The numbers behind the plan.
WHAT IT MUST DO
Show whether the business works, and when.
WHAT TO BUILD FROM
Assumptions, stated explicitly.
WHAT ASSUMPTIONS TO STATE
How customers are acquired, and at what cost What each customer is worth How many stay Price Cost of delivery Fixed costs Timing of payments
WHY EXPLICITLY
They are what is actually being debated, and they can then be tested.
WHAT TO BUILD UPWARD
From units: customers, orders, jobs.
WHY NOT FROM MARKET SHARE
Percentages of large markets are not a mechanism.
WHAT TO SHOW
Revenue Direct costs Gross margin Fixed costs Profit Cash, monthly
WHY CASH SEPARATELY AND MONTHLY
Businesses fail from cash, and annual figures conceal the troughs.
WHAT TO IDENTIFY
The lowest cash point When the business becomes cash positive How much funding is required to reach it
WHAT TO ADD
A margin, because it will be worse than modelled.
WHAT TO BUILD ALONGSIDE
A conservative case.
WHAT TO ASK OF IT
Whether the business survives.
WHAT TO TEST
Which assumption changes the outcome most.
WHY
That is the one to validate before committing.
WHAT TO AVOID
Costs that do not grow with revenue Omitting your own salary Growth with no mechanism
WHAT TO UPDATE
The model, against actual results.
WHY
It is how the next forecast becomes accurate.
