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Posted on February 12, 2013 @ 08:05:00 AM by Paul Meagher
I added some new features to the monthly
linear growth business model I discussed in my last blog posting. In the newest version of that business model, I have
added the idea of investor involvement. Including an investor in the business model has the benefit of clarifying the timeframe
in which an investment might be paid back. The investor is assumed to receive, on a monthly basis, some percentage of the overall
profit the company makes in that month. These profits will be paid out, or at least calculated, on a monthly basis and at the
end of the projected time period, we can determine if the investor has recouped their original investment yet. If they have,
we can calculate how much profit they have earned so far.
I developed a script called monthly_growth_with_investor.php to model investor involvement.
I configured this model with the same settings I used in the monthly_growth.php business model discussed in my last blog posting (Implementing a business model in PHP). I added two
new settings, one for the size of the investment made in the company ($investment_size) and a second for
the percentage of profits the investor will earn in return for their investment ($investor_profit_percentage).
Given these additional settings, this is the report that the monthly_growth_with_investor.php script generates.
| Year | Month | # Customers |
Revenues | Costs | Profits |
Company Profits | Investor Profits |
| 2013 |
2 |
10 |
$300.00 |
$1,100.00 |
-$800.00 |
-$800.00 |
$0.00 |
| 2013 |
3 |
20 |
$600.00 |
$1,200.00 |
-$600.00 |
-$600.00 |
$0.00 |
| 2013 |
4 |
30 |
$900.00 |
$1,300.00 |
-$400.00 |
-$400.00 |
$0.00 |
| 2013 |
5 |
40 |
$1,200.00 |
$1,400.00 |
-$200.00 |
-$200.00 |
$0.00 |
| 2013 |
6 |
50 |
$1,500.00 |
$1,500.00 |
$0.00 |
$0.00 |
$0.00 |
| 2013 |
7 |
60 |
$1,800.00 |
$1,600.00 |
$200.00 |
$160.00 |
$40.00 |
| 2013 |
8 |
70 |
$2,100.00 |
$1,700.00 |
$400.00 |
$320.00 |
$80.00 |
| 2013 |
9 |
80 |
$2,400.00 |
$1,800.00 |
$600.00 |
$480.00 |
$120.00 |
| 2013 |
10 |
90 |
$2,700.00 |
$1,900.00 |
$800.00 |
$640.00 |
$160.00 |
| 2013 |
11 |
100 |
$3,000.00 |
$2,000.00 |
$1,000.00 |
$800.00 |
$200.00 |
| 2013 |
12 |
110 |
$3,300.00 |
$2,100.00 |
$1,200.00 |
$960.00 |
$240.00 |
| 2013 Totals |
$19,800.00 |
$17,600.00 |
$2,200.00 |
$1,360.00 |
$840.00 |
| 2014 |
1 |
120 |
$3,600.00 |
$2,200.00 |
$1,400.00 |
$1,120.00 |
$280.00 |
| 2014 |
2 |
130 |
$3,900.00 |
$2,300.00 |
$1,600.00 |
$1,280.00 |
$320.00 |
| 2014 |
3 |
140 |
$4,200.00 |
$2,400.00 |
$1,800.00 |
$1,440.00 |
$360.00 |
| 2014 |
4 |
150 |
$4,500.00 |
$2,500.00 |
$2,000.00 |
$1,600.00 |
$400.00 |
| 2014 |
5 |
160 |
$4,800.00 |
$2,600.00 |
$2,200.00 |
$1,760.00 |
$440.00 |
| 2014 |
6 |
170 |
$5,100.00 |
$2,700.00 |
$2,400.00 |
$1,920.00 |
$480.00 |
| 2014 |
7 |
180 |
$5,400.00 |
$2,800.00 |
