Case Study – Financial Analysis for Logistics
Case Study – Financial Analysis for Logistics
Introduction
Duka Logistics is a logistics service provider that operates similarly to a ride-hailing model. It moves goods across the country by allowing customers to opt for transporting certain consignments according to specifications provided in their own vehicles, such as vans and tuk-tuks. As financial analyst logistics working for Duka, one of our primary responsibilities is to conduct case scenario analysis (financial analysis for logistics) and create a financial model for logistics company. This involves analyzing key SaaS financial metrics such as revenue, profitability, operating expenses, etc., in order to provide insights on areas where further improvements can be made.
One of the most important aspects of financial modeling is understanding the SaaS financial model and how it can be applied to different business scenarios. This involves understanding key metrics such as customer acquisition cost (CAC), customer lifetime value (CLV), churn rate, etc., that are critical for optimizing company performance.
Overall, financial analysis of logistics company is an exciting and rewarding challenge, as it requires us to constantly stay on top of industry trends and developments in order to deliver value-added insights to our clients.
Duka Logistics offers the following services to its clients:
- Deliveries (higher volume items, bigger and heavier objects)
- Furniture and light goods deliveries
- Removals
- Courier Services
- Waste Haulage
- Collection and selling of scrap metals
- Van rentals
- Airport luggage transfer
- Transportation of event materials
- Transportation of cleaning equipment and materials
- Transportation of groceries and building materials
Duka prides itself on being the best in getting the right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer, at the right price,
Not only is this company in the logistics industry, but they are also in the SaaS industry, which is a software-as-a-service.
Background
The owner of Duka Logistics wanted to develop a financial model for logistics company that would map out revenues, profitability, and cash flow projections over the next five years. For that, Oak Business Consultant was required to conduct a preliminary financial analysis for logistics.
We conducted extensive market research and put together the following analyses for a clear picture:
- SWOT Analysis: This mapped out Duka’s strengths, weaknesses, opportunities, and threats.
- Industry Analysis: With this, we delved into trends such as legal barriers, the impact of COVID-19, economic factors, growth potential, CAGR
- TAM, SOM, and SAM (elaborated further in the Market Validation segment)
- The Go-To-Market Strategy: This would help set objectives, goals and use tools that would help implement marketing efforts
- Competitor Analysis: This entailed looking at products, services, and payment options by direct competition.
- Trends and statistics pertaining to the industry
Moreover, our financial analyst logistics obtained a report on South Africa’s ride-hailing and food delivery services.
Objectives
Oak Business Consultant provided services as expert financial analyst logistics.
The aims of the project were twofold:
- Estimate the total number of subscribers who would then perpetuate the revenue stream over the years.
- Analyze how much funding was required based on financial need analysis and whether that would be enough to cover start-up expenses.
What is financial need analysis?
Or one could wonder what is analysis in finance. Here’s our answer. Financial need analysis is a process of evaluating financial requirements and determining the best course of action to meet those financial goals. This may involve analyzing factors such as revenue, profitability, operating expenses, cash flow, and other financial metrics in order to identify areas where improvements can be made.
What is leverage analysis in financial management?
Leverage analysis is an important tool we use to assess the financial health of a company. Through this, we also identify areas where financial risk may be present. This typically involves analyzing different debt and equity instruments to determine their relative impact on overall financial performance.
Problem
There were a number of issues that cropped up in the course of conducting this case scenario analysis:
- There was difficulty in estimating the number of subscribers that Duka could capture. Even though we estimated the TAM, SAM, and SOM, the target subscribers over a period of five years defied reasonable estimates.
- Startup Expenses for the first year were well in excess of the funding that we planned to be acquired by the client.
Financial Analysis Logistics, Financial Model, and Business Proposal with Pitch Deck
Oak Business Consultant conducted a detailed financial analysis of Duka Logistics. This included projected revenue and profitability over the next five years. Using this analysis, we were able to estimate the number of subscribers that Duka could capture and provide recommendations for improving profitability. In addition, we provided a comprehensive business proposal with an integrated financial model and pitch deck to help Duka secure the funding it needed to successfully launch its logistics services. With our expertise in financial modeling and market research, we are confident that our recommendations will help Duka succeed in the competitive logistics industry.
1. Input Sheet
This is where the financial model for a logistics company begins. It contains cells for entering details such as investment from owners and private funding, loan details, revenue assumptions, and costs incurred. Additionally, market research metrics such as population growth rate, active internet user growth rate, and mobile usage growth rate are also entered here.
2. Operational Expenses
Our financial analysts populated this sheet with information regarding all monthly expenses. These expenses included employees’ payroll, salaries of consultants, CAPEX, and operating expenses.
3. Revenue Analysis
Our revenue analyst used this sheet for computing the breakdown of revenue into its various constituents. We started off with the pipeline for total subscribers based on the market research that we conducted. We also calculated the growth rate and the churn rate to determine net subscribers. Apart from that, we broke down the revenue into that generated “Within the City” and “In Last Miles”. This information relied on the number and type of vehicles used.
