Assignment Problem: FP&A Modeling Exercise
Section 1: Cash Bookings (sales) Model
Based on the following information build a month over month forecast of the next 3 years cash bookings (2020, 2021, 2022)
For the sake of simplicity, assume we are on 1/1/2020 and there are no bookings coming from pre-2020 cohorts.
New users (free subscription)
Company acquires new users through 2 channels:
- Paid acquisition: we spend $500k per month at a $10 CPA
- Organic: as of today we acquire 50k users per month thanks to word of mouth and Press Releases (PR). Volume of organic account is growing by 2% every month on average.
Premium conversion:
Premium subscription is sold at $60/year (only 1-year subscriptions available).
10% of organic users convert to premium within 12 months.
5% of paid acquisition users convert to premium within 12 months.
Renewal rate:
Premium users from all channels renew at 80% the first time they are up for renewal; 90% the second time.
Section 2: GAAP Revenues Model
Based on Section 1 results and using Saas revenue recognition standards, build the forecast of company's GAAP revenues for the next 3 years.
Section 3: Cost of Goods Sold (COGS) & Gross Margin
In COGS we currently have:
- Transaction fees: 5% of GAAP revenues on average and pretty stable over time
- Hosting costs: 5% of GAAP revenues as of today. Thanks to scaling benefits, this % has decreased over time, it was 6% a year ago and 8% two years ago.
- User support: 5% of GAAP revenues and pretty stable over time.
Build the forecast of COGS, Gross Progit and Gross Margin % for the next 3 years.
Currently user support is done by an external team (this external team is what is covered by the 5% of GAAP revenues mentioned above).
In order to improve the quality of our service, we want to hire internal user support agents. This will come in addition to the cost of the external team.
Internal user support agents cost $50k / year.
At any point in time in the next 3 years, how many internal user support agents can we have if we want to maintain gross margin at or above 80%?
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Attachment:- Modeling Test.rar