## COGS

COGS is a direct cost of products sold by a company. This amount includes the additional material charges as well, which are used for delivery and packaging of the goods.

Don’t forget Freight-in. Freight-in is the transportation cost associated with the delivery of goods from a supplier to the receiving entity. You should add freight costs per unit to COGS.

COGS does not include sales&marketing expenses. COGS also does not include any expense associated with acquiring new clients.


We ask a few questions about you and your company to be able to find all inputs and help you with any questions you have about your financial model.

The first date of business is when your business will begin to operate.
Even if you plan to have only expenses for a while first, enter the date when you expect your first expenses.

CAC stands for _**customer acquisition**_ cost. It’s calculated by dividing all expenses involved in acquiring new customers over a given time period by the total number of new customers acquired over that period.

The formula to calculate CAC is:  
CAC = (total cost of sales and marketing) / (# of customers acquired).

For example, if you spend $10,000 to acquire 500 customers, your CAC is $20.  
CAC = ($10,000 spent) / (500 customers) = $ 20 per customer

Organic growth means users that come organically and you don’t need to pay to acquire such a customer.

Number of purchases is how often an existing customer will make a repeat purchase for a given period: every week, month or year. If you sell high-cost, long-lasting items, don’t expect your repeat orders to be as often as a brand that sells low-cost consumables.


Each financial model has at least one driver. A driver is a variable that drives the entire model in terms of revenue and main non-financial metrics (number of customers, number of orders etc.)

1. You can choose new customers as a key driver and the number of new customers will translate into revenue. Your marketing expenses will be a function of how many new customers you'll get and the acquisition cost of one customer will determine your marketing budget
2. The second option is marketing expenses as a primary driver. Your marketing budget is divided by the cost of acquisition of one customer and will determine how many customers you'll get for a given period.

If you use the same assumptions for both drivers, the model will be the same. Which driver to choose depends only on which way is easier for you to forecast your business.

Remember, you also can get all new customers on organic growth. You can add these assumptions in the next steps.

If you aren't sure which drivers to choose, you can always change it in the model after you get it.


In general, each ecommerce company has the following team structure:

- General manager - 1; Average annual salary is $71,730;
- Customer service representatives - 3; Average annual salary is $36,226;
- Supply chain and procurement management - 1; Average annual salary is between $50,650 and $86,499;
- Content editor - 1; Average annual salary is between $27,000 and $89,000.


We now have all information needed to your generate financial model.
Please proceed to the payment step, which is powered by Stripe and is 100% secure.


If you plan to buy fixed assets such as computers, furniture, and software, you can enter how much you're going to spend on each category and when.
If you have subscriptions for software, this is not considered fixed assets because you don’t buy the software, just the right to use.

Why is all this important? Fixed assets add long-term value to a company, which is why you don’t expense it right away.

If you aren’t sure about your fixed assets right now, you can leave it blank and change it after you get your finished model.


Monthly churn rate refers to the percentage of customers lost over the course of a month. To calculate monthly churn rate, divide the number of customers you lost over the month by the number of customers you had at the beginning of the month. Multiply the result by 100.

Calculating churn for ecommerce is trickier, but doable, and well worth the effort. The key difference for non-subscription-based ecommerce companies is that they need to define what constitutes a churn event. For example, if a company knows that most of their customers who will make a repeat purchase do so within 90 days, they may choose to mark any customer who has not made a purchase in that time period as being `churned`.


Expected growth rate for Year 2 is a percentage of the number of new customers in Year 2 compared to Year 1. You also can put 0% and the number of customers in Year 2 will be equal to the number in Year 1.

To forecast the growth of new customers in Year 2 and 3 you need to keep in mind your limitations.
Your possible limitations could be:

1. How many new customers can you serve everyday?
2. Can you support the same customer experience for 1,000 clients that you have 100 clients?
3. What volume of returns can you handle?
4. As you grow your customer acquisition cost could change.

Monthly churn rate refers to the percentage of customers lost over the course of a month. To calculate monthly churn rate, divide the number of customers you lost over the month by the number of customers you had at the beginning of the month. Multiply the result by 100.

Calculating churn for ecommerce is trickier, but doable, and well worth the effort. The key difference for non-subscription-based ecommerce companies is that they need to define what constitutes a churn event. For example, if a company knows that most of their customers who will make a repeat purchase do so within 90 days, they may choose to mark any customer who has not made a purchase in that time period as being "churned."


We ask you questions regarding how you plan to finance your activity.
Are you going to put up your own money at the beginning of the business? If yes, put a number into the first field.

If you plan to get external investments, put an amount and when you’re planning to get this investment into the company.

If you're planning to get debt financing at some point, you can enter an amount, when you'll receive the debt, the date of repayment, and the cost of the debt (interest rate).

If you aren’t sure about your source of financing right now, you can leave it blank and change it once you get your finished model.


You have two options:

1. To enter marketing budget in the first month and when forecast monthly growth rate for the rest 11 months in the first year.
2. Or the second option is to manually enter marketing expenses for each month in the first year.

You always can change it if you change your mind after you complete the model.


Expected growth rate for Year 2 is a percentage of marketing expenses in Year 2 compared to Year 1. You also can put 0% and the marketing budget in Year 2 will be equal to the number in Year 1.

Monthly churn rate refers to the percentage of customers lost over the course of a month. To calculate monthly churn rate, divide the number of customers you lost over the month by the number of customers you had at the beginning of the month. Multiply the result by 100.

