Archives for August 2014

Financial Modeling for Revenue Share Loans

August 28, 2014 by Adam Hoeksema Leave a Comment

This week we released a new feature on ProjectionHub to support an innovative financing model that many small businesses are now utilizing. Our tool now supports financial modeling for revenue share loans.

How do revenue based loans work?

A business will borrow a lump sum of money, let’s say $100,000. Then each month the business will repay the lender a predetermined percentage of monthly revenue.

What percentage of revenue must you repay on a revenue share loan?

Typically, you might be looking at between 3% and 7% of monthly revenue as your repayment.

How long do you have to keep making payments on a revenue share loan?

Typically, you make monthly payments until you reach a maximum repayment which could be 1.5 times the original loan (in this case $100,000 x 1.5 = $150,000)

At ProjectionHub, we became aware of this financing solution through our partner LocalStake. LocalStake blends crowdfunding with revenue based lending. Many individual lenders can all come together and put their own funds behind a local business. LocalStake closed their first deal in August of 2013 and since that time 5 companies have successfully raised over $1 million using the revenue share structure.

Advantages of Revenue Share Loans

According to Lighter Capital, one of the leaders in revenue based financing, this unique security can provide some distinct advantages over traditional bank loans and equity investment.

Ownership is not diluted
Repayment is flexible, if revenue goes down during a season, so will your payment
The lender is aligned with the revenue growth of your business
Business owners won’t be pushed for an exit like they may be from traditional investors

According to Ryan Flynn, one of the Founders of LocalStake, “Revenue share can work well for certain types of business because it creates a unique incentive structure for investors. While its technically a loan, investors can participate directly in the potential upside of the investment by being customers and advocates of the business. The more they help the business by buying their products and telling others to buy their products the more revenue the company makes which ties directly to the investor’s rate of payback. For the business, it almost functions as a marketing tool in addition to a financing option because investors are incentivized to be repeat customers and drive others to the business”

At ProjectionHub we think this is a very powerful financing tool for many businesses, so we are excited to release this new feature which will allow users to create financial projections that include revenue share loans in addition to traditional loans and investments. Check out our financial projection web app here for free.

Projecting Startup Costs for a Mobile App

August 6, 2014 by Adam Hoeksema Leave a Comment

At ProjectionHub we have new mobile app developers utilizing our mobile app business financial analysis template every day to try to create some basic projections for potential investors. One of the common pieces of feedback I hear from this crowd is that they don’t know how much it will cost to develop their app, so they don’t know how much to budget in their projections.

Recently I came across a really nice tool to help first time or even experienced mobile app developers get a handle on how much it will cost to develop their app. The Calculator is offered by Otreva and walks you through the process of coming up with a quote for your app.

One very important feature is on the first page their is a button that says “Stats” if you click on that it will show you some really helpful benchmarking data. For example you might be wondering whether you should bother developing your app for Windows Phones, the Stats page can tell you what percentage of developers are releasing an app on Windows Phones.

The Stats page can also show you what percentage of apps have different features like a bug tracking system, user profiles, and payment system.

Once you start to go through the process here are the questions you will need to think through:

What platforms will the app need to be built for?
What features will the app have?
What features will the administrator need to have?

Once you add all the needed features, you will arrive at a total estimated development cost like this:

This is a great tool, and based on my experience developing ProjectionHub, I think the estimates seem to be pretty reasonable. Of course prices may vary, but this is certainly a great place to start.

A Quick Way to Project Startup Costs and Breakeven

August 2, 2014 by Adam Hoeksema Leave a Comment

Intuit recently came out with a quick and easy tool for startups to quickly project their startup costs and breakeven. It may be a good resource for companies that don’t need the full detailed monthly financial projections that ProjectionHub can provide. I do think it is probably faster than our tool for a quick snapshot of your breakeven and startup costs. Check out this short video to learn more:

I think if Intuit continues to develop this tool, there may be an opportunity for ProjectionHub to integrate for startups that need additional detail in their projections and the ability to download an Excel file with monthly Profit and Loss, Balance Sheet and Cash Flow projections for potential investors. What do you think?