A Comprehensive Service Business Financial Model
“What will happen if I acquire a new customer?” was one of the questions that Steve wanted to answer. At first glimpse, the answer seems to be obvious and positive. However, a closer look and consideration of different factors revealed some potential pitfalls.
The addition of a new client leads to the increase in stock and for accounts payable. Moreover, all clients pay for the services provided with different delays that can be up to 90 days. At the same time, Steve has to pay his contractors on other terms, which can be 20 or 30 days. Thus, there is a need to check if acquisition of a new customer won’t lead to the lack of working capital, and as a result the lack of money in Steve’s account.
Our service business financial model allows Steve to analyze and simulate his relations with the customers and manage his cashflows. Furthermore, it provides calculations on the average monthly revenue by customer, and allows forecasting the revenue generated by each client during specific period of time.
Seasonality
Here is another interesting feature of the model that I created for Steve. The model takes into account the impact of seasonality on the amount of monthly sales during the year. Thus, the whole model can be adjusted to the average amount of sales that can vary from month to month. There is a great ability to switch between the scenarios, with regard to the time of the year, on the dashboard.
Summary
As you can see, we did a great job with Steve and created a very interesting and effective tool to control his business. I hope some of the features described in this article will help you build a more holistic business model and consider a wide range of factors that play role in your company’s growth. Should you have any questions or comments, feel free to contact me here or in the comments section below.
Originally published at new.finmodelslab.com.