4. Start-Up Summary
In this tab, we calculated the net revenue that Duka would likely generate over the first year. We also estimated the investment and financing requirements based on our financial analysis logistics. Trusting these figures, we were able to put together a detailed business proposal with a pitch deck to help secure funding for the start-up.
5. Monthly P&L and Yearly P&L
We used these tabs to compute the different elements of the profit and loss statement, both on a monthly and yearly basis. The final value we calculated was the net profit. Which we further utilized in relevant tabs. Based on our financial modeling and market research, we believe that Duka has a strong chance of success in the competitive logistics industry.
6. Depreciation Schedule
Our financial analyst logistics used the Depreciation Schedule to calculate the monthly and yearly depreciation as and when the client purchased and disposed of different assets.
7. Cash Flow Statement
This tab depicted the various operating, investing, and financing cash flows.
8. Balance Sheet
When it came to financial reporting, we used the final value of the balance sheet to populate a series of graphs. These graphs depicted assets and liabilities over time. We also calculated the net capital, which was then reflected in this tab.
9. Loan Amortization Schedule
Calculating loan amortization schedules is part of our financial modeling service. Here, we used the inputs from different tabs to calculate the monthly payment, principal repayment, interest payment, and remaining balance. All of it is based on the tenure, amount, and interest rate of each loan.
10. Marketing
Since this is a SaaS model, a marketing budget needed to be developed that was well-defined. We broke down each marketing channel i.e., Google, Twitter, Instagram, etc. into various cost components, and used them to compute total marketing spending.
11. Market Validation
The market validation tab was a very crucial one. But our expert financial analysts made it look easy. Developing it entailed finding out the:
- Total Accessible Market (TAM) based on total population, number of taxi drivers available, number of total subscriptions, active internet users, penetration rate, internet users, mobile usage, number of subscribers
- Serviceable Available Market (SAM) based on targeted subscribers and expected market share
- Serviceable Obtainable Market (SOM) based on expected subscribers
12. Break-even Analysis
This sheet detailed the revenue, contribution margin, and break even in dollars, in order to ascertain levels of profitability.
13. Project Evaluation
We utilized the NPV and IRR to calculate internal rates of return (IRRs) for Duka. These are metrics that would help us to ascertain if this is a financially viable project with the right amount of risk.
14. Duka CAPEX
In this tab, our analysts provided a breakdown of CAPEX asset classes, as well as the quantity and cost of each item. As described in Cases A and B below, CAPEX items were tweaked to ensure that funding covered expenses in year one.
15. Diagnostic Tools
We developed key metrics to help analyze the profitability, liquidity, and break-even. These diagnostic tools proved invaluable in assessing the company’s performance and identifying areas for improvement. By using these metrics, our client would be able to stay competitive in the ever-changing business landscape.
16. Dashboard
A dashboard is a visual representation of the company’s key performance indicators (KPI), which helps provide a high-level overview of financial analysis for logistics. This data enables businesses to monitor their performance, identify areas for improvement, and make strategic decisions. With our dashboard, Duka is well-positioned to understand how its operations are contributing to the bottom line.
In order to perform the financial analysis, we broke it up into two parts:
- Case A: This assumed that funding of $150,000 was obtained. The expenses for the first year were well exceeding the funding. So, we postponed some CAPEX purchases well beyond the first year of operations. For example, Bikes totaling 5 in number would be bought in year 2 instead of year 1. Moreover, we assumed that the hiring of all the employees did not take place in the first year and that the payroll expanded over the course of operations.
Case A: Loan of $150,000
- Case B. This assumed that funding of $100,000 was obtained. For this, we assumed that only certain items of each CAPEX asset class were purchased in the first year and the remaining ones over the next 5 years. For example, out of the 5 bikes mentioned above, 2 were bought in year 1 and 3 in year 2. The CAPEX was hence staggered (the same asset classes are hence being repeated in the screenshot below).
Case B: Loan of $100,000
The financial analysis report was then developed based on all the findings that were made from the financial model.
Pitch Deck
In order to formulate a pitch deck that gave a competitive advantage in obtaining funding, we developed a questionnaire. Here are some of the questions we asked:
1. What are the primary objectives of your business?
2. What is your target market and how do you plan to reach those customers?
3. How does your business stand out from the competition?
4. What are some of the risks associated with your business model, and how are you planning to mitigate these risks?
5. What kind of financial projections do you have, and which metrics are you using to track performance over time?
6. How do you plan to use the funds that you will be receiving from investors, and what milestones would you like to achieve by specific deadlines?
7. What other resources or partnerships will help your business succeed in the long term?
Based on the responses to these questions, we developed a pitch deck that highlighted our client’s strengths, outlined their plans for growth, and explained how we would use the funding to achieve their goals. We tailored the pitch deck specifically for investors in Duka’s target market, making sure to highlight all of the key information that they would find most relevant and persuasive. This is the reason, Oak Business Consultant’s pitch deck service is the best in the market.
Outcome
All these efforts culminated in Duka being able to receive the funding that it needed. With Oak Business Consultant’s professional consultancy and financial services, Duka was able to stand out from other businesses and secure the funding they needed to grow their business.
If you are looking for a business consultant to help your company stand out from the competition, Oak Business Consultant is the best choice. Get in touch today for more information about our services!
