Reconsidering Financial Analysis
When checking our financial projections and defining which return rate we would be able to provide to our investors we realized it was not particularly high and it would not be interesting for them. As well, this fact told us that our implementation and marketing milestones were probably too delayed.
For those reasons and by doing and overall revision of our finances we decided to do the following adjustments in our financial plan spreadsheet:
˃ Only 5 months in a Católicas controlled environment. It was too much spending a whole year targeting Católicas universities in Portugal and it just allowed new competitors to arise and even copy our idea. Having the full first year of operations with such a small potential delayed our premium version revenues and therefore, our ads stream as well. Hence we speed our sales milestones.
˃ Numbers of users’ targets redefined. Our new targets in terms of users are 50 000, 150 000 and 350 000 as users by the end of years 1, 2 and 3 respectively, which are accordingly supported by our marketing efforts and the dynamism of the market. Based on this numbers of users we computed the premium version sales, considering that the conversions for the premium will come 6 months after the new users started with our platform, which we consider a moderated expectation.
˃ Reduced growth rate for institutional customers. We reduced the final target of having 22 universities by the end of year 3 to 16, having goals of getting new customers now more spread out than before. By doing this we reduce the weight this revenue stream had in our finances and the pressure in our marketing team.
˃ Updated advertising revenues. The amount of sales from this source was updated according with the new evolution and growing of platform’s users.
˃ Wages. Taking into account that as the number of institutional customers growths it will mean for us higher requirements in terms of service, we will hire an extra person to provide support to universities. Equally, the wages in year 3 will increase to 900€.
˃ Hosting costs. Considering that each university will require an individual hosting, this variable cost is now included in the calculations. It means, we increased our costs related to the institutional customers while keeping the same price per month.
By doing this changes that in our opinion make much more sense, we managed to reduce the investment required, since we will need to finance less months with losses, we will offer a really interesting return on investment and the IRR of our start-up for the 3 first years of operations is clearly satisfactory.
For those reasons and by doing and overall revision of our finances we decided to do the following adjustments in our financial plan spreadsheet:
˃ Only 5 months in a Católicas controlled environment. It was too much spending a whole year targeting Católicas universities in Portugal and it just allowed new competitors to arise and even copy our idea. Having the full first year of operations with such a small potential delayed our premium version revenues and therefore, our ads stream as well. Hence we speed our sales milestones.
˃ Numbers of users’ targets redefined. Our new targets in terms of users are 50 000, 150 000 and 350 000 as users by the end of years 1, 2 and 3 respectively, which are accordingly supported by our marketing efforts and the dynamism of the market. Based on this numbers of users we computed the premium version sales, considering that the conversions for the premium will come 6 months after the new users started with our platform, which we consider a moderated expectation.
˃ Reduced growth rate for institutional customers. We reduced the final target of having 22 universities by the end of year 3 to 16, having goals of getting new customers now more spread out than before. By doing this we reduce the weight this revenue stream had in our finances and the pressure in our marketing team.
˃ Updated advertising revenues. The amount of sales from this source was updated according with the new evolution and growing of platform’s users.
˃ Wages. Taking into account that as the number of institutional customers growths it will mean for us higher requirements in terms of service, we will hire an extra person to provide support to universities. Equally, the wages in year 3 will increase to 900€.
˃ Hosting costs. Considering that each university will require an individual hosting, this variable cost is now included in the calculations. It means, we increased our costs related to the institutional customers while keeping the same price per month.
By doing this changes that in our opinion make much more sense, we managed to reduce the investment required, since we will need to finance less months with losses, we will offer a really interesting return on investment and the IRR of our start-up for the 3 first years of operations is clearly satisfactory.
Financial Analysis
After class' feedback on how our financial analysis was so optimistic, we made further research and rearranged our Revenues and Costs. Here is the final outcome!
P&L
Revenue
Important assumptions and facts to take into account when analysing our P&L
Regarding the Premium Version flow:
- During our interviews and surveys we discovered 2 important things:
27% of the students were willing to buy the premium version;
Students would need an experiment period before actually adopting the platform fully.
Therefore, we considered that (1) 27% of our new users would subscribe a premium version (2) but they would only do so, after 6 month of their first log in.
- During the first year our platform will be opened only for Católica'a students, serving the Porto, Lisbon, Braga and Beiras Católica's Universities. The objective is to iterate and correct any problems in a safe environment as is our own University. This means that by the end of the first year we will have 10.807 users (according to http://www.ucp.pt/site/custom/template/ucptplportalpag.asp?sspageID=10&lang=1 in the year 2012/2013 this was the number of students studying in Católica)
- In the second year we will open our platform to all users worldwide. We expect the network effect to be triggered and leveraged by our high marketing efforts. http://8020world.com/2012/08/s-curve-model-for-facebook-and-dropbox-user-adoption/
- The initial number of users is the same number of unique visitors from our first Landing Page
Regarding University fees:
- The first year will be exclusively from Católica Lisboa, Porto, Braga and Beiras - we will serve 4 different clients.
