Subscription Buisness Valuation Bot

Prompt with variables >>>>>>>>>>>>>>>>> Thank you for providing some initial information on the subscription-based business. To properly value the business, I need to gather some more information. Please provide the following details: Operating expenses: What are the monthly operating costs of the business, such as employee salaries, marketing, rent, and other overhead expenses? Customer acquisition cost: How much does it cost to acquire a new customer, on average? Churn rate: What percentage of customers cancel their subscriptions each month? Profit margin: What is the average profit margin on the $4 monthly subscription fee? Industry comparables: Are there any comparable companies or recent transactions in the industry that could provide insight into valuation multiples? Discount rate: What is an appropriate discount rate to use for this business, taking into account its risk profile and market conditions? >>>>>>>>>>>>>>>>> 1. the operating expenses are around 16000 per month 2. all customers are acquired by word of mouth, due to no advertising the CAC is unknown or 0 3. churn rate is 0.5% 4. profit margin is 10% 5. unknown 6. use a 10% discount rate >>>>>>>>>>>>>>>>> Thank you for providing the additional information. I will now proceed to calculate the valuation of the business using the provided data. First, let's calculate some key financial metrics: 1. Monthly revenue: 4,000 customers * $4/customer = $16,000 2. Monthly profit: Monthly revenue * 10% profit margin = $1,600 3. Monthly customer growth (net of churn): 4,000 customers * (1 + 4% - 0.5%) = 4,140 customers Now, let's project the future cash flows of the business. Since the expected customer life span is 5.5 years, I will use this time horizon for the cash flow projections. Year | Customers | Monthly Revenue | Annual Revenue | Annual Profit --- | --- | --- | --- | --- 1 | 4,140 | $16,560 | $198,720 | $19,872 2 | 5,137 | $20,548 | $246,576 | $24,658 3 | 6,374 | $25,496 | $305,952 | $30,595 4 | 7,905 | $31,620 | $379,440 | $37,944 5 | 9,802 | $39,208 | $470,496 | $47,050 6 (0.5 year) | 12,162 | $48,648 | $291,888 | $29,189 *Assuming that the churn rate and the growth rate will remain constant for the entire 5.5-year period. Next, let's calculate the present value of the future cash flows using the 10% discount rate: Year | Annual Profit | Present Value Factor | Present Value --- | --- | --- | --- 1 | $19,872 | 0.9091 | $18,065 2 | $24,658 | 0.8264 | $20,377 3 | $30,595 | 0.7513 | $22,989 4 | $37,944 | 0.6830 | $25,909 5 | $47,050 | 0.6209 | $29,199 6 (0.5 year) | $29,189 | 0.5645 | $16,474 Summing up the present values of the future cash flows, we get a valuation for the business: $18,065 + $20,377 + $22,989 + $25,909 + $29,199 + $16,474 = $133,013 Based on the provided information and assumptions, the estimated valuation of the subscription-based business is approximately $133,000. Please note that this valuation is highly sensitive to the input assumptions, such as the growth rate, churn rate, and discount rate. Additionally, the lack of comparable companies or transactions makes it difficult to assess the reasonableness of this valuation within the industry context. >>>>>>>>>>>>>>>>> redo the calculation with an expected life of 16 years >>>>>>>>>>>>>>>>> To redo the valuation with an expected customer life span of 16 years, I'll extend the cash flow projections and recalculate the present value of the future cash flows. Year | Customers | Monthly Revenue | Annual Revenue | Annual Profit --- | --- | --- | --- | --- 1 | 4,140 | $16,560 | $198,720 | $19,872 2 | 5,137 | $20,548 | $246,576 | $24,658 3 | 6,374 | $25,496 | $305,952 | $30,595 4 | 7,905 | $31,620 | $379,440 | $37,944 5 | 9,802 | $39,208 | $470,496 | $47,050 6 | 12,162 | $48,648 | $583,776 | $58,378 7 | 15,083 | $60,332 | $723,984 | $72,398 8 | 18,704 | $74,816 | $897,792 | $89,779 9 | 23,204 | $92,816 | $1,113,792 | $111,379 10 | 28,778 | $115,112 | $1,381,344 | $138,134 11 | 35,649 | $142,596 | $1,711,152 | $171,115 12 | 44,104 | $176,416 | $2,116,992 | $211,699 13 | 54,502 | $218,008 | $2,616,096 | $261,610 14 | 67,256 | $269,024 | $3,228,288 | $322,829 15 | 82,851 | $331,404 | $3,976,848 | $397,685 16 | 102,808 | $411,232 | $4,934,784 | $493,478 *Assuming that the churn rate and the growth rate will remain constant for the entire 16-year period. Next, let's calculate the present value of the future cash flows using the 10% discount rate: Year | Annual Profit | Present Value Factor | Present Value --- | --- | --- | --- 1 | $19,872 | 0.9091 | $18,065 2 | $24,658 | 0.8264 | $20,377 3 | $30,595 | 0.7513 | $22,989 4 | $37,944 | 0.6830 | $25,909 5 | $47,050 | 0.6209 | $29,199 6 | $58,378 | 0.5645 | $32,914 7 | $72,398 | 0.5132 | $37,150 8 | $89,779 | 0.4665 | $41,870 9 | $111,379 | 0.4241 | $47,204 10 | $138,134 | 0.3855 | $53,218 11 | $171,115 | 0.3505 | $60,002 12 | $211,699 | 0.3186 | $67,471 13 | $261,610 | 0.2897 | $75,743 14 | $322,829 | 0.2633 | $84,942 15 | $397,685 | 0.2394 | $95,099 16 | $493,478 | 0.217 | $107,333 Now, we sum up the present values of the future cash flows to get the valuation for the business: $18,065 + $20,377 + $22,989 + $25,909 + $29,199 + $32,914 + $37,150 + $41,870 + $47,204 + $53,218 + $60,002 + $67,471 + $75,743 + $84,942 + $95,099 + $107,333 = $729,884 Based on the provided information and assumptions, and with an expected customer life span of 16 years, the estimated valuation of the subscription-based business is approximately $729,884. Please note that this valuation is still highly sensitive to the input assumptions, such as the growth rate, churn rate, and discount rate. The lack of comparable companies or transactions also makes it difficult to assess the reasonableness of this valuation within the industry context.