Crafting Your Business Projection Model | Brendan Burns | Skillshare

Crafting Your Business Projection Model

Brendan Burns, Entrepreneur and Professor

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12 Lessons (46m)
    • 1. Introduction

      2:03
    • 2. Overview

      4:06
    • 3. Basic Ground Rules

      3:45
    • 4. Assumptions Model Structure

      9:35
    • 5. Example: Art Prints Company

      6:45
    • 6. Sales Revenue

      2:33
    • 7. Cost Drivers

      1:00
    • 8. Operating Income

      0:57
    • 9. Operating Expenses

      5:14
    • 10. Net Income Cash Flow

      4:01
    • 11. Model Review

      3:52
    • 12. Closing

      2:28

About This Class

Business Projections are a key component of building a successful business for any business owner or entrepreneur.  

The common misconception is that you need to be a math whiz, spreadsheet jock or have an MBA to successfully complete a business projection.  Nothing could be further from the truth.

You do need to think logically, be well organized and prepared to critically examine the key components and variables that surround your business.  Otherwise, the ability to add and subtract are all the math you need!

People who have started a business but are unfamiliar with financial modeling or our thinking about starting a business and want to plan for the future should take this class.  

Transcripts

1. Introduction: Hello. My name is Brendan Burns. I bet a business person and entrepreneur for over 20 years. During that period of time, I've started a handful of companies myself. I've joined companies in progress and tried to help improve them. I've advised companies and for the last 15 years have been a professor at the business school at Columbia, mostly teaching entrepreneurship and helping students turn ideas into projects. One inherent part of that process and for any startup company, is creating the business model projection. The common misperception when you're creating a projection or you're thinking about working in the spreadsheet is that you have to be math Wiz, where you have to have worked for two years, a Goldman Sachs, McKinsey or some bank. It's really not true. What you do need to dio or you're really benefit from is no basic math. In fact, I would simply say high school math is fine. You need to be a logical and linear thinker. You need to be well organized and intellectually curious, and I'll talk more about those things in a few minutes. Now, on its surface, the term business model projections, I will readily admit, can sound pretty boring. Truth, though, is that the process of creating a projection is really about taking your idea and quantifying it in a way that other people can understand and relate to. It becomes a super important part of turning an inspiration into reality. Today, we're gonna walk through a very straightforward process that will help you do that for yourself. We're gonna create a real model. I've done that myself in preparation for this class and you'll be able to follow along and do that at home. In addition, I will show you several examples of other people's models, and hopefully you'll do the work and be able to apply this to anything that you choose to do in the future. Let's get started. 2. Overview: Welcome back. Over the last 25 years, millions and millions of people have started businesses of all sizes, mostly small, but many that have gotten big companies like Apple, Amazon or Airbnb create products that we all know in love. Well, guess what each one of those companies started as an inspiration from one person may be a several people. Sometimes that inspiration even started on a cocktail napkin. Sometimes even the business model production started on a cocktail napkin. We're gonna come back to that concept of a blank piece of paper in a few minutes, starting to businesses fund. And for many people, it's the realization of a lifelong dream. If you think about it, it makes lots of sense. Wouldn't it be great to be your own boss, set your own schedule, maybe even create financial independence? That kind of inspiration. A lot of people call that passion really fuels you to get out of bed in the morning, But it also comes with a lot of responsibility. Like, for example, who do you hire? When do you hire? How much money will it cost to start something? How do you explain and justify what you're going to do to an investor or banker Or maybe most importantly, your life partner, uh, or a parent? Well, business model projections are an inherent part of quantifying your dream. And so today we're gonna do together, create a business model projection, and that process will be one that you'll be able to take forward. Fundamentally, we all know that predicting the future is very difficult, if not impossible. In fact, predicting the future is a job for some people like a weather person. When you think about what the weather person does, her real goal is to be approximately correct or in the business world. Sometimes we call this directionally correct, and the way she does that is she has a very sophisticated analytic model that she puts real data into our really maybe people that she works with at the data. But over time, that model becomes better and better and better inherently. That's really the same kind of process that we're going to pursue with a business model projection. We're going to create a model. We're gonna add data elements to that model. We're gonna look at those over