- Nevertheless, our focus in terms of Universities will still be located in Portugal.
- In the third year, due to the expected wide usage among students of our platform we expect to reach Universities from the rest of the world, having a new client every month.
Advertising fees:
- The same assumptions as in the TAM SAM SOM, except for the fact, we changed the periodicity of the students log in from 3 times a week to 5 - to be more realistic.
We automatically excluded the VAT, since it should always be delivered to the State.
Regarding the Premium Version flow:
- During our interviews and surveys we discovered 2 important things:
27% of the students were willing to buy the premium version;
Students would need an experiment period before actually adopting the platform fully.
Therefore, we considered that (1) 27% of our new users would subscribe a premium version (2) but they would only do so, after 6 month of their first log in.
- During the first year our platform will be opened only for Católica'a students, serving the Porto, Lisbon, Braga and Beiras Católica's Universities. The objective is to iterate and correct any problems in a safe environment as is our own University. This means that by the end of the first year we will have 10.807 users (according to http://www.ucp.pt/site/custom/template/ucptplportalpag.asp?sspageID=10&lang=1 in the year 2012/2013 this was the number of students studying in Católica)
- In the second year we will open our platform to all users worldwide. We expect the network effect to be triggered and leveraged by our high marketing efforts. http://8020world.com/2012/08/s-curve-model-for-facebook-and-dropbox-user-adoption/
- The initial number of users is the same number of unique visitors from our first Landing Page
Regarding University fees:
- The first year will be exclusively from Católica Lisboa, Porto, Braga and Beiras - we will serve 4 different clients.
- Nevertheless, our focus in terms of Universities will still be located in Portugal.
- In the third year, due to the expected wide usage among students of our platform we expect to reach Universities from the rest of the world, having a new client every month.
Advertising fees:
- The same assumptions as in the TAM SAM SOM, except for the fact, we changed the periodicity of the students log in from 3 times a week to 5 - to be more realistic.
We automatically excluded the VAT, since it should always be delivered to the State.
Costs
Platform related costs
- Server will be purchase in http://www.1and1.com/dedicated-server?__lf=Static&linkOrigin=server&linkId=ct.btn.continue.bottom.ServerPremium. We will start with the less expensive until reaach the XXL in the third year.
- Web Hosting costs were calculated based on this website offers http://www.1and1.com/web-hosting?__lf=Static&linkOrigin=hosting-apps&linkId=ct.btn.hosting-landing#hosting-system. In the fisrt year we will use the "Unlimited" package and in the second and third the "Performance" one.
Marketing costs
- Adwords and FacebookAds explanation is in the following Excel File. Still, we have Adwords running, to test our conversion rate.
- Prize for Competition is an amount payed to the winner of contests we will be making in the context of Viral Marketing (for example an Ipad). Videos with high quality, explaining our value proposition will hopefully also turn viral. These would be made mostly in the critical month for students: September and February.
- In Social Media we included Sponsorship of Facebook Page - we did a simulation and the costs were of 15€/day in September and February, 30 days/month = between 54 and 214 likes per day and 11€/day the rest of the year, 15 days/month = between 39 and 157 likes per day. Plus, LinkedIn Business Package would be of 22,13€/month.
Other Operational costs
- Financial and Accounting outsourcing costs were based on the services provided by "Financial Outsourcing Solutions" in the website http://www.financialoutsourcingsolutions.ie/our-packages.html - assuming our needs will grow as the number of users and Universities increase.
- Social Security was calculated based on the currently used TSU of 23,75%.
Subsidies
- Iapmei "Bolsa do Passaporte para o Empreendedorismo" fits one of our members requirements.
Bootstrapping
- Operations will take place in own homes.
- A Hacker co-founder will be incorporated in our team.
- Except for the Hacker, we will use our personal computers.
- We will not pay any wages to our founders during the first 6 month.
- Server will be purchase in http://www.1and1.com/dedicated-server?__lf=Static&linkOrigin=server&linkId=ct.btn.continue.bottom.ServerPremium. We will start with the less expensive until reaach the XXL in the third year.
- Web Hosting costs were calculated based on this website offers http://www.1and1.com/web-hosting?__lf=Static&linkOrigin=hosting-apps&linkId=ct.btn.hosting-landing#hosting-system. In the fisrt year we will use the "Unlimited" package and in the second and third the "Performance" one.