Calculating churn for ecommerce is trickier, but doable, and well worth the effort. The key difference for non-subscription-based ecommerce companies is that they need to define what constitutes a churn event. For example, if a company knows that most of their customers who will make a repeat purchase do so within 90 days, they may choose to mark any customer who has not made a purchase in that time period as being "churned."


You have two options:

- Enter a number of new customers in the first month and when forecasting monthly growth rate for the remaining 11 months of the first year, or
- Manually enter the number of customers each month in the first year.

How to forecast new clients if you haven't started yet?

First, understand what channels you will use to attract clients. If you use Facebook or Google to buy leads, then your number of new customers is how much will be spent on marketing divided by the cost of acquisition of one client, plus whatever you expect from organic growth.

Second, you can look at your competitors and peers that are relevant to your business and find data on how they grew from scratch within the first 12 months since their launch.

You always can change it if you change your mind after you complete the model.


Your expected growth rate for year 2 is a percentage of the number of new customers in year 2 compared to year 1. You also can put 0%, and the number of customers in year 2 will be equal to the number in year 1.

To forecast the growth of new customers in year 2 and 3, you need to keep in mind your limitations.
Some possible limitations include:

1. How many new customers can you serve everyday?
2. Can you support the same customer experience for 1,000 clients that you have for 100 clients?
3. What volume of returns can you handle?
4. As you grow your customer acquisition cost could change.

Monthly churn rate refers to the percentage of customers lost over the course of a month. To calculate monthly churn rate, divide the number of customers you lost over the month by the number of customers you had at the beginning of the month. Multiply the result by 100.

Calculating churn for ecommerce is trickier, but doable — and well worth the effort. The key difference for non-subscription-based ecommerce companies is they need to define what constitutes a churn event. For example, if a company knows that most of their customers who will make a repeat purchase do so within 90 days, they may choose to mark any customer who has'nt made a purchase in that time period as "churned."


The average annual cost to rent office space per employee varies from $4,000 in a small US city to $15,000 in New York.

Other expenses could include:

- Website hosting and support
- Returns and refunds
- Storage expenses
- Insurance
- Subscriptions to software services


You can choose to proceed to payment or enter additional information about working capital, investment and fixed assets. It's a totally optional step and doesn’t have any impact on your model.

- Working capital calculations consist of receivables, payables and inventory turnover assumptions.
- The investment section includes questions about your initial investment into the company, external investments and questions about debt financing.
- The fixed asset section consists of questions about how much you'll invest in computers, software and furniture.
- Moreover, you can easily enter these assumptions at any stage after you get your model.


Pricing your product is one of the toughest parts of a business strategy. We want to give a few pieces of advice:

- Add up all your variable costs per one unit first;
- Add a profit margin; target price=(variable cost per product)/(1-year desired profit margin as a percent)
- Calculate all your fixed expenses for a period (month or year) and divide by the number of units you plan to sell over that period.

Want to learn more about pricing? Check out these articles:

- [How to Price Your Product](https://www.shopify.com/blog/how-to-price-your-product)
- [Pricing Strategies](https://www.shopify.com/blog/pricing-strategies)
- [Pricing Strategy Guide](https://www.profitwell.com/recur/all/pricing-strategy-guide/)

COGS stands for cost of goods sold and represents the direct cost of products sold by a company. This amount also includes additional material charges, which are used for delivery and packaging of the goods.

Don’t forget freight-in. Freight-in is the transportation cost associated with the delivery of goods from a supplier to the receiving entity. You should add freight costs per unit to COGS.

COGS does not include sales and marketing expenses, nor any expenses associated with acquiring new clients.

_\*% of each product in one order. It means if you enter 10% for Product #1, when you sell 1 unit of product #1 per 10 order or 10% per one order. If you enter 100% for Product #2, when you sell 1 unit of product per one order._


How to forecast new clients if you haven’t yet started?

First, understand what channels you will use to attract clients? If you use Facebook or Google to buy leads then your number of new customers is how much will use spend on marketing is divided by the cost of acquisition of one client plus whatever you assault is going to be organic growth.

Second, you can look at your competitors and peers that are relevant to your business and find data on how their grew from scratch within the first 12 months since the launch.


Shipping fees are $2.5 minimum, rising to $3.5-$5 depending on the shipping distance and the cube size. Walmart offers free shipping for $35+ orders and charges $5.99 for shipping below $35 per order.

Shiphero charges $5.29 for the smallest size (<0.5 Lbs).


Accounts payable turnover rates are typically calculated by measuring the average number of days that an amount due to a creditor remains unpaid. For example, you receive inventory from your supplier and pay to the supplier 30 days after you receive these items. This means that your accounts payable turnover is equal 30 days.

Accounts receivable turnover shows the average number of days that it takes a customer to pay the company for sales on credit. For example, you sell your products on credit, and a customer pays this credit in 15 days. This means your accounts receivable turnover is 15 days.

Inventory in transit turnover is how long on average inventory is situated between its shipment and delivery locations. For example, after you order your inventory it takes 45 days to ship your products to your warehouse. This means your inventory in transit turnover is 45 days.

Inventory turnover is the number of days it takes on average before a company needs to replace its inventory. For example, you sell on average $45,000 in one month in cost of goods sold (not revenue), but your warehouse inventory is valued at $60,000, which means that your inventory turnover is 40 days.

Why are we asking these questions? These turnovers affect your working capital and, as a result, your cash flow. If you need to prepay all your inventory and you sell to end customers in credit you need a lot of working capital.

If you aren’t sure about all these turnovers, you can leave them blank and change them after you get your finished model.


Great, let's start with details about your business.