Freemium Model with CaC Payback - 5 Year Forecast
Originally published: 27/07/2018 09:10
Last version published: 27/01/2022 15:03
Publication number: ELQ-72267-4
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Freemium Model with CaC Payback - 5 Year Forecast

Forecast a 5-year financial plan based on logic specific to the freemium strategy. Includes 3-statement model / cap table.

Model updated with fully integrated 3-statement model, cap table, and better global assumptions.

The freemium strategy has many variations, but in general it means you give customers a service for free but with ads and then there is an ability for the user to pay a monthly subscription to remove the ads and/or pay for a premium service that is better than the free version.

This creates a lot of opportunity for new services that might have a hard time getting in the door with a monthly subscription up front. Instead, users can experience the service in exchange for having to view ads now and then. It has worked for a lot of organizations.

The logic is specific to planning for these variants. You can determine expected impressions per user per month, conversions of traffic to your free service / paid service and movement to and from the paid and free services.

Logic also exists to determine start dates of traffic/free/paid services. There is also churn logic.

The expense logic allows you to easily categorize G&A, S&M, COGS, and R&D and define those costs on a monthly basis over 5 years as well as determine the start month for each line item.

There are also variable costs that exists so you can adjust some marketing / COGS items base on them being a % of total revenue and/or a specific $ cost per user.

A lot of visuals and an executive summary are included to show you the primary financial summaries at a glance.

The model does go as far as to estimate taxes and depreciation if needed. If not, those can be 0's out to get down to a free cash flow.

The equity requirement is an auto-fill that calculates based on the minimum monthly cash position considering all assumptions.

Key Ratios Included:
1. CaC
2. LTV
3. CaC Payback (months)
4. LTV to CaC ratio
5. Debt service coverage (if applicable)

This Best Practice includes
1 Excel template and 1 tutorial video

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Further information

Forecast out cash flow and key expected performance figures .

A business that has ad revenue combined with a subscription service.

Non recurring revenue models.

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