Assessment Results

About This Tool

This tool provides a framework for assessing a company's profitability and the fundamental viability of its business model. It integrates financial performance metrics with key operational indicators to offer a holistic view.

**Key Metrics & Concepts:**

• **1. Profitability Ratios:** These indicate how efficiently a company is generating profit from its operations.
  • **Gross Profit Margin:** Measures the percentage of revenue remaining after deducting the cost of goods sold. $$ \text{Gross Profit Margin} = \frac{\text{Revenue} - \text{COGS}}{\text{Revenue}} $$
  • **Operating Profit Margin:** Shows the percentage of revenue remaining after deducting all operating expenses (COGS + SG&A + R&D). $$ \text{Operating Profit Margin} = \frac{\text{Revenue} - \text{COGS} - \text{Operating Expenses}}{\text{Revenue}} $$
  • **Net Profit Margin:** Represents the percentage of revenue left after all expenses, including interest and taxes, have been deducted. $$ \text{Net Profit Margin} = \frac{\text{Net Income}}{\text{Revenue}} $$
• **2. Growth Rates:** Indicate the company's expansion or contraction.
  • **Revenue Growth (YoY):** Percentage change in revenue from the previous year. $$ \text{Revenue Growth} = \frac{\text{Revenue}_{\text{Current Year}} - \text{Revenue}_{\text{Previous Year}}}{\text{Revenue}_{\text{Previous Year}}} $$
  • **Net Income Growth (YoY):** Percentage change in net income from the previous year. $$ \text{Net Income Growth} = \frac{\text{Net Income}_{\text{Current Year}} - \text{Net Income}_{\text{Previous Year}}}{\text{Net Income}_{\text{Previous Year}}} $$
• **3. Customer Acquisition Cost (CAC):** The average cost to acquire one new customer. $$ \text{CAC} = \frac{\text{Total Marketing & Sales Expenses}}{\text{Number of New Customers Acquired}} $$
• **4. Customer Lifetime Value (CLTV):** The predicted net profit attributed to the entire future relationship with a customer. $$ \text{CLTV} = \text{Average Revenue Per Customer (ARPC)} \times \text{Average Customer Lifespan (Years)} $$ (Note: This is a simplified CLTV calculation for this tool. More complex models might include churn rate and discounting.)
• **5. CLTV:CAC Ratio:** A critical metric for business model viability, indicating how much value a customer brings over their lifetime compared to the cost of acquiring them. A ratio of 3:1 or higher is often considered healthy. $$ \text{CLTV:CAC Ratio} = \frac{\text{CLTV}}{\text{CAC}} $$
• **6. Break-Even Analysis:** Determines the point at which total costs and total revenues are equal, meaning there is no net loss or gain.
  • **Contribution Margin Per Unit:** The amount each unit sold contributes towards covering fixed costs. $$ \text{Contribution Margin Per Unit} = \text{Average Selling Price Per Unit} - \text{Variable Cost Per Unit} $$
  • **Break-Even Point (Units):** The number of units that must be sold to cover all fixed costs. $$ \text{Break-Even Point (Units)} = \frac{\text{Total Annual Fixed Costs}}{\text{Contribution Margin Per Unit}} $$
  • **Break-Even Point (Revenue):** The total revenue needed to cover all costs. $$ \text{Break-Even Point (Revenue)} = \frac{\text{Total Annual Fixed Costs}}{\text{1 - (Variable Cost Per Unit / Average Selling Price Per Unit)}} $$

**Disclaimer:** This tool provides a high-level assessment for illustrative purposes. A comprehensive profitability and business model viability assessment requires in-depth financial analysis, market research, industry benchmarking, and professional judgment. The thresholds for "strengths" and "areas for improvement" are general guidelines and may vary significantly by industry, business stage, and economic conditions.