time, hopefully get better data and make better decisions over time. Creating a business model projection is a path to navigating that uncertainty. It's a real tool that can help you again. Not exactly predict the future, but get better and better and better. And doing that well is a function off structure process, linear thought, asking good questions, getting good data, using that to get better data as you move ahead the following or some of the key questions that you'll need to answer end with the use of your model you'll be able to answer over time. How much money is it gonna cost for me to start my business? When will we break even? Who do I need to help me to do this? How do I attract customers? How much will it cost me to attract customers and so on? The primary building blocks we will cover today include your assumptions and the core metrics that you're gonna cover. You're staffing costs, your revenue drivers, your expense drivers, a very straightforward approach to net income, cash flow and break even and importantly, your unit economic equation, which is really kind of the building block that helps you determine at what level you need to become profitable, and we'll walk through the steps that we need to cover so that you could make these determinations for yourself. So let's start to dig in. 3. Basic Ground Rules: Welcome back. Before we get started, let's discuss a couple ground rules or things that you need to tell to think about in basic skills that you oughta have prepped for yourself. Number one. I already said that you don't need to be a math whiz, and that's really true, but you need to be facile with the basics. Addition, subtraction, multiplication and division. It's also gonna help you very much to be intellectually curious, particularly intellectually curious about your own process. You're gonna need to bring along some basic research skills, and you won't have to be have a master's in library science. But you will need to be comfortable talking to other people perspective customers, hopefully and using publicly available databases. Maybe going to the library, even calling the trade association. And the last thing I would say is that basic spreadsheet skills or familiarity would be really helpful If you're not, though, it's not a nonstarter. What I would recommend doing is going to the skill share class taught by L. Chen. Terrific introduction Teoh to basic use of Excel, and I think this will help you get on your way. So let's cover some key questions first of all, where do I start? Is this a company that already has some history? For our example, we're gonna pick a brand new business. But if you have history, that's OK. You can start just thinking about the future from there. Are you thinking about it from a top down perspective or a bottom up perspective? In a minute, I'll cover the difference between those two things. But basically top down just means what's the whole universe of my possible business? Bottom up is really who am I gonna sell to? Lastly, a really important consideration is what kind of business is this? Are you selling to other businesses, or is it a B two B? Are you selling directly to consumers like a B two C Is a retail or manufacturing or you actually making a product, or is it a software as a service business? Each of these different types of businesses requires a slightly different approach to modeling. I will show you a couple different examples, but for our business, we're gonna be both B two c and B two c b two b, and I'll talk about that in a few minutes. Okay, so I said we're gonna forecast from scratch. That means we're gonna need to come up with our assumptions, our core metrics, our, uh, unit economic equation. Uh, then we're gonna have to think about revenue drivers and cost drivers perhaps the trends that are inherent in our industry. Then we'll move on to creating a staffing tab and which are really, you know, fixed expenses. And I should mention that variable expenses will really be related to our revenue drivers. But we'll see those in cost of goods sold. So all of these are gonna be different components. And then finally, in our profit and loss tab, which is where all the information gets pulled together, we'll cover net income and a very simple approach to cash flow. Now, one of the things that if you do have some familiarity with accounting specifically, you may say, What are we going to do in a cruel or a cash based approach? We're going toe, actually produce or pursue more of a cash based a crow approach for today's class. And the reason is just to lower the complexity of what we're gonna talk about 4. Assumptions Model Structure: in this section, we're gonna cover assumptions and the basic model structure that we want to set up now a quick commercial for assumptions. Assumptions are absolutely the foundation upon which everything else that we do is built. There's an old saying in the venture venture capital community, which is that don't pay attention to the spreadsheet. Pay attention to the assumptions, and what they really mean when they're talking about that, is that you can find out more about what kind of an entrepreneur a person is. How smart and intellectually curious and passionate they are about their idea by looking at their assumptions because their assumptions really are not just fax because they're not facts. They're really the earthy sees. And those assumptions are the function of the relationship between the questions that they're