Marketing costs
- Adwords and FacebookAds explanation is in the following Excel File. Still, we have Adwords running, to test our conversion rate.
- Prize for Competition is an amount payed to the winner of contests we will be making in the context of Viral Marketing (for example an Ipad). Videos with high quality, explaining our value proposition will hopefully also turn viral. These would be made mostly in the critical month for students: September and February.
- In Social Media we included Sponsorship of Facebook Page - we did a simulation and the costs were of 15€/day in September and February, 30 days/month = between 54 and 214 likes per day and 11€/day the rest of the year, 15 days/month = between 39 and 157 likes per day. Plus, LinkedIn Business Package would be of 22,13€/month.
Other Operational costs
- Financial and Accounting outsourcing costs were based on the services provided by "Financial Outsourcing Solutions" in the website http://www.financialoutsourcingsolutions.ie/our-packages.html - assuming our needs will grow as the number of users and Universities increase.
- Social Security was calculated based on the currently used TSU of 23,75%.
Subsidies
- Iapmei "Bolsa do Passaporte para o Empreendedorismo" fits one of our members requirements.
Bootstrapping
- Operations will take place in own homes.
- A Hacker co-founder will be incorporated in our team.
- Except for the Hacker, we will use our personal computers.
- We will not pay any wages to our founders during the first 6 month.
Please click in the botton below for further information - P&L divided by month during these 3 years.
Balance Sheet
Assets
LeadTeam Platform
- We considered the platform as an Investment, therefore it is only reflected in the Balancesheet and Cash-Flow statements.
- An initial investment will be made based on the following information: http://thenextweb.com/dd/2013/12/02/much-cost-build-worlds-hottest-startups/ . Still, we expect to talk with an expert and confirm this data.
- Several upgrades will be made to the platform periodically - everytime we have a new "University customer" an upgrade will take place. Here, not only our Hacker co-founder will work, but also an outsourced programmer. The cost was calculated based on Odesk platform. In fact, we found a perfect match for us in https://www.odesk.com/o/profiles/users/_~010b0a3ccf7fca24fd/
- To make sure our investors have an exit strategy, we are going to subscribe a patent. According to official information in the websites bellow, we estimated a price of €6.500 with a duration of 20 years in Europe.
http://ec.europa.eu/internal_market/indprop/patent/faqs/index_en.htm#maincontentSec11;http://www.epo.org/law-practice/legal-texts/official-journal/2014/etc/se3/p1.html; http://ec.europa.eu/internal_market/indprop/docs/patent/faqs/cost-comparison_en.pdf
- We are going to register a Trademark costing €900, according to the following information
http://www.inta.org/TrademarkBasics/FactSheets/Pages/CommunityTradeMarkFactSheet.aspx
- Our co-founder Hacker will need a computer with a Miscrosoft license.
- Depreciations were calculated based on the following table: http://www.pwc.pt/en/guia-fiscal-2012/irc/taxas-depreciacao-amortizacao-fiscais.jhtml
- We considered the platform as an Investment, therefore it is only reflected in the Balancesheet and Cash-Flow statements.
- An initial investment will be made based on the following information: http://thenextweb.com/dd/2013/12/02/much-cost-build-worlds-hottest-startups/ . Still, we expect to talk with an expert and confirm this data.
- Several upgrades will be made to the platform periodically - everytime we have a new "University customer" an upgrade will take place. Here, not only our Hacker co-founder will work, but also an outsourced programmer. The cost was calculated based on Odesk platform. In fact, we found a perfect match for us in https://www.odesk.com/o/profiles/users/_~010b0a3ccf7fca24fd/
- To make sure our investors have an exit strategy, we are going to subscribe a patent. According to official information in the websites bellow, we estimated a price of €6.500 with a duration of 20 years in Europe.
http://ec.europa.eu/internal_market/indprop/patent/faqs/index_en.htm#maincontentSec11;http://www.epo.org/law-practice/legal-texts/official-journal/2014/etc/se3/p1.html; http://ec.europa.eu/internal_market/indprop/docs/patent/faqs/cost-comparison_en.pdf
- We are going to register a Trademark costing €900, according to the following information
http://www.inta.org/TrademarkBasics/FactSheets/Pages/CommunityTradeMarkFactSheet.aspx
- Our co-founder Hacker will need a computer with a Miscrosoft license.
- Depreciations were calculated based on the following table: http://www.pwc.pt/en/guia-fiscal-2012/irc/taxas-depreciacao-amortizacao-fiscais.jhtml