kienbui1995/financial-modeling

Financial Modeling

When to Use

When evaluating whether a business decision makes financial sense — new product, pricing change, market expansion, or funding round preparation.

Core Jobs

1. Unit Economics

For a SaaS or marketplace, calculate:

• CAC (Customer Acquisition Cost) = Total sales & marketing spend / New customers acquired
• LTV (Lifetime Value) = ARPU × Gross Margin % × Average Customer Lifetime
• LTV:CAC Ratio — healthy = 3:1 or better
• Payback Period = CAC / (ARPU × Gross Margin %) — target < 12 months

2. Revenue Projections

Build a bottoms-up model:

New MRR = New customers × ARPU
Expansion MRR = Existing customers × upsell rate × upsell ARPU
Churned MRR = Churning customers × their ARPU
Net New MRR = New + Expansion - Churned

3 scenarios: pessimistic, base, optimistic (vary growth rate assumption)

3. Cost Structure

Fixed: salaries, infrastructure, office Variable: hosting (per user), payment processing fees, customer support cost per ticket Model cost per unit at different scale points (100, 1K, 10K customers)

4. Break-Even Analysis

Break-even = Fixed costs / (Revenue per unit - Variable cost per unit) When does the model become profitable at current growth rate?

5. Sensitivity Analysis

Identify the top 3 assumptions that most affect the outcome:

• If churn is 5% vs 10%: how does LTV change?
• If CAC is 2x: when does payback period exceed 18 months? Show a sensitivity table for each key assumption.

Key Outputs

• Unit economics dashboard (CAC, LTV, payback)
• 3-scenario revenue projection (12–24 months)
• Break-even analysis
• Sensitivity table on key assumptions

Anti-Patterns

• Top-down TAM projections without bottoms-up validation
• Ignoring churn in LTV calculations
• Single-scenario models (no pessimistic case)
• Not stress-testing assumptions