Asteria can model the inevitable uncertainty in your business plans: it can also model the complexity caused by the interactions of different aspects of your business.

Things are never simple

Let’s look at a big ticket software start-up: it sells a sophisticated bleeding-edge technology to large customers. Each sale takes a considerable time to come through, and involves a lot of effort from the sales and engineering teams. In essence, there are a few high value sales with long lead times.

With its current level of funding, the outlook looks a bit grim. It’s going to run out of cash in about 80% of possible outcomes, and we can see that the dangerous period is after about a year: before the sales start bringing in enough income to cover the costs.

CashExhaustion2 CashBalance2

So would a higher level of sales improve the situation?

Higher sales

 

Suppose the average number of leads per month goes from 8 to 10, but the lead time and conversion rate remain the same.

HigherSales

 

The long term prospects look a bit better, but when we zoom in we can see that there is little short term effect.

Comparison1ZoomComparison1

 

And in fact, the situation is actually worse than before, as the cash is exhausted in about 90% of cases instead of only in 80%.

ExhaustionComparison1

 

Going for a higher sales level is a higher risk strategy. Would reducing the lead time be better?

Shorter lead time

Let’s suppose the lead time goes from an average of 10 months to an average of 6.

ParameterComparison2

Again, the long term prospects look a bit better, but this time when we zoom in we can see that the turnaround point comes earlier.

Comparison2ZoomComparison2

 

And the risk is substantially less.

ExhaustionComparison2

 

Structural modelling

In this example, Asteria modelled the relationship between sales and costs. It can model all sorts of other relationships, too. All the pictures on this page are actual output from Asteria. you can explore the results using Asteria’s intuitive interactive tools for comparing results and assumptions by heading on over to our demo pages. (You’ll need to log in with a Google id).

Using Asteria to model your business plans can help you to assess different strategies and business models, by helping you understand the risks involved.