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Creating a Financial Model for Digital Courses

Sturppy allows you to create the financial model for any business that sells courses or consulting.

Creating a financial model for a Consulting or Courses business is very easy with Sturppy. The steps that we will follow are the standard ones for creating a financial model: defining customer acquisition, configuring the revenue and finally listing the expenses.

Step 1: Defining Customer Acquisition

To create a customers acquisition projection navigate to /Users/Acquisition, here we will define how we are going to get new customers.
Here we can add different traffic sources that will bring in traffic and, in turn, customers.

When adding a new traffic source you can define:

  • Name: this is the name that you assing to this traffic source, we suggest you use the marketing channel where you are going to advertise on, like Facebook Ads, Google Ads or SEO.
  • Paid or Free: this is the type of the traffic source, either paid or free. A paid traffic source is any source that requires a direct investment of money.

Then, based on the type of the traffic source you decided, you have to enter:

Paid

If you want to add a paid traffic source, then you have to define:

  • Monthly Budget: how much you are going to spend each month on this traffic source.
  • CPL (Cost per Lead): how much each lead from this traffic source will cost you.

It is possible that you already have a traffic source called Marketing. This is completely fine. This source was created when you followed the steps in the onboarding to create your first financial model. You can keep it, edit it or remove it and add a new one.

Free

To add a free traffic source, you need to define:

  • Organic Monthly Traffic: this is how much traffic you are generating every month. Depending on your source, this could come from your social media presence, SEO, content, word of mouth or others.
  • Conversion Rate: the percent of free traffic that becomes a lead. Since this is free and not very targeted traffic, conversion rates are usually low.

At the end we will calculate the number of leads that you are going to receive.

Paid Leads = monthly budget / CPL
Free Leads = monthly traffic * conversion rate

You can add as many different traffic sources as you want.

Free traffic

Be carefull when adding free traffic sources. You can easily be over-optimistic and tilt your projections.

Free traffic can come from an existing social media presence, PR, SEO (this requires time) and other sources.

Step 2: Configuring the Revenue

When configuring the revenu for a courses business, you can decide between a recurring model (subscriptions) or a single time purchase.

To start configuring your revenue go to /Revenues/Courses.

Courses

Here you can enter the data for the conversion of leads to paying customers and all the courses that you offer. You can also mix and match different revenue models (some recurring and some single purchase). To learn how to configure your courses with more detail click here.

Step 3: Listing your Expenses

For the final part we will add the expenses to the financial model. Adding expenses is super important and should be done with great attention to avoid missing key expenses that could turn the startup upside down.

The expenses for a Courses business are mostly associated to human resources. We will go over each expense that you can add, but you can always go in more detail on the ones that you are most interested about.

COGS: Cost of Goods Sold

For a Courses these costs aren't really a lot (fortunately!). Here you can add the cost per thousand customers, which reflects the load that your infrastructure will neeed to handle as more customers come using your product (think about how you will need more and better servers to handle the increasing load).

You can also add any fixed cost that you need to face monthly, directly linked to your product. For instance if you are using an external piece of software integrated in your product you will need to add it's monthly cost here (think about all the APIs that you will use, like programmatic emails, etc.).

If you want to learn more about COGS, read here.

SG&A: Selling, General & Administrative

This will be your main cost when running a Courses company. The team behind your product will make your startup go big or go home and so it is of rightfully the biggest cost you have to face.

Be sure to list all of your current employees and those that you will hire in the future, plus, set up rules to hire them automatically as more customers come in.

We have a complete section dedicated to the hiring plan.

Founders Salary

Don't make the mistake of not adding the salary of the founders to your SG&A.
The financial model has to be complete and is needed to forecast your startup not to show the spirit of sacrifice of the founders.

CAPEX: Capital Expenditure

If you need to invest any significant amount of money in buying equipment for your startup, you have to add it here. For instance, all the technical equipment, like computers, monitors and office furniture should be added here.
Also, if you need to buy any software, or have an external agency build it for you, you have to add the cost here.

If you want to learn more about CAPEX, read here.

Next

You should now have a solid financial model, but you can always go back in and add more details and tweak the assumptions. You now have access to all the financial statements, metrics and scenario planning.

Don't forget that you can also add other monetization modes, such as: sales and transactions and you can also add your various operating activities.

Go Live

Don't forget that you can now go live and connect your forecast to your actual live data!

Learn more

Questions? Contact us at info@sturppy.com

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