$2,600.00 |
$2,080.00 |
$520.00 |
| 2014 |
8 |
190 |
$5,700.00 |
$2,900.00 |
$2,800.00 |
$2,240.00 |
$560.00 |
| 2014 |
9 |
200 |
$6,000.00 |
$3,000.00 |
$3,000.00 |
$2,400.00 |
$600.00 |
| 2014 |
10 |
210 |
$6,300.00 |
$3,100.00 |
$3,200.00 |
$2,560.00 |
$640.00 |
| 2014 |
11 |
220 |
$6,600.00 |
$3,200.00 |
$3,400.00 |
$2,720.00 |
$680.00 |
| 2014 |
12 |
230 |
$6,900.00 |
$3,300.00 |
$3,600.00 |
$2,880.00 |
$720.00 |
| 2014 Totals |
$63,000.00 |
$33,000.00 |
$30,000.00 |
$24,000.00 |
$6,000.00 |
| 2015 |
1 |
240 |
$7,200.00 |
$3,400.00 |
$3,800.00 |
$3,040.00 |
$760.00 |
| 2015 |
2 |
250 |
$7,500.00 |
$3,500.00 |
$4,000.00 |
$3,200.00 |
$800.00 |
| 2015 |
3 |
260 |
$7,800.00 |
$3,600.00 |
$4,200.00 |
$3,360.00 |
$840.00 |
| 2015 |
4 |
270 |
$8,100.00 |
$3,700.00 |
$4,400.00 |
$3,520.00 |
$880.00 |
| 2015 |
5 |
280 |
$8,400.00 |
$3,800.00 |
$4,600.00 |
$3,680.00 |
$920.00 |
| 2015 |
6 |
290 |
$8,700.00 |
$3,900.00 |
$4,800.00 |
$3,840.00 |
$960.00 |
| 2015 |
7 |
300 |
$9,000.00 |
$4,000.00 |
$5,000.00 |
$4,000.00 |
$1,000.00 |
| 2015 |
8 |
310 |
$9,300.00 |
$4,100.00 |
$5,200.00 |
$4,160.00 |
$1,040.00 |
| 2015 |
9 |
320 |
$9,600.00 |
$4,200.00 |
$5,400.00 |
$4,320.00 |
$1,080.00 |
| 2015 |
10 |
330 |
$9,900.00 |
$4,300.00 |
$5,600.00 |
$4,480.00 |
$1,120.00 |
| 2015 |
11 |
340 |
$10,200.00 |
$4,400.00 |
$5,800.00 |
$4,640.00 |
$1,160.00 |
| 2015 |
12 |
350 |
$10,500.00 |
$4,500.00 |
$6,000.00 |
$4,800.00 |
$1,200.00 |
| 2015 Totals |
$106,200.00 |
$47,400.00 |
$58,800.00 |
$47,040.00 |
$11,760.00 |
| 2016 |
1 |
360 |
$10,800.00 |
$4,600.00 |
$6,200.00 |
$4,960.00 |
$1,240.00 |
| 2016 |
2 |
370 |
$11,100.00 |
$4,700.00 |
$6,400.00 |
$5,120.00 |
$1,280.00 |
| 2016 Totals |
$21,900.00 |
$9,300.00 |
$12,600.00 |
$10,080.00 |
$2,520.00 |
| Overall Totals |
$210,900.00 |
$107,300.00 |
$103,600.00 |
$82,480.00 |
$21,120.00 |
The investor has not recouped their $50,000.00
investment yet. You still owe the investor $28,880.00.
So, after three years the investor has not earned back her initial investment of $50,000. If we ran the model out to 5 years with all the other configurations staying the same, you might have a situation where the investor has recouped their investment and made some profit. Alternatively, if we offer the investor a greater percentage of the profits, we can pay back the investor (with a profit) in a period of 3 years or less. The benefit of a formalized business model is that it puts relevant decision making information on the table for an entrepreneur and an investor to inspect, jointly understand, and hopefully agree upon as to the exact arrangement that might work.
For those more technically inclined, below is the PHP script implementing a simple linear business model with an investor.
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$2-5M yours from 1 share in LLC in 5 yrs. Buy my house, lease it to me, I will give you the share.
