The customer acquisition cost is calculated by dividing the sales and marketing costs by the number of new customers acquired during an accounting period. To make economic sense the lifetime value of the new customer must be greater that the cost to acquire the customer.
For the purposes of the financial projection template other liabilities are defined as amounts owed by a business at the year end arising from operating expenses, finance costs, and income tax expenses. The year end value of other liabilities is calculated using the other liabilities days assumption.
The opening day other liabilities balance forms part of the opening balance sheet of the business. For the purposes of the financial projections. other liabilities are amounts which are owed by the business in respect of operating expenses, finance costs and income tax expenses.
The working capital over total assets ratio is a financial ratio used by a business to give an indication of it’s liquidity or financial distress. The ratio is calculated by taking the difference between the current assets and current liabilities and dividing this by the total assets of the business.
A business can fund it’s operations from both internal (retained earnings) and external (debt and injected capital) sources. The retained earnings to total assets ratio is the ratio of the accumulated retained profits of the business compared to its total assets, and is an indication of the percentage of assets funded by internal resources.
An understanding of the cash flow statement allows the startup entrepreneur to manage the cash flow of a business effectively. In doing so they will avoid many of the cash flow problems which can damage or even destroy what would have been a successful startup operation.
A service based business can use break even point analysis to calculate the number of units it is required to sell in order to reach break even. As a service business does not normally have a physical product to sell it must first define the unit (clients numbers, labor hours, projects, jobs etc.) to be used in the analysis.
A manufacturing business needs to review its draft financial projections to ensure that they include sufficient capital investment to provide the production capacity needed to meet the sales demand forecast and the required inventory levels.