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Startup Financial Model example: Slidebean (actual) earnings and expenses ?

Startup Financial Model example: Slidebean (actual) earnings and expenses ?

This is not clickbait. In this video, we are going to review the
full financials of Slidebean for our most important year: the year when we raised our
first $250,000, the year when we grew our subscriptions by 800%. As much as we are open and transparent about
many things, we can’t release detailed financials for our current company stage- but 2015 was
a while ago, so we are OK with you digging in through our numbers- I will be linking
this spreadsheet in the video description. We’d like you to pay close attention to:
How a financial model looks. How a startup distributes its expenses. How much money is required to get a company
off the ground. A reality check, on the struggles you will
have to endure as you start your first company. Without further due, here’s Startup Financial
Model: Slidebean’s 2015 financials. Just in case you are new here, I co-founded
Slidebean with these guys back in 2013. Slidebean is a pitch deck platform for startups. We have an AI design platform that designs
your slides for you, or if you are looking for more advanced, human help, we can also
get involved in writing the slides for your deck. Alright, so we got together, bought the
domain on May 2013 and started working on the platform. We held part-time jobs and managed other projects
between 2013 and 2014 to pay our bills. In 2014 we got accepted in Startup Chile,
an accelerator in Santiago that gave us $35,000 and allowed us to dedicate all of our time
to the platform. Later that year, we also went to Dreamit Ventures,
an accelerator in NYC. We leveraged the Dreamit Network heavily to
get into investor conversations. The presence in New York was also crucial
towards getting the launch of the platform covered by the startup press… Finally, we joined 500 Startups in the winter
of 2014, raised $75,000 from them and closed an additional $250,000 from a mix of investors
in New York and San Jose. Our financials at that time were… complex,
and indeed not well documented. Some money came from consulting projects we
took, which were unrelated to Slidebean, so it’s not necessarily a great example for you. If you haven’t done so, you should look into
our founder’s agreement video, to get an idea of how to manage money at such an early stage. But again, by February 2015, we had money
in the bank, and we could start spending more aggressively- so here’s the breakdown. We started the year with $1,178 in subscriptions,
and we closed it with $16,197. We generated a total of $113,535 in revenue
and spent $313,685. Yeah, that’s why startups raise money, because
turning a profit your first year is hard. Before we dig deeper into the document,
let me explain briefly how a startup financial or any business financial model works. A financial model is usually split into SG&A
(Selling, General, and Administrative Expenses), COGS (Cost of Goods Sold), Revenue, and CAPEX
(Capital Expenditure). In our case,
COGS: holds all of our server costs essential to the business. This includes AWS as well as any other platform
or tool that the Slidebean platform needs to operate correctly. CAPEX: we use mostly for equipment: office
furnishing and computers. When you buy a company laptop, you are not
spending the money but putting it into an asset, so for financial purposes, this works
somewhat differently. There’s depreciation and a few other things that get calculated here. SG&A has all of the other expenses, including
team, marketing costs, rent, insurance, and services the organization needs to execute
its tasks. Finally, the Revenue sheet not only has our
final revenue metrics for the month but our financial projections. We have iterated over different formulas to
calculate our future revenue. As a SaaS business, we can somewhat accurately predict how much renewal revenue we are going to make on a given month, based on historical retention
rates or churn. For future months we estimate our revenue based on that and on our marketing spend. We have a formula that estimates the dollars
earned in revenue per dollar spent in marketing, including team, ads and so on… if on the
SG&A sheet we scale the marketing budget, we see that reflected in the future estimated revenue. This formula assumes, of course, that you
can scale your marketing budget with the same efficiency. It would be a bold statement to say that you
can triple your spend in marketing and see that reflected in your revenue proportionally- but you can make small, percentual
monthly increases while adding a variable to predict that more spend will be less efficient. Or your cost of acquisition will go higher. Another formula we use is the support staff
required depending on the number of customers. You can estimate that you will need to hire
a new support person for every 1,000 new active customers you have on the platform. So as your subscriber base scales (based on
your predicted increase in marketing spend) so will your estimate expenses to support
that user base. You can apply a similar formula to server
costs and other platforms and all the stuff in the financial model. Calculating all this is rather complex, and
every business will need a different formula, but estimating this correctly will allow you
to spend your budget more efficiently. Knowing what will happen or being able to estimate it accurately, in the next few months
lets you choose when and how to scale your team and your growth efforts without endangering
the company. Now, back to our own financials. We closed $170,000 of funding in February
2015. Thanks to the fact this was a convertible
note (go watch our video in convertible notes), we collected the first $170,000 in February and an additional $80,000 in May. Yes, at this point I had never seen so much
money on a bank account I had access to. Let’s start with SG&A. We spent around $146,000 in payroll that year; which includes wages and payroll taxes. Founder salaries were close to $93,000 for
the year. You can quickly guess that we allocated about
$2,500/mo per founder, or around $30,000/yr. Figuring out founder salaries is hard, and
negotiating them with your investors is hard as well. The wage of a founder needs to be enough,
so you don’t have to spend time worrying about your salary. It’s also important to understand that this
should be good enough to get by, but not to save money. Your ‘savings’ as a founder are the stock
you own in the company, and it increases in value based on the effort you put in. During this time we were partially based in
Costa Rica and partly based in California and New York (we were exiting the 500 Startups
accelerator). If it works as a reference, the minimum wage
in Costa Rica at that time was around $700/mo. Whenever we had to spend time in expensive
cities, we had a small adjustment to cover the extra cost of staying in the city. Being based in Costa Rica has been, by far,
one of the core reasons for our success. We have been able to attract great talent
at a fraction of the cost of hosting those teams in the US. They are not an outsourced or remote team,
but fully embedded in our company culture thanks to our local office. It was only until late 2015 when we were able
to scale our organization. Our logic behind this was that we wanted to
prove our ability to scale our user base, and we did. Once we projected good revenue for the months
to come, we allowed ourselves to hire new team members. If you look at the financial model doc, you’ll
also find team members that made more money than me. That is totally fine at this stage. You, founder, are betting it all on this company
to grow and you have the upside of being a majority shareholder. If you want to attract talented people, you
are going to have to pay them market salaries. We spent about $83,000 on paid marketing,
plus an additional $4,000 on platforms or tools directly related to marketing. We separate those tools from the rest of the
services we use to calculate a full cost of acquisition for the month. While we track the effectiveness of each campaign
individually, it’s essential to know the average cost of a lead and a customer, taking into
account everything from the ad cost, to the team executing the ads and the tools they
used to work. Not a lot to add there, you’ll find pretty
standard business expenses. You’ll see some legal costs in the model,
mostly related to the documents needed to close the round. Equipment is another highlight worth mentioning. We, founders, had to upgrade our laptops in
the process, and spending $2,500 on a new MacBook Pro was an unjustified company expense
when we could have gotten along with a cheaper version. So the company bought the laptops, but we
paid the company back in monthly installments. If you are an e-commerce platform, the cost
of the things you sell would be calculated here. Since we are a software platform, we only
include server costs, which allows us to calculate a gross margin for the cost of running the
platform vs the revenue we get. This is not a real gross margin since the
platform also needs human beings to operate, to provide support, and so on… but you can calculate
an adjusted margin if you include the cost of the support team and the marketing costs. You’ll find a lot of KPIs on this sheet, most
of them are quite specific to SaaS, or are used as part of our formula to estimate revenue. A lot of this data comes from ChartMogul or
from Baremetrics- so Excel is mostly for monitoring and a future revenue prediction tool. Some points worth mentioning: Days in the month: when you are making $5,000
a day, it makes a difference if the month has 30 or 31 days- or you know, 28. Another useful metrics is the 3, 6, and 12-month trends, which are another good way to determine how things are moving forward and to implement those numbers in your future
projections. Alright- once again, you can download our
2015 financial model on the link in the description. As always, if you are one of the first 25 people to sign up to the platform, you will get 3 months free on Slidebean on any plan. Finally, a new feature is: we are going to be holding weekly live sessions answering the questions that we’re getting through the week. Subscribe. Leave any other questions you have in the comments and we’ll see you next week.