gonna ask about their business, the answers they have today and answers they hope to get tomorrow. So focus on the assumptions. First, get those right and commit to improving them over time, and your business will flow from there and be relatively easy to model. So best practices first start with a blank piece of paper That's right. Get a blank piece of paper, pull it out and start writing down what you think is gonna happen with your business. Define your initial goal and the time frame that you hope to build your model around so your gold might be Well, I wanna watch the business within two months, and I need to be able to support myself on. And I'm going to give myself a year to do that. Or it may be a bigger, more ambitious vision. But whatever it is, make it yours, then start asking some really key questions. Who are we selling to? How often will they buy and at what price? How much would cost to make our products? How much money do we need to invest where we get that money from? Who's gonna help me do this? And what are we all doing as a team? Then you start doing some original research. So once you've created the questions, then you go out in the field and you start to get the answers. Your answers are going to come from a couple different places, and we're gonna We're about to talk about that. But let's focus on the market first. So I suspect many of you have heard the concept addressable market. There are a couple different ways to think about addressable market. A lot of people think about it as top down top down basically means the entire market that we could focus on Bottom up is really who am I gonna sell to? And when this graphic here literally just took from Wikipedia for our purposes today we're really gonna focus primarily on the target market. But let's talk about the definitions a little bit, just so everybody understands what we're really dealing with. Total addressable market, for example, is I'm selling oxygen. How many people can I sell too well? Everybody on the earth consumes oxygen or how many companies use electricity at what rate and what kilowatt hour? These air really big, broad definitions, and sometimes you'll look at your overall business opportunity and say, Hey, I know this is a huge opportunity because there are seven billion people in the world that breathe oxygen, and if I could just sells a little bit of oxygen to each one of those people, or oxygen to a small percentage of those people have a huge business. But in practical terms, you really have to start to think about who we can really sell to in a practical way, sooner rather than later. So the second smaller circle served available. Market is what we call kind of a steady state scenario. So after we've started, we've started to build our business. How big can we be? Based on our current available resources, this is what we call a served available market. But again, for our purposes, we're gonna focus on the target. Which means OK, we've done our planning. We've created our model. We've got our product who were going to sell to the current team. How will re reach them? In other words, what activity are we gonna engage in today to start making money tomorrow? Take a look at an example here of a company that and this was pre start up, did a very good and in depth Tam, Sam and target market analysis. This particularly company you'll notice is in the leisure travel space. The first place they looked was in the overall travel market. And you can see the research resource is that they used over on the right hand column in the middle. You'll see the served available market again. They have done good research here, but from a high level, and they've narrowed it down a little bit, too. Niche travel or a special group travel, but their target market are two segments that are smaller, but you can begin to see how they could actually sell to these segments. And these two segments are the Student Travel Market and the Bachelor Bachelorette Group Travel Market. What's interesting about this and you can begin to get the point about who were going to sell to is that in both the student travel market and the bachelor bachelorette market. They can actually go out and talk to real people. And every company that serious about doing what they want to do for achieving what they want to is gonna go out and talk to real people. So overall, our assumptions and our drivers include addressable market key customer behaviors like how frequently will they buy? Are they even interested in my product, the price point of the product, the direct costs to create that product? The relationship between these things helps you understand what your unit economics are, and ultimately what your break even point is in the business, how expensive it is to acquire a customer or what we call customer acquisition costs, frequency of purpose and overall startup costs for our business. Before we really dig into the rest of it, I want to talk just quickly about two ways to send up our model. One way is one tab for addressable market, one tap for unit economics, one tap for assumption and drivers staffing tab and then, overall, the profit and loss tab. Here's a simpler way to do it one tap that includes addressable market unit economics, revenue and costs. That's the overall assumptions tab, a separate tab for staffing and then finally, the profit and loss tab. And you'll notice here that for the purposes of today, we're going to ignore the balance sheet, and we're