Starting with the financials is far from being the cup of thee of entrepreneurs. However, it may be easier than you thought! Ask yourself key questions regarding the sales generation. It will help you to challenge your business model and at the same time to fill in main items of your financial plan. Good luck!

1. Financial assumptions
Step 1: Sales
12/09/2013
Azèle Mathieu
Rodolphe d’Udekem d’Acoz
Business & Finance Advisors @ BEA

2. Step 1: Sales
2
Sales?
What?
cfr. Value
Proposition
When? How much? Price?
Cfr. Revenue
streams
How?
Cfr.
Channels

3. Step 1: Sales – How much?
• Total Addressable Market (TAM)
– Bottom-up from primary market research
– Validate top down: Economy > Industry > Market >
Segment > … > Your business
• Market share?
– Top-down : TAM x market share
– Bottom-up : Resources x ‘Usage’ (preferred approach)
Combine both approaches
• Growth rate?
• One-off/recurring/bundled sales?
3

4. Step 1: Sales – How much?
TAM
4
TAM: 750M€
Identified similar
customers: 40
Initial 10 customers
potential: 15M€
Life Sciences Devices:
350B€
FCM: 1,5B€

5. 5
(a) 1 million people 1.000.000
(b) restaurant 2.000
(c) restaurant / 1 million people 2.000
(d) 25% target (25-40) 25%
(e) 2 orders per month 2
(f) orders / months 500.000 (a x d x e)
(g) orders / month / shoes shop 250 (f / b)
(h) order average 25 €
(i) margin 12%
(j) Tageted market share 30%
(k)
Targeted orders / month /
shoes shop
75 (g x j)
Can you really
make it?
Step 1: Sales – How much?
Top down approach

6. 6
2013 2014 2015
Sales Volume
Number of sales
representatives
0 1 3
Number of restaurants 100 300 900
Daily Orders per restaurant (Orders)
3 3 3
Total Daily Orders (Orders)
300 900 2.700
Total Monthly Orders (Orders)
9.000 27.000 81.000
Total Annual Orders (Orders)
109.500 328.500 985.500
Will they
achieve it?
Still
profitable?
Step 1: Sales – How much?
Bottom up approach: what can you really achieve?

7. Step 1: Sales – Price?
• Pricing of alternative solutions
• How much is the customer ready/willing to pay?
Quantified value proposition
• Price:
– Not too low
– Not too high
– Coherent
• Evolution of the selling prices?
7

8. 8
MBA BP 2013 – Business Planning (for
entrepreneurial ventures) INTEGRATIVE
COURSE - 6.0 ECTS
Step 1: Sales – Price?
Quantified value proposition

9. Step 1: Sales – How?
9
• Sales map process
– Sales channels:
• Direct?
• Indirect?
– Impact on the cost of customer acquisition (COCA)

10. Step 1: Sales – How?
10
Alpha C

11. 11
Target
Calls
Meetings
First sale
€?
Step 1: Sales – How?
Cost of Customer Acquisition

12. 12
Month 1 Month 2 Month 3 Month 4 Month 5
# calls/day 10 10 10 10 10
# days 10 10 10 10 10
# calls/month 100 100 100 100 100
% met persons 20% 20% 20% 20% 20%
# met persons 20 20 20 20 20
% acquired customers 10% 10% 10% 10% 10%
acquired customers 0 2 2 2 2
time to close a deal 1 month
customer base 0 2 4 6 8
churn rate 25%
customer leaving 0 0 1 1,5 2
net customer base 0 2 3 4,5 6
Step 1: Sales – How?
Cost of Customer Acquisition (COCA)

13. • How much resources (time, €, HR) does it require?
• Includes unsuccessful prospects
• To be taken into account in your P&L, CF
• Essential step for your sales assumptions
• Choice of channel financially sustainable?
13
Step 1: Sales – How?
COCA

14. Step 1: Sales – How?
COCA & Life time value of an acquired customer
• Cost of Customer Acquisition (COCA)
• Life time value of an acquired customer (LTVOAC)
Compute
Monitor over time
Impact on:
‒ Business model (VP, distribution channel,…)
‒ Cost structure
‒ Pricing decisions
14
COCA = Sales & Marketing Costs / Customers
LTVOAC = revenue over life time x gross margin

15. • Lifetime value of a gym member who spends €20 every
month for 3 years?
• €20 X 12 months X 3 years = €720 in total revenue (or €240
per year)
Allowable acquisition cost?
How to optimize LTVOAC?
Discount while managing CF
…
15
Step 1: Sales – Price?
LTVOAC: example
Source: www.entrepreneur.com

16. • Rule of thumb*
• Depending on the industry and the period
16
LTVOAC > 2 COCA
Step 1: Sales – How?
Link between LTVOAC & COCA
(a) order average 25 €
(b) margin 12%
(c) targeted orders / month / restaurant 75
(d) Restaurant Acquisition Cost € 500
(e) Restaurant Lifetime value (5 years) € 13.500 (a) x (b) x (c) x 12 x 5

17. Step 1: Sales
• Probably one of the most important parameters … and
certainly the most difficult to estimate !!
• Consider different (sub)categories of products and/or
services
• Consider the volume of units (products/services) sold and
the respective selling prices
• Outputs
– Per product (category)
– Per client / market / segment
– Per channel
– Combine ?
17

18. Step 1: Sales
• Gross sales or Net sales (e.g. after commission, bad debts…)
• Consider the initial volumes and the growth rates for each
line of products/services without forgetting potential
seasonality and potential evolution of the selling prices
• Do not forget potential delays and lower (initial) volumes &
growth rates than expected !
• Consider the sales without VAT (unless you do not
recuperate it !)
18

19. Step 1: Sales
• The sales data should be based on tangible elements and
hypothesis directly linked to the business plan
• In no circumstances should the volume of sales be based
on the costs …
« spontaneous sales creation » in order to achieve break
even or benefit on paper does not help and could
possibly endanger your credibility in the eyes of third
parties
• To keep in mind:
– User friendliness, avoid too much items
– Internal logic : price, discount, cost of sales, payment
conditions… & cycle
19

20. L’Agence Bruxelloise pour l’Entreprise peut vous
aider pour le lancement et le développement de
votre projet d’entreprise, et notamment pour son
financement, via ses différents canaux
d’information, via ses conseillers
et via son réseau de partenaires.
ABE – Agence Bruxelloise pour l’Entreprise
Tour & Taxis, Avenue du Port 86C, 1000 Bruxelles
Tél: via le n°régional d’aide à l’entreprenariat : le 1819
www.abe.irisnet.be - www.entreprendreabruxelles.be
www.ecosubsibru.be – www.monstarterkit.be – www.brutrade.be
info@1819.be - info@abe.irisnet.be
AGENCE BRUXELLOISE
POUR L’ENTREPRISE