Financial Model for Fintech Start-Up Businesses

Myinvestorchoice is a Financial and Business Consulting firm that provides Financial and Business Planning and Management services. In this case study, we discussed one of our clients who provides services within Africa. As part of their Fintech-based mobile-banking alternative financial services business, they wanted to target the African continent. We were asked by our client to prepare a dynamic and efficient financial model for their fintech start-up company. This case study illustrates how our company provided the best solutions, met the client’s requirements, and prepared a detailed financial model for a fintech start-up.  

An Overview Of The Client

An unbanked population in the world is served by the client’s fintech start-up. They believe that Fintech technology will revolutionize the financial industry by facilitating faster, cheaper, and more secure transactions. We were asked to assist them in preparing a financial model that would enable them to secure funding from investors.

Objectives Of The Organization

To provide financial services to the African unbanked population, the client’s primary objective was to develop a fintech-based mobile-banking alternative financial services business based on mobile technology. The company wanted to create a platform that would enable users to store, transfer, and exchange digital assets securely and quickly. Using a mobile device, users would be able to access their accounts and conduct financial transactions from anywhere in the world.

How We Approach the Problem

We began the project by analyzing the client’s business model and market. To better understand their objectives and goals, our team reviewed their business model. Our next step was to develop a financial model that would enable the client to forecast their financial performance over the next three years.

A combination of financial modeling techniques was used, including revenue modelling, expense modelling, and cash flow modelling. In addition, we conducted several estimations to assess the impact of various factors on the client’s financial performance, including changes in revenue growth rates and operating expenses. 

Complexity/Challenges Of The Technology

Data From The Past

To prepare their financial model for their fintech startup, Myinvestorchoice expert collected historical data from the client. We had access to only seven months of financial data for our client, which provided an overview of the company’s financial position. In addition, the past data was not organized, making it difficult to prepare the model and integrate it with past financial data as well as future projections. 

Stream Of Complex Revenue 

Because the company provides multiple services and collects commissions from third parties, it was challenging to develop the revenue model. In addition, to determine the exact revenue, we need to estimate the monthly recurring revenue (MRR), a key metric for subscription-based businesses. 

Obtain The Investment 

We were asked by our client to analyze the return on invested capital (ROIC), net present value (NPV), internal rate of return (IRR), and burn rate analysis. A brief overview of the company’s business potential and position is necessary. 

An investor needs to be assured that the business is financially stable and has a strong potential for growth. To demonstrate that the company is generating significant revenue from its customers, we had to evaluate the CLV/CAC ratio and incorporate it into the financial model. 

An Answer

Our team collected the client’s seven-month past data, incorporated it into the fintech start-up financial model, and prepared a forecast based on extensive market research. 

We have provided our experts with an estimated revenue projection for the next three years that includes the client’s % of commission, service fees, exchange charges, and loan-related income streams. Additionally, the model is dynamic and user-friendly, so the user can change their assumptions, and the model will update automatically and display the results. 

We also determined our client’s monthly recurring revenue (MRR) and identified all the sources of recurring revenue, including subscription fees, recurring service fees, and maintenance fees, and incorporated them into our model.

The project evaluation has been estimated, and the CLV/CAC analysis provides valuable insight into the financial health of our client. In general, a high CLV/CAC ratio indicates that the company generates significant revenue from its customers, and its acquisition costs are relatively low. An indication of financial stability and growth potential, this is a positive sign for investors and stakeholders.

Outcomes

As a result of our financial model, the client was able to forecast their financial performance over the next three years. Revenue projections, expense projections, and cash flow projections were included in the model. In addition, a sensitivity analysis was performed to assess the impact of various factors on the financial performance of the client.

Financial projections are accurate and detailed, which impresses the potential investor. As a result, it enabled our client to obtain funding from investors. In addition, the model provided the client with a clear understanding of the company’s financial position. Additionally, it enables them to make future financial decisions and strategies. Below are the financial statements and projections for the future.   

Highlights Of The Financial Year

Assumptions About Input

The business model includes information regarding investments, user inputs, payroll, revenue inputs, and other relevant information. 

Financial Statements

According to our experts, the registered user growth rate was 30% based on the historical data of seven months. Additionally, it evaluated the net transacting customers based on the number of active users, transactional users, and churn rates.    

A Cash Flow Analysis

Our professionals prepared a statement of cash flows for our client, which outlines the monthly inflows and outflows of cash for three years. Accordingly, the company experienced the greatest amount of cash flow from financing activities during the third year, as they intended to use the funds for start-up expenses and operational management.

Furthermore, the company aimed to invest in fixed assets such as equipment, which resulted in significant capital expenditures in the first year. The statement illustrates the company’s ability to generate cash flow in the next three years.

Detailed Balance Sheet

Based on our forecast, we prepared a balance sheet that represents the assets, equity, and liabilities of the company. As can be seen from the statement, the company has increased its assets in the third year and is showing a positive trend.  Furthermore, the company has no obligations or liabilities because it doesn’t acquire a loan. 

Final Thought

Our firm is pleased to have assisted our client in preparing a fintech start-up financial model for their Fintech-based mobile-banking alternative financial services company. Our fintech start-up financial model provides our clients with a clear understanding of their financial position. They are also able to make strategic business decisions based on this information. We are looking forward to continuing to assist our clients in growing their businesses and achieving their goals. 

Myinvestorchoice ensures that businesses stand out and perform exceptionally well. Market research and financial forecasting are analyzed in depth. Additionally, Myinvestorchoice considers every aspect of the organization to provide our clients with a holistic perspective of their business.