only going to include a very simple analysis or measurement of cash flow. And we're doing this mostly just to keep it approachable for everyone involved, and perhaps in the later in a later class or for your own research. You can go and understand that relate the better relationship between three cash flow statement having it be independent and a balance sheet. How that integrates with the profit and loss statement. Let's take a quick look at an example of a company that the person was trying to build a or start a retail location for beverages. And you'll notice here that what she did was she had some basic assumptions. Based on research, she did so Food Services Food service of Ty's been growing about 3 to 5%. That helps her establish a growth trend. Inflation on costs will be about 2%. Her goal is to maintain a gross margin of at least 35%. And you'll notice that she's estimating, after putting all these costs together for construction inventory, all this kind of stuff that the total start up capital she's gonna need is about $211,000. So this is a good example of someone who is really trying to start a business and the assumptions that she's made based on research that she's done to get into business. Here's another example of unit economics and assumptions back to our travel company. You'll see here that they're estimating that they can make $10 per flight. They sell $17 per hotel they sell overall costs and then down here, they've gotten to the point where they've done their break even already. But I just want to show this as another example of a company that's in a different space. 5. Example: Art Prints Company: Okay, So you remember that cocktail napkin we talked about in the beginning? Well, you don't have to use a cocktail napkin, but you should get out of blank piece of paper, and you should start to describe what you want to accomplish. And then you should start to create your goal and your vision and talk about the time frame and start to pick questions next. After you've spent some real time doing this. Set up your spreadsheet just like we talked about in the last section for my company. I'm going to do or create on art poster company. So we're going to sell reproductions off art that you could buy in any museum, shop or online from a handful of different companies. Our business. And I think I mentioned this before. We're gonna be both B two B, meaning we're gonna sell directly to museum shops and B to C, meaning we're also gonna sell online consumers from a cost point of view. We're gonna license artwork. That means we're going to incur royalties. So we'll license artwork from museums, probably from some artist foundations and maybe even from some third parties that represent museums or artists foundations to keep things simple. In this case, we're not going to manufacture ourselves, but we'll outsource to somebody else. So we're gonna outsource production and fulfillment. That would give us a relatively straightforward cost metric, and we're gonna forecast monthly for the first year. And we're only gonna do one year in this case. And I want to say one thing quickly here, which is that, um, everybody for the first year should always forecast monthly. And I like to do it for two or three years out because, as we said before, it's very difficult to predict the future. Forecasting monthly is challenging enough. All right, let's look at our basic and first cut at addressable Market. So I like to write a little narrative and I'm gonna read it here. Art Prints Inc is a fine arts production company production company. We make posters or reproductions of famous works of art, primarily seen. Museums are market is driven by normal demand for people buying wall decor and impulse purchases when a person goes to him exhibition and decides to purchase a reproduction online or in the museum shop afterwards. Therefore, our market is a part of the wall in court market and also is positively impacted by the number of people going to visit museums. So we look first at kind of what what environment or ecosystem do we exist in? This is really a top down look, so the wall decor market is about 60 billion in revenue, give or take. And again, you don't have to be too precise here, but you don't want to back it up and understand Thean destry that urine off that 2.5 billion approximately our final reproductions from a museum point of view, there are 35,000. Believe it or not, museums in the United States. This is all information that's readily available. They get 850 million visitors annually, which is a huge number. I was stunned by when I was in that, and they enjoy over half a 1,000,000,000 online visits. I did find it kind of curious that there were less online visits than physical visits. But hey, sometimes data is funny, but we're really focused on the art museum market there, 7000 art museums. So you see, what we're talking about here is we're really slowly drilling down into what our target market really is. We're not going to try to sell every single museum. We're gonna try to solve the art museums, right? Well, those aren't museums have 62 million visitors. So one of the quick things that I did and I want it, I want to point everybody out to calm. H is, I took it just a simple average for the number of visitors to all museums, which is, uh, you know, 35,000, 850 million basically gives you about 24,000 visitors visitors. And then I looked at Well, wait a second, If that's that number doesn't make sense. The