Introducti

on
about
Financial
modeling
Open Workshop
2Apr2022
A. Basics about financial
model
1. What is financial model
2. Who need it
3. What is it used for
4. What skills needed to master financial modelling
Financial
model
Financial models are projections of
financial performance of a
company in terms of its
• P&L
• Balance sheet
• Cash flow
• Key financial metrics
 Income statement - Simple

For the year 2021

Revenue 600,000

Cost of sale (210,000)

Gross profit 390,000

A simple Rental

Staff
(120,000)

(60,000)

income Utility (36,000)

statement Store contribution 174,000

D&A (90,000)

Store profit 84,000

Back-office cost (24,000)

Profit before tax 60,000

Income Tax (20%) (12,000)

Profit after tax 48,000

 Balance sheet
1/1/2021 12/31/2021 Change

Cash 500,000 624,000 124,000

Account receivable - 50,000 50,000

Deposit - 30,000 30,000

Fixed asset cost - 270,000 270,000

Balance Accumulated depreciation - (90,000) (90,000)

sheet Total Asset 500,000 884,000 384,000

Account payable - 30,000 30,000

Tax payable - 6,000 6,000

Debt 200,000 400,000 200,000

Paid in capital 300,000 400,000 100,000

Retained earning - 48,000 48,000

Total Liability + Equity 500,000 884,000 384,000

 Cashflow After Before
Profit before tax 60,000 60,000
Adjust for non-cash transaction
Depreciation 90,000 90,000
Adjust for change in working capital
Account receivable (50,000) -

Deposit (30,000) (30,000)

Tax paid (6,000) (12,000)

BS linked Account payable

CF from operating activities
30,000
94,000
-
108,000

to Cash Fixed asset cost (270,000) (270,000)

flow CF from investing activities (270,000) (270,000)

Debt 200,000 -
Paid in capital 100,000 -
CF from financing activities 300,000 -

Opening cash 500,000 500,000

Net cash movement 124,000 (162,000)
Closing cash balance 624,000 338,000
Who need
Financial model
skill
1. Investment bankers
2. Business analysts
3. Management accountant
4. Financial controllers
5. Consultants
What is FM
used for?
1. M&A
2. Strategic business planning
3. Investment evaluation
4. Strategic business cooperation
M&A
1. Business model
2. Growth plan
3. Projection of PL, BS, CF
4. Key business metrics
5. Valuation
Strategic planning
1. Master P&L
2. Master BS
3. Master CF
4. Sale plan
5. Production
6. Procurement plan
7. Investment plan
8. Financing plan
Key skills needed

1. Financial Accounting background

2. Management Accounting background
3. Finance knowledge
4. Business knowledge
5. Excel skill
B. Business models &
Revenue models
1. Manufacturing
2. Shopping mall leasing
3. Consumer retail
4. Ecommerce platform
5. Subscription model
Business models
A business model is a company's core strategy
for profitably doing business.

Models generally include information like:

1. products or services the business plans to
sell
2. targeted markets
3. anticipated expenses
Question for
discussion

What is business model of?

1. Golden Gate restaurant chain
2. Tiki
3. Base.vn
Unit economics
Unit economics are the fundamental or basic financial building blocks of a business
in which we can identify direct revenues and costs specifically expressed on a per
unit basis.
The point of unit economics is to understand how much profit a business makes
before fixed costs so that one can estimate how much a business needs to sell in
order to cover its fixed costs. Unit economics are thus a fundamental part of
breakeven analysis.

Example: a customer to Tiki is a unit economics

• Revenue: customer’s lifetime value of goods/service purchased from Tiki
• Cost:
• Cost of acquiring the customer (registration benefit, digital marketing)
• Cost retaining the customer (customer care, loyalty benefit)
• Cost per customer orders (cost of sale, promotion, digital marketing,
delivery)
Unit economics
Question for discussion:

What can be unit economic of:

 A restaurant chain (Golden Gate)
 A convenient store chain (Circle K)
 A cosmetic company who distributes its products to
spas
 A company manufacturing Confectionery products
(Bibica)
1.
• Example:
• Revenue formula = Order volume x Price per unit

Manufacturing
• Revenue: mainly from B2B order
• Cost structure: high investment, high direct cost, small profit margin, big
volume

revenue model • Key focus:

• Capacity maximization
• Efficiency maximization
 Volume Year 1 Year 2 Year 3 Year 4 Year 5
Product 1 3,000 3,180 3,371 3,573 3,787
Product 2 4,000 4,240 4,494 4,764 5,050
Product 3 3,500 3,710 3,933 4,169 4,419
Product 4 2,700 2,970 3,267 3,594 3,953
Product 5 2,000 2,200 2,420 2,662 2,928

