This how we’re going to have your affiliate business running when we get done here. Just churning out campaigns like assembly line workers. *disclaimer: probably not
Still with me? Have you been doing the exercises? Each of these things leads to the next. We’re going to use pieces to build on.
That means if you haven’t done the past posts I highly suggest heading back and doing them now before moving forward.
Step 3 – Building a media buying business, financial model
For many years I never had a model I operated off of. Well I take that back, I did, just nothing in writing. It was all in my head (bad idea). I had started being an affiliate and all I knew was “I just want to make money”. Then I started A4D and that carried on the same way. I would hire people looking at the overall bottom line and thinking well they’re making money so I’m good. But operating this way made me not want to hire anyone that didn’t directly make the company revenue. Such as sales reps and account managers.
If you’re going to start hiring employees they can’t read you mind. You need to have things down in writing so everyone is on the same page.
Rather then discuss it lets dust off our Excel and start plugging numbers into a spreadsheet.
But Jason I’m not quite sure how to do that.
No problem, I’ve built a basic Media Buying Affiliate Company Financial Model that you can use.
Once downloaded click and open it up, you’ll see all the departments a media buying company could have. Sure I understand that you’re not going to want hire all these people to start. But you need to consider who is going to do these things. You can make things like IT/Dev relate to outsourced companies so you budget for those expenses monthly.
As you blankly stare at this spreadsheet you’ll see fancy blue numbers and black numbers. The blue numbers are the things you can edit. The black numbers are things auto-generated based on the values you put in the blue numbers.
Blue = Editable
Black = Formulas auto-calculated
There’s also some assumptions set at the top.
Under the media buying section you’ll see we have it setup to pay our buyers a %. I always believe in motivating your staff that generate the revenue for you with commissions and giving them a piece of what they’re generating. This spreadsheet also has a department manager setup. Typically the department manager is going to have a commission override on the whole department based on the outcome and production.
Then we have the rest of our support staff below. All this adds up to the totals at the bottom. Below that we have the total salary of the employees plus the taxes and insurance.
Next we have all the month fixed expenses to make the business run.
Lastly we total up expenses from fixed + employee and subtract it from the total net profit.
Not too difficult right?
Now stop and think how powerful this might be for you for just a second. Say you have your spreadsheet all setup and you’re thinking about hiring another buyer, plug them in and see how it effects the overall net as they learn.
I save a month end version of this for each month with the actuals for that month. I keep a folder structure like Finance->Monthly Reports->2013->August.
To make sure my projection sheet is staying on course I have my finance team send me the P&L from Quickbooks once it’s reconciled for the month. It typically takes them 15-30 days to get me finals. Then I compare the two and see what tweaks I could make to improve the projections the next month.
I’m not sure if you see how powerful this is to yet.
Any decision I decide to make I plug into this financial spreadsheet first to see how it’ll effect the company revenue/profit in the short term and the long term.
How do I decide what we can pay in salaries and commissions? Work the spreadsheet.
How do I decide what I can pay in rent? Work the spreadsheet
I encourage you to play with this Excel spreadsheet to model it to your business now. And then also where you want to be in 12-24 months from now. Build your projected financial sheet and you have your target you’re aiming for. Obviously things are subject to change but you need to have a vision to get where you want to go. This will just make it more concrete.
As with the last set of posts this is getting too long for all one sitting. I’m going to break this into a few posts. So the next will go up on Thursday.
See you in a couple days.