number that I'm getting for art museums and I get 7000 art museums with 62 million visitors spread over them about 21,000. Okay, well, that makes sense. They're not exact, but that makes sense to me. You'll notice down below. I'm starting to think about unit economics, and we're gonna go there next. So, key metrics and unit economics. Now we're going to start to get to some actual real data. The equation for unit economics is a simple one. Price minus cost of goods sold that's COGSA plus royalty gives us our gross profit. Gross profit is actually the building block for break even for our company. And the only way we're ever going to get profitable is if we can scale enough units with enough gross profit to cover all of our costs. So for my example, I'm gonna presume that we can sell our posters on average for about $100 it's gonna cost us outsourcing. Remember, 40 bucks per poster, that's our cost of goods sold that were gonna pay on average, a 15% royalty on that $100. So 100 minus 40 plus 15 gives us 45 so you'll see below. I've created the equation. That's gonna help us determine how many prints we need to break even and to the right. What our customer acquisition cost is the repeat purchase behaviour or met percentage, the percentage of returns, referrals, customer lifetime value, and then a really important ratio for any company that sells online. The customer acquisition cost relationship to customer lifetime value. We don't have enough information to get this stuff. Yeah, but I'm just noting that these air metrics that we're gonna really care about as we move forward 6. Sales Revenue: now that we understand the market that we're operating in and have begun to create assumptions around unit economics and our break even, let's start talking about revenue. So how we're gonna be able to sell at what frequency and then the corresponding costs. So we know that we're going to try to generate revenue from two places. Be to be direct sales to museums and B to C selling museums to online visitors to I'm sorry , selling prints to online visitors to our own website. You'll see in the screen shot here that I'm proposing that we can sell one new museum a month. So in the first month we have one museum customer. But by my 12 we have 12 museum customers, and we're presuming we can sell 50 prints Teoh each museum for them to actually sell to consumers through their museum shop. From a B two c point of view. We're starting with 10,000 visitors to our website, and we're proposing that will be able to grow those 5000 month so that by the end of the forecast period, we end up with 65,000 visitors in our conversion rate from a visitor to a sale is 2%. So in the first month, if you do that math, 50 prints plus 2% of 10,000 prints, which is 200 gives us 250 prints under January. You can see that at $100 price point, we're going to do $25,000 in revenue in January, which would be great for the first month of a new business doesn't always happen. Sometimes you do better. Sometimes you don't. But that's why we're creating the projection so we can begin to test these and thes assumptions and determine whether they're realistic or not. By most 12 we will be selling 1900 prints that's possible for the holidays, right and generate almost $200,000 in revenue. What's the cost that's gonna be related to that activity? And let's just recognize that these air variable costs right. They vary with respect to the volume of revenue and activity that we're creating, and specifically to the number of products that we sell 7. Cost Drivers: so the cost to produce each print is 40 bucks in the world. He's 15% and we're presuming it will cost about 2% and shipping. Now shipping. I'm not including explicitly in our unit economic costs, because the likelihood is we can pass all or some of the that expense through to the customer. So let's set that aside for a minute, but still included in the cost. So 40 bucks, 15% royalty, 2% shipping gives us $14,250 in costs related to 25,000 revenue. That revenue minus three expense leaves us with $10,750 in the first month. You'll see it scales with the overall sales activity, and we have a gross margin number there of 43% on this activity. 8. Operating Income: Let's take a quick look at what all of this peers like when we put it all together. So number of museums, as you could see scales, number of prints as you could see scales, online visitors, conversion rate and so on and so forth. And then down at the bottom, you can see gross profit and gross margin. One of the great things about where we're at now is we have laid out pretty much all of our core assumptions for how our business needs to grow. But we don't have enough information to see what the business will really operate like yet , and we don't, um we don't really understand yet what are break even point is, or how much money will need to get started and what kind of cash resources will need to sustain ourselves until we're profitable. So let's move on to fixed expenses 9. Operating Expenses: from variable expenses. We're gonna move to fixed expenses, primarily staffing, but also other corresponding overhead. Let's cover staffing first because we gave staff in its own tab. Reason why we gave staff in its own tab is because there are lots of different assumptions we're gonna need to make relative to how many people when and who's going to do what, and it can get pretty complicated. So we're gonna try to keep it simple to start because we don't really have