Example c1 Price Year 1 Year 2 Year 3 Year 4 Year 5

–
Product 1 5.00 5.15 5.30 5.46 5.62
Product 2 10.00 10.30 10.61 10.93 11.26
Product 3 7.00 7.21 7.43 7.65 7.88

manufactur Product 4
Product 5
8.00
9.00
8.24
9.27
8.49
9.55
8.74
9.84
9.00
10.14

ing model
Revenue Year 1 Year 2 Year 3 Year 4 Year 5
Product 1 15,000 16,377 17,866 19,509 21,283
Product 2 40,000 43,672 47,681 52,071 56,863
Product 3 24,500 26,749 29,222 31,893 34,822
Product 4 21,600 24,473 27,737 31,412 35,577
Product 5 18,000 20,394 23,111 26,194 29,690
Total 119,100 131,665 145,618 161,078 178,235
2. Shopping mall
revenue model
• Example:
• Vincom
• Lotte
• Aeon
• Revenue formula = [Total leasing area] x
[% fulfillment] x [Average rent rate]
• Main revenue from leasing income
• Rental to payback investment
• Service fee to cover operating
expense
• Huge investment cost, low operating cost
• Key focus:
• Space fulfillment
• Quality of tenant mix
Example c2 – shopping mall model

Y1 Y2 Y3 Y4 Y5
Base rent 8,874,000 9,865,800 10,475,774 11,122,358 11,806,387
Gross lease area 58,000 58,000 58,000 58,000 58,000
Occupancy rate 85% 90% 91% 92% 93%
Average monthly rent rate 15.00 15.75 16.54 17.37 18.24

Service charge 2,958,000 3,288,600 3,489,814 3,707,453 3,935,462

Gross lease area 58,000 58,000 58,000 58,000 58,000
Occupancy rate 85% 90% 91% 92% 93%
Average monthly service fee 5.00 5.25 5.51 5.79 6.08

Revenue based rent 5,000,000 5,768,750 6,615,470 7,550,500 8,581,770

Footfall 6,000,000 6,300,000 6,615,000 6,945,750 7,293,038
Spending per customer 25 26.25 27.56 28.94 30.39
Total mall revenue 150,000,000 165,375,000 182,309,400 201,010,005 221,635,410
Threshold revenue for revenue sharing 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
% revenue share above threshold 5% 5% 5% 5% 5%

Event revenue 1,040,000 1,201,200 1,375,920 1,565,109 1,769,777

Event fee average per day 20,000 21,000 22,050 23,153 24,310
Total weekends in a year 104 104 104 104 104
% weekends booked 50% 55.00% 60.00% 65.00% 70.00%

Total revenue 17,872,000 20,124,350 21,956,978 23,945,420 26,093,398

3. Consumer retail
revenue model
• Examples:
• F&B retail
• Clothing & Accessory Retail
• Sport goods
• Home products, appliance & furniture
• Recreational products..
• Revenue formula
Revenue per outlet = [Number of customer] x
[Spending per customer]
Total revenue = [Number of outlet] x [Revenue per
outlet]
• Main revenue from retail goods/service to consumers
• High margin, quick payback
• Key focus:
• Network development (number and quality of outlet)
• Customer per outlet
 Example c3 – consumer retail model

COFFEE & SNACK REVENUE

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Customer count (TC)
Dine in 4800 4896 4994 5094 5196 5300 5406 5514 5624 5736 5851 5968
Take away 1200 1224 1248 1273 1298 1324 1350 1377 1405 1433 1462 1491
Delivery 900 918 936 955 974 993 1013 1033 1054 1075 1097 1119
Total customer 6900 7038 7178 7322 7468 7617 7769 7924 8083 8244 8410 8578

% customer buying
Drink price 35,000 95%
Food price 40,000 35%
Average bill value (TA) 47,250

Revenue
Dine in 226,800,000 231,336,000 235,966,500 240,691,500 245,511,000 250,425,000 255,433,500 260,536,500 265,734,000 271,026,000 276,459,750 281,988,000
Take away 56,700,000 57,834,000 58,968,000 60,149,250 61,330,500 62,559,000 63,787,500 65,063,250 66,386,250 67,709,250 69,079,500 70,449,750
Delivery 42,525,000 43,375,500 44,226,000 45,123,750 46,021,500 46,919,250 47,864,250 48,809,250 49,801,500 50,793,750 51,833,250 52,872,750
Total revenue 326,025,000 332,545,500 339,160,500 345,964,500 352,863,000 359,903,250 367,085,250 374,409,000 381,921,750 389,529,000 397,372,500 405,310,500
4. Ecommerce
revenue
model
• Example:
• Revenue formula
GMV = [Number of customer] x [Spending per customer]
NMV = GMV x %[Commission/fee charged on seller]
• Low margin, huge volume, big investment in tech platform,
very long payback
• Key focus:
• User acquisition
• User retention
• Lifetime value from customer
 Example c4 – eCommerce model
E-COMMERCE PLATFORM MODEL

