Taking out a loan to grow can accelerate your company or squeeze your cash flow for years. Before you sign, it pays to answer three questions with numbers, and that is exactly what this spreadsheet does: you fill in the assumptions and it calculates whether the debt pays for itself.
The spreadsheet's three questions
- Is selling my product profitable? With your CAC, average ticket, number of purchases over the customer's lifetime and contribution margin, the spreadsheet calculates LTV and the return on acquisition cost.
- Does the debt pay off? It compares the total cost of the debt with the gross result and the contribution margin the money should generate. Both ratios need to be greater than 1.
- Can I afford it? From the amount, monthly rate and term, it calculates the installment, how much additional revenue you need to cover it, how many sales that represents and how much to invest in acquisition to generate those sales.
Who it's for
- Business owners evaluating a loan, financing or credit line to grow.
- Finance managers who need to justify borrowing to their partners.
How to use it
Fill in the assumptions with the real numbers of your business and the bank's offer. At the end, the spreadsheet sums up the decision in three questions: does it deliver ROI? Does it fit the cash flow? And if it doesn't fit today's cash flow, will the new sales cover it?