any employees yet, But we're gonna give ourselves the flexibility to make changes over time. Hence, that's why we've created our own tab for staff. So if you look here, I'm gonna presume that we have two founders the founder, CEO, and co founder of the VP of technology for the first couple months of operations were the only people that are gonna take a salary. And we all know in the real world of startups that there's a good chance we may not get to pay ourselves anything. But for now, we'll just be optimistic. In March of the third month, we're gonna bring on a customer service person because we have a lot of customers now and we need to care for them properly. In April, we're gonna add a programmer, and we're gonna add a museum relations and curatorial person. This is this museum relations and curatorial person is gonna interface directly with our museum customers and also help us pick new art. And so one of the things I'm beginning to think about in our business is how will the business evolved over the course of that 1st 56 months or maybe a year? And correspondingly, who do we need add? And at what rate? In order to keep our business working well, by June, we're fully staffed with a team of six people as we've added an accounting in HR resource. If you look down below, you'll see I've also included a benefits line. Now, benefits also in this in this scenario includes taxes and benefits likely includes local, state and federal taxes. The typical rule of thumb is anywhere from 20 to 30% depending on your you know, your business and the location that you are, uh, resident in. So I'm picking 25% and I'll just say that a important approach is and this is what most people do is we use a payroll service just to make sure you're in compliance on benefit issues. So now we're gonna go back over to our spreadsheet, and we're gonna look at expense categories that are related to our business. Thes air gonna be the fixed expense items related to our business. These air things like rent, equipment, hardware, software, dosing, subscriptions, office supplies, meals, office and equipment. I'm sorry. Office and equipment is the summary. Now it's hard to imagine every single item that you need and you're bound to forget one. But think about the things that are really obvious. So I know we're gonna have office meals, for example. That means that we're gonna pizza on Fridays and maybe beer Thursday nights on. We're going to spend about 100 bucks a week to do that marketing expense. And our business is also going to be really important. So trade shows and conventions, for example, I'm just presuming we're going to spend a total of $12,000 through the course of the year on trade shows now, rather than trying to put that in a single month from from our vantage point today, I'm gonna spread that out over the cost of the year, and I'm going to do the same thing with marketing, collateral advertising and promotions. That's in general public relations now. One thing I do want to point out is that online advertising, which is a very important part of our business, is the only thing here that I haven't really made a fixed expense. I'm gonna grow that and vary it relative to our revenue. And so if we look at the cell note here, you'll see our assumption is 5% off total revenues, which in March was $2750 over the course of the year balance of the year. It grows in relation to revenue, and I can tell you from great experience that it's never exact. It's always gonna change for those reasons and some others were not going to include it in our cost of goods sold calculation today, but we are going to include it and our overall marketing expense calculation. So now we have staffing and we have fixed expenses and we're just about ready to pull things together, 10. Net Income Cash Flow: Now we're looking at our live model. Let's go over to the P and L section. You'll see what I've done here is I've collapsed the CAW eggs and I've collapsed overall expenses so that we can talk about net income. Well, let's start with net operating income and then cash flow our net operating income, you notice. Based on the assumptions that we've made, we start out and we lose $18,000 in January. By the end of the year, we're making a profit. And although we lose a little bit of money for the balance of the year, as long as we can stay on this trend, we're going to be profitable. From this point forward, I've included a very simple cash flow analysis at the bottom, you'll notice in Line 53. We're assuming that we start with $100,000 in the bank. We lose $18,000 in the first month. So at the end of the first month, we have 82,000 left in the bank, which is also the balance that we start with in the second month. We lose 12,300 and so the balance after the second month is about 70 grand and so on and so forth. And the loss, this net income loss or operating loss really in our business is gonna go up and down a little bit based on the volume of that month. If we've added additional expenses like, for example, some new employees. If you remember, we added people in March, April and June, I believe. And then once we get to the middle of the month, I'm sorry the middle of the forecast period. We're gonna end up right around the zone where we think we can break even. And very interestingly. Now we can begin to analyze what are really break even point is in the business. So let's go back to our assumptions. What we've done is we've taken and you'll see the cell note