Business Model "Flag"
Visual to include managerial accounting and unit economics into pitching financial projections
Link to the paper where the approach is explained step by step: "The Business-Model ‘Flag’: A Visualization Tool for Pitching Financials "paper in SSRN.
Link to spreadsheet for plotting the flag based on price, unit variable cost, quantity and fixed costs
Most business pitches usually require a bit more quantitative discipline than what they usually present, even if the projections (a.k.a. "financials") are still very uncertain and biased.
The challenge is to to show some of the projections in a relative transparent and amenable way, keeping the flow of the presentation, but enabling further questions. Here we developed a visual aid, which brings back the basic economics and managerial accounting into the art of entrepreneurial pitching.
The diagram visually combines two well known ingredients.
One is the standard plot of prices vs quantities used in Economics, taking advantage of the demand and supply curves.
The other is the so-called Cost-Volume-Profit (CVP) model used in Managerial Accounting.
Among the advantages of using the "flag model" is that in a 3-5 seconds one could:
Quickly visualize margin and the operational leverage of the business.
Easily observe the break-even quantity.
Eyeballing of how much a change in volume q would impact profits (dProfit/dq).
Visually discuss the four families of strategies for increasing profits: increase p, increase q, lower c, lower F. This brings concreteness and avoids buzzwords.
Space for visual conjectures about the trade-off between price and quantity. That means, discussing about the so called "residual demand curve" faced by the startup.
Similar space for discussing about "supply curve" and the availability of key inputs for the growth narrative