  • Caya, you and the Slidebean team are putting out practical and awesome content for aspiring startups. Pulling back the curtain on your early financials really gave me more insight into what happens on 'the other side' regarding finances.

    Thank you for the value you're added to the community. Continue being awesome.

  • Great content. I just wanted to ask you how much equity one is expected to lose at your stage, not you specifically but in general.

  • Very useful, Thanks for sharing…. I'm working on my startup as well….
    btw, How can i get the 3 months free subscription?

  • Thanks a lot for all the videos you are putting in. I have a few questions regarding my startup and I am shooting one here.

    As a Solopreneur, how can I find my early-team when the startup has no-funds and no-product. I don't have a big circle and I talked to hundreds of people on LinkedIn but that didn't help either. What should I do to build a team before building a startup?

  • You guys should make a video on trademark and patents especially for people from other countries that want to incorporate a startup in america

  • Hello! First off great Videos! Being a start up related to Bakery and coffee shops (Also Fast moving Consumer goods), does it make more sense to analyse monthly trends or yearly trends. Also should the accounting be focused on monthly data or yearly data? Thanks

  • How do you guys negotiate the salaries of founder and co-founders as the profit grow bigger? I can see initially all get the same amount. But as the startup grow bigger, I think the responsibility and work load of everybody start to differ. Secondly, when do you guys change it? Do you revise quarterly, or annually?

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