above the revenue in August. That's PML Line 47. I think it's J 47 and we are looking at what the contribution margin is, and this tells us so. If our contribution or gross profit in our unit economic equation is $45 then we know that to break even, we need 1000 and 28 prints so going back over to the P NL at a total expense base in the 54 to $55,000 range. We're gonna need 1000 and 28 prints to break even. And if we include our advertising and we go down to marketing expense and we look at online advertising, we're spending in the range of $6000 a month. So adding that onto our assumption helps us to understand that our break, even including the advertising expense, is about 1200 to 1300 prints sold per month. That's a very important indicator for us, and a key reason why we went through all this work to build the model is to know at what volume we need to get Teoh to effectively break even and build a business and justify the risk that we've taken 11. Model Review: you'll remember that we said that beginning we knew we'd be wrong. The question is, how much? Well, one of the reasons when we built this model is to be able to make changes based on real data that we get and understand how that impacts our business. Thes air really called sensitivities, and if you build your model the right way, it's going to make it much easier for you. Teoh do sensitivities over time. So here's an example. What if, instead of being able to sell, say, 50 prints a month, we can only sell 30 prints a month, and, uh, we let's carry that across, say, for the 1st 9 months of the year. And what if our conversion rate, instead of being 2% is 1%? That's all feasible. Might be a little bit disappointing, but it's all feasible. So if that's the case, then maybe we'll keep it 2% in December. So now, making those changes, let's see what the impact ISS well before are Break even was in the July August time frame . Right now are break even isn't until December for break even isn't until December, and in fact we need more cash, right? So we now see a low point in cash. A $130,000. Probably. If we're planning properly, we're gonna put more cash or have more cash available than that. Maybe 150 or 200,000. This is a good example of the type of sensitivity analysis that you want to be able to do. Another way to think about it is ah, for example, what if it costs more? Or what if we need more people? Or what if we need fewer people? All of those changes are super easy to make. The way we've set the model of one other quick note. If you look at the model that we went through, the way we've designed it is I'm summing on a horizontal basis here. So all of these numbers are being summed in the cell note 0 22 Down here, though, I'm summing vertically, and the reason why we're doing it this way is because it makes it easier for us to do a quick spot check and find any errors or mistakes. Now it's not foolproof, but if you do it building a model yourself, you want to take little shortcuts, so this is one way to do it. And I also know that the way we've created the model, because we're using the drivers in the assumptions tab and the staffing tab and having those flow through to the P and L. It's easy for me to make these sensitivities and changes and have it flow all the way through, and my model is more robust over time. 12. Closing: thank you again for joining me today for my skill share class on business model projections . I hope you found this valuable and productive and straight to the point. As we said in the beginning, business model projections really are a way to quantify your vision or inspiration and how it gets turned into something of value in a way that you could easily show other people. We've talked about a very straightforward approach that starts with articulated your dream , doing appropriate research and then organizing all of that in a way that is easy and straightforward and linear fall through. So the final thing I want to talk about is just give you some tips to keep in mind as you do this for yourselves. So first assumptions are the foundation of everything. Invest in the your assumptions. If you've got any trepidation all about, is in the spreadsheets and excel in particular goto the skill share class that Al Chen is done. He's actually got three of them, at least that I saw on using Excel in their terrific. Then focus your model on approach on Bottoms off. That means build from sales. Who you specifically you're gonna self, too, and don't focus on market share. Use the tips that we talked about to set up a worksheet so that it's easy to follow. And after you get the information together, it's easy to perform sensitivities like that ones I showed you. Use the some cells in your sheet to do quality control in accuracy. Check. When you're building spreadsheets, there could be a lot of detail, and everybody make makes mistakes so these some cells can help you quickly identify where you where you may or may not have made a mistake. Don't make it too complex at first and keep that format in simple Aziz. Well, one of the great best practices is to put the whole sheet together before you really try to make it look good. Lastly, commit updating monthly, the more you come back to it more familiar with it, you'll be more comfortable. You'll be Morial import rial data from what you see in your business, and the more accurate the overall tool will be over time. So again, best of luck. My name is Brendan Bones, and we'll see you again soon.