. Thanks!

Mark Morris

November 12th, 2013

@Rob thanks again for the advice.  Having a granular model and running any changes through the model makes a lot of sense.  I'm sure that the financial model will grow, especially as we start tracking metrics with the beta; however, at this point I'm trying to make some decent bottom up pro-forma statements, that at least cover the basics, which I will continue to manipulate and add items as we test our channels.  Either way I think seeing your template will definitely help me think about things now and for future assumptions.

@Cynthia, both Rob and Dhruv have helped me out some, but I'm open to any suggestions from folks who have found things or processes that have worked particularly well for them. 

Best,
Mark

helloandyhihi

November 13th, 2013

This Excel template may be a good reference. Aaron Patzer of Mint.com provided it to the Founder Institute, the accelerator I went through. 

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