Total for the year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
TRAFFIC
Organic traffic 15,917,123 1,000,000 1,050,000 1,102,500 1,157,625 1,215,506 1,276,281 1,340,095 1,407,100 1,477,455 1,551,328 1,628,894 1,710,339
% organic traffic growth 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

Paid traffic 32,076,428 1,500,000 1,650,000 1,815,000 1,996,500 2,196,150 2,415,765 2,657,342 2,923,076 3,215,384 3,536,922 3,890,614 4,279,675
% paid traffic growth 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

CONVERSION RATE
Organic traffic conversion 6% 5% 5% 5% 5% 5% 6% 6% 6% 6% 6% 6% 6%
Paid traffic conversion 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

ORDER VOLUME
Order from organic traffic 892,602 50,000 53,550 57,330 61,354 65,637 70,195 75,045 80,205 85,692 91,528 97,734 104,331
Order from paid traffic 3,207,643 150,000 165,000 181,500 199,650 219,615 241,577 265,734 292,308 321,538 353,692 389,061 427,968
Total number of order 4,100,245 200,000 218,550 238,830 261,004 285,252 311,772 340,780 372,512 407,231 445,221 486,795 532,298

AVERAGE ORDER VALUE

Goods value 24.40 20.00 20.60 21.22 21.86 22.52 23.20 23.90 24.62 25.36 26.12 26.90 27.71
Shipping fee 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

GMV 100,049,831 4,000,000 4,502,130 5,067,973 5,705,550 6,423,882 7,233,109 8,144,631 9,171,253 10,327,373 11,629,161 13,094,787 14,749,983
% revenue charge on seller 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
NMV 5,002,492 200,000 225,107 253,399 285,278 321,194 361,655 407,232 458,563 516,369 581,458 654,739 737,499

Shipping fee 12,300,734 600,000 655,650 716,490 783,012 855,757 935,316 1,022,339 1,117,537 1,221,692 1,335,662 1,460,385 1,596,895

Net revenue 17,303,226 800,000 880,757 969,889 1,068,290 1,176,951 1,296,971 1,429,570 1,576,100 1,738,061 1,917,120 2,115,124 2,334,394
5. Subscription • Example:
revenue model • Revenue formula
Revenue = [Number of
customer] x [Subscription fee
per customer]
• High margin, big investment
in key product, payback
• Key focus:
• User acquisition
• User retention (churn
rate)
• Annual revenue per
customer
 Example c5 – subscription model
SAAS MODEL

Total for the year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Customer base
Beginning customer 300 300 315 330 345 360 375 390 405 420 435 450 465
New customer 30 30 30 30 30 30 30 30 30 30 30 30
Churned customer (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15)
Ending customer 480 315 330 345 360 375 390 405 420 435 450 465 480

Package
Basic package 300 300 300 300 300 300 300 300 300 300 300 300 300
Standard package 1,000 500 500 500 500 500 500 500 500 500 500 500 500
Premium package 2,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Package user %
Basic package 50.0% 49.0% 48.0% 47.0% 46.0% 45.0% 44.0% 43.0% 42.0% 41.0% 40.0% 39.5%
Standard package 35.0% 35.5% 36.0% 36.5% 37.0% 37.5% 38.0% 38.5% 39.0% 39.5% 40.0% 40.5%
Premium package 15.0% 15.5% 16.0% 16.5% 17.0% 17.5% 18.0% 18.5% 19.0% 19.5% 20.0% 20.0%

Revenue
Basic package 631,080 47,250 48,510 49,680 50,760 51,750 52,650 53,460 54,180 54,810 55,350 55,800 56,880
Standard package 905,700 55,125 58,575 62,100 65,700 69,375 73,125 76,950 80,850 84,825 88,875 93,000 97,200
Premium package 855,000 47,250 51,150 55,200 59,400 63,750 68,250 72,900 77,700 82,650 87,750 93,000 96,000
Total revenue 2,391,780 149,625 158,235 166,980 175,860 184,875 194,025 203,310 212,730 222,285 231,975 241,800 250,080
C. Build up the detailed
Financial statement
1. Revenue
2. Cost of sale
3. Selling expense
4. Marketing expense
5. Operating expense
6. Back-office expense
7. Balance sheet & Cashflow
D. Financial projection for
main business cycles
1. Revenue – AR
2. Cost of sale – Inventory – Purchase – AP
3. Rental – Rent payable – Prepaid rental – Deposit
4. Asset – Depreciation
5. Loan – Interest expense
6. Capital – Dividend
 Recommended
workflow

3. Combine the 8. Calculate all

2. Project the unit P&L with 4. Calculate 5. Calculate 6. Consolidate key metrics & 9. Reorganize 10. Create
1. Build Unit 7. Prepare CF &
unit P&L into grow plan to Brand specific Brand specific company wide review Key executive
economic P&L financing plan
future time make Brand BS projection BS projection P&L, BS reasonableness assumptions summary
projection of those
Reference sources