Case study on building a financial plan and estimating the business valuation of a startup-s future business.  

Introduction on building blocks of financial planning and steps needs to address before using our financial model built with MS Excel.

1. Business idea and planning your business

If you are reading these pages, probably you already have a business idea about entering into SEO business. Before doing any financial calculation, you might challenge your business idea, draft business and marketing plans. At the latter stages, we will not go through determining the soundness of your business idea and how you plan to achieve it, it is highly recommended to build a solid business idea and strategy that will support operational numbers we will be playing later on. Nevertheless, it will be fun determining how many customers, revenues, orders, you need to achieve compared to resources you would be required to invest in order to keep the operation going. 

In the essence of providing SEO service to customers, the business idea is to provide an automatic solution for assessing your website, provide deep analysis of every aspect that ranks you on Search engines, and provide recommendations for improvement while constantly tracking trends and competitors.  

There are many good websites for challenging your business idea and draft a business plan and we will recommend a few of them. 

2. Understanding business model

 How the business model is set up and what are the value propositions, customer segments,  channel operational, and financial processes throughout the entire business setup. One of the best tools to assess a business model is the Osterwalder-s Business model Canvas BMC.  It is generally one side business model with various customer-s segments, where SEO agency sells its value proposition throughout the specific channels. Once you have developed your BMC you will set up the most important key segments of your business strategy. some of the most important business segments to figure out are as follows 

Business Model Canvas BMC

you can also have a look to specifically design BMC for Digital Agencies, here.  

3. Market and customers

 After extensive research and analysis, you will figure out where will you sell your service. in the Financial model, you can set up up to three customers group with up to six services to sell. For example, you can set up a customer's group as;

- geographical region (domestic customers, regional customers, and international). You can differentiate different products and prices for different regions.

- Vertical (various industries)- Marketing agencies that focus on domestic, international clients.

- White label you sell the platform to another startup SEO company that wants to sell SEO services without investing in the application.

- Online businesses target companies that sell their services entirely online. (travel agencies, e-commerce, services)  

Our financial model has two fundamental bases for establishing service revenue growth, By forecasting, customer level or service level directly. Even if you did not found your business research on a number of customers, we strongly recommend using a customers base since it gives more valuable information about your customers than will be useful in defending your financial plan.

 In the Customer Section of the financial model, you can forecast the acquisition of new customers based on organic and paid marketing levels, as well as churn rate. In the same sheet, you can enter relationships with offered services in order to forecast the number of ordered services from that customer. More details about all parameters you can use in the Customer sheet is provided in the resource section.

In this Case Study we choose the following key estimate:

- Retention rate 98%

- 20-26% year-on-year customers growth in the first 4 years, and after gradually declining to 7%

-77% of new customers will come from paid marketing.

Long-term value/Customers Acquisition cost in the first 3 years is 7x, while increases to 90x after 7th year. 

On Customers Dashboard you can see all key important information about your customer's forecast and validate your entry with your business and operational plan. Also, you can oversee an in-depth view of the quarterly movement of your customer's forecast and key important KPI for each Year.