Case Study- Fintech Start-up Business: Financial Model

Introduction

The oak business consultant is a Financial and Business Consultancy that provides Financial and Business Planning and Management Services. This case study discussed one of our clients that provides services within Africa. They are involved in the Fintech-based mobile-banking alternative Financial Services Business and wanted to target the African region. Our client wanted us to prepare a dynamic and efficient financial model for their fintech start-up business. This case study shows how our company provided the best solutions, fulfilled the client’s requirements and prepared a detailed fintech start-up financial model.  

Client Background

The client is a fintech start-up company that focuses on providing financial services to the world’s unbanked population. They believe that Fintech technology can help revolutionize the financial industry by providing faster, cheaper, and more secure financial transactions. They approached us to help them prepare a financial model that would enable them to secure funding from investors.

Business Objective

The client’s primary objective was to develop a fintech-based mobile-banking alternative financial services business that could provide financial services to the African unbanked population. They wanted to create a platform that would enable users to store, transfer, and exchange digital assets securely and quickly. The platform would be accessible through mobile devices, making it easy for users to access their accounts and conduct financial transactions from anywhere in the world.

Our Approach

We began the project by thoroughly analyzing the client’s business model and market. Our team reviewed their business model to understand their objectives and goals better. Then we developed a financial model that would enable the client to forecast their financial performance over the next 3 years.

We used a combination of financial modeling techniques, including revenue modeling, expense modeling, and cash flow modeling. Moreover, we conducted several estimations to assess the impact of various factors on the client’s financial performance, such as changes in revenue growth rates and operating expenses. 

Technical Complexity/Challenges

Past Historical Data

The Oak Business Consultant’s expert collected historical data from the client to prepare their fintech startup financial model. Our client had only 7 months of data which gave an overview of the company’s financial position. Further, the past data was not organized, and it was challenging to prepare the model and integrate it with past financial data and future forecasts. 

Complex Revenue Stream 

It was challenging to develop the revenue model because the company has multiple services and commissions collected from 3rd parties. Further, for exact revenue evaluation, we are required to estimate the monthly recurring revenue (MRR); a critical metric for subscription-based businesses. 

Acquire the Investment 

Our client wanted us to evaluate the return on invested capital (ROIC), NPV, IRR, and burn rate analysis because the company wanted to acquire the investments. It is necessary to give an overview of the business potential and position of the company. 

The investor needs to know that the business is financially stable and has strong potential for growth. Therefore, we were required to evaluate the CLV/CAC ratio and incorporate it into the financial model to show the company is generating significant revenue from its customers. 

Solution

We collected the client’s seven months’ past data, appropriately incorporated and organized it into the fintech start-up financial model, and found the growth and inflation rate by extensive market research for future forecasting. 

Our experts estimated revenue projection for the next 3 years, in which we have mentioned about client’s % of commission, service fees, exchange charges, and loan-related streams. In addition, the model is dynamic and user-friendly, where user can change their assumptions, and the model will update automatically and present the data. 

Furthermore, we estimated our client’s monthly recurring revenue (MRR), and we identified all of the revenue sources that generate recurring revenue, such as subscription fees, recurring service fees, and maintenance fees, then incorporated it into the model.

We have estimated the project evaluation, and CLV/CAC analysis provides valuable insights into our client’s financial health. A high CLV/CAC ratio suggests that the company is generating significant revenue from its customers, and the cost of acquiring those customers is relatively low. This is a positive sign for investors and stakeholders, indicating that the company is financially stable and has a strong potential for growth.

Results

Our financial model enabled the client to forecast their financial performance over the next three years. The model included revenue projections, expense projections, and cash flow projections. It also included sensitivity analysis to assess the impact of various factors on the client’s financial performance.

The potential investor is impressed by the accuracy and details of financial projections. Thus it helped our client to secure funding from investors. Moreover, the model provided the client with a clear understanding of the financial position. Also enables them to make financial strategies and decisions for the future. The following section shows the financial statements and future projections.   

Financial Highlights

Input Assumptions

The input assumptions sheet helps our client insert the value in our dynamic fintech start-up financial model and generate the reports accordingly. It contains investment, user inputs, payroll, revenue inputs and other relevant information related to the business model. 

Income Statement

Our experts found the registered user growth rate of 30% and applied it to the historical data of seven months. It developed the future forecast; further, the active user, transactional user and churn rate also apply to evaluate the net transacting customers.    

Cash Flow

Our professionals created a statement of cash flows for our client, which presents the monthly inflows and outflows of cash in the business for a period of three years. During the third year, the company experienced the highest amount of cash inflow from financing activities, as they intended to allocate their funds towards their start-up expenses and operational management.

Additionally, the company aimed to invest in fixed assets such as equipment, which resulted in significant capital expenditures in the initial year. This statement demonstrates the company’s potential to generate cash flow in the upcoming three years.

Balance Sheet

We forecasted a balance sheet that represents the assets, equity and liabilities of the company. The statement shows that the company has higher Assets in the third year and shows a positive trend.  Furthermore, the company has no obligations or liabilities because the company not acquiring a loan or any kind of debt. 

CAC-CLV & MRR

Our analysis revealed that the client’s CAC was relatively high, indicating that the company was spending significant money on customer acquisition. However, we also found that the CLV was higher than the CAC, indicating that the company was generating more revenue from its customers over their lifetime than it was spending to acquire them. This was a positive sign, suggesting that the company had a solid customer base and was generating significant revenue.

Secondly, we evaluated the client’s MRR, which is a key metric for businesses with a subscription-based model. MRR represents the recurring revenue the company generates monthly from its customers. We found that the client’s MRR steadily increased over time, indicating that the company was adding new customers and retaining existing ones. This was a positive trend. As it suggested that the company’s services were in demand and that customers were finding value in its offerings.

Dashboard

Our objective was to create a tool that would allow the client to visualize and analyze its financial data in a more efficient and effective manner. To begin, our team worked closely with the client to identify their key performance indicators (KPIs) and data sources. We then used Excel to create a dashboard that displayed the KPIs in an intuitive and user-friendly format. The dashboard included various charts, graphs, and tables that provided a detailed overview of the company’s financial performance.  

Conclusion

Oak Business Consultant is proud to have helped our client prepare a fintech start-up financial model for their Fintech-based mobile-banking alternative financial services business. We believe that our fintech start-up financial model shows a clear understanding to our clients of their financial position. Also enables them to make strategic decisions for their business. We look forward to continuing to support our clients as they grow their businesses and achieve their goals. 

Oak Business Consultant makes businesses stand out and perform exceptionally well. We go through a deep analysis of market research and financial forecasting. Furthermore, oak business consultants consider every aspect of the company to give our clients a critical viewpoint in developing their business success journey.