First of all we need to understand that every business has it's particular financial model, there is no one-size-fits-all. Mobile apps are no exception. What are the particularities of a financial model for an app startup? If we can identify the differences and the key unique things than we can create a perfect financial model, luckily, we at Sturppy already did this for you. Since we are app developers too, we understand how to create actual financial models that reflect the reality at their best. Let's learn how to create a financial model for your new startup.
To make things easier, we decided to split the creation of the financial model in different parts. Each part is used to configure a particular part of your financial model, at the end of these five simple steps you will have built your financial for your mobile app model from scratch without you even knowing it.
A mobile app lives and dies by the number of it's users. Let's see how to create a complete and realistic user projection in your financial model in a quick and easy way.
You need to bring people to your app, you need to make your app known. These is where you will configure how you will drive traffic to your app.
As you can see from the image, there are four main variables that you need to set:
As you can see, after you have entered these numbers, the platform will automatically generate the projections for the user acquisition of your app.
You may be seeing more inputs and some extra parameters that you can set, but for now you can ignore those, we will see later how to use Sturppy to create your financial models to it's fullest.
Unfortunately not all the users that download your app keep it, we hoped that they did, but most of them uninstall the app after it's first use. Of course this is a great area for improvements.
This time you only need to configure two variables:
At the end we have an accurate projection of your userbase. In this example we can see that at the 12th month, we will get 3.100 new users, lose 2480 users for a total of 9.920 active users in month twelve.
This is a very important part of your financial model. You can decide what part to configure based on the monetization of your app. If you have multiple monetization models you can add them all.
If your app makes money by displaying ads to your users. This is the most common around free mobile apps, giants like Instagram and Facebook use this business model. In your case, you will use a third party service like AdMob or Facebook Audience Network.
Everyone most hated and loved monetization method. If you sell unlockables inside your app you can configure them here. These are items that you buy once or multiple times, not subscriptions. If you have subscriptions then go to the next section.
Very similar to In-App Purchases, but the customers are brought along in the next month since they are subscribers and will pay you monthly (if you receive payments annually, just divide your cost by twelve).
And very easily you have configured the revenues for your financial model, combining different businesses models. Of course if you have one you can use it alone.
This is the last step in creating the financial model for your mobile app startup. We now need to configure the expenses that you have to sustain and everything is done.
Cost of Goods Sold. These are costs that are directly linked to the selling of your product. In a mobile app you don't have many they are mainly for physical goods, but you can't ignore them.
We at Sturppy have identified the best COGS for you to track while creating the financial model for your mobile app.
Selling, General & Administrative. These are the cost that are intrinsic of running a business, also called OPEX (operational expenses). These cost are not directly related to the selling or use of your product. A good way to understand the difference with COGS is that SG&A are costs that even if you are not selling anything and no one is using your app, you still have to sustain.
The marketing budget that you defined in the User Acquisition section, is automatically added.
Capital Expenditure. The costs that you have to sustain to buy assets that are needed in your startup. The basic example is computers, but you may need some specific software that you have to buy.
With this all the expenses are configured and nicely projected. Of course this is just a simple model, but you can easily configure it to make it more complex and more specific to your startup.
After these three simple steps you have now configured everything you need to create a financial model for your app startup. Let's see what Sturppy generated for you (all the dirty work).
This is flow statement that is used to track your revenues, expenses and calculate your margins and net incomes.
How your assets compare to your liabilities.
How much cash are you producing. Cash is King.
As you can see creating a financial model for your startup is very easy with Sturppy. You just have to concentrate on your metrics and on your product while we do the rest, no need to learn accounting or finance.
This was just a basic example, but you can configure much more in the platform like debt, taxes and incremental increases. Also you will find explanations in the platform in every page and useful suggestions when creating assumptions for your financial model.
If you like Sturppy and want to give it a try for free, sign up today!