Formatting and General Structure for IRR Waterfalls or Preferred Return Waterfall Templates

 I've worked on a lot of models and templates that contained cash flow waterfalls with multiple IRR hurdles, single IRR hurdles, multiple preferred return hurdles with simple interest, single hurdle preferred returns and everything you can think of in-between. There are some commonalities between good waterfalls as far as how you should lay out the formatting so that it is easy for investors to understand as well as anyone that needs to view them.

What Makes a Good Multi-Family Underwriting Template

 When we are talking about underwriting in this context, it means evaluating and assessing the risk of investing in a a multi-family real estate deal. The main thing investors looks for when using these kinds of templates is if the deal can produce sufficient returns given the required investment and assumptions about future operating cash flow as well as at what occupancy levels and/or debt service levels does the deal not make sense anymore. Not making sense means negative operating cash flows and/or negative cash flows after debt service.

10 Equipment Rental Business Model Strategies

 The equipment rental space is vast and all sorts of business models have been built around the idea of making money be renting out equipment. The main thing owners and operators (and investors in these businesses) want to know is if the investment is worth the risk (WACC). They are cash flow businesses (buy equipment, rent it out for cash flow over time) and possibly sell the equipment at some future date.

Financial Model Template Beginner's Guide

 I've been building financial models for clients regularly since 2016. This includes small businesses and businesses with 100s of millions in revenue. What makes a good template depends on several factors and nearly every case is a little bit different. I'll go over all the factors I consider when building something new.

Real Estate Trends Over the Next 20 Years

 It is currently mid 2023 and I am looking at some of the potential big trends to come in the real estate industry. Real estate is where you get rich slowly and often it takes patience with long-term goals / mindset. To drive those goals, it is important to have some macro-level ideas about what is going on in the space and where things could be headed.

SaaS Spreadsheet for Management vs SaaS Financial Projection Model

 I've worked with all sorts of owners, operators and executives in the SaaS space. One thing that is interesting is what management uses to help make decisions in terms of spreadsheets vs. what is used to raise money from investors in the form of a three or five year SaaS financial model. They are both used to some degree, but day-to-day management requires simplicity and functionality that is not so rigid or formal.

Economic Limitations of Blockchain and Cryptographic Token Ecosystems

 Are there any current logical flaws in the macro economics of the current state of cryptographic tokens, blockchain, and cryptocurrency in general? Well, there may be so let's dive in.

Limitations of WACC Methodology

 The WACC (weighted average cost of capital) is a methodology commonly used to come up with a discount rate for the future cash flows of some project or business. The rate is telling the analyst what it cost to finance a companies operations based on the cost of equity (measured as a rate) and the cost of debt (measured as a rate). The cost of debt part is pretty straight forward but the cost of equity is where things can get messy.

Sustainable Investing by Large Companies

 Larger companies are increasingly recognizing the importance of sustainable project investing as part of their corporate strategies. They are integrating environmental, social, and governance (ESG) factors into their decision-making processes to mitigate risks, enhance their reputation, and create long-term value. STWD (Starwood Property Trust REIT) recently announced they were jumping into this (June 2023) by raising north of $350M to finance various projects that were considered 'sustainable'.

What Open Source Means and How it Can be Monetized

 Open source refers to a type of software or product that is released under a license that grants users the freedom to use, modify, and distribute the source code. It promotes collaboration and transparency, allowing anyone to view, modify, and contribute to the codebase. You will often see for-profit companies that are partially open source, meaning they will release certain projects that are licensed with usage restrictions and are proprietary in nature (such as OpenAi's GPT-3 and GPT-4 language models.

General Contractor Risk Management Strategies

 Running a construction business / being a general contractor involves risks from many angles. There are some best practices that can be undertaken to try and reduce some of these risks and thereby maximize the chances for long term success.

Financial Modeling for Scaling Up Multiple Physical Locations

 I've done a bunch of financial models for clients that need to understand the monthly cash flow effects of opening physical locations over time. There are a few different approaches to this, which I'll discuss below. Most of the industry-specific models I have are for bottom-up assumptions of a single location and planning all the economics of that, but I also have a few broad-based models that can plan 12 to 25 locations. For clients, I've done them for arbitrarily large scaling plans.

What Makes a Successful Car Salesman

 A good car salesman is worth his weight in gold. There are some things that can be taught and some things that come naturally. Let's take a look at some key characteristics and ways to become better at selling cars.

Payroll Best Practices for SMBs

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CAPM Calculation Helper

 CAPM stands for capital asset pricing model. It is referring to the methodology used to come up with a rate of return you should expect from a project or business (usually used for specific projects) when taking into account general market data or industry-specific data that the project or business is a part of.

WACC Calculator Spreadsheet with Formulas

SmartHelping / Valuation / Excel

WACC Calculator

Calculate a defensible weighted average cost of capital and connect it directly to a 15-year discounted cash flow analysis. Work through debt, equity, tax and market assumptions with the formulas visible and explained.

Cost of debt + CAPM Automatic tax shield 15-year DCF analysis WACC and NPV sensitivities

$45 One-time purchase / Excel download

Add WACC Calculator Model to Cart

Immediate download after purchase. By purchasing, you agree to the Terms of Service.

Watch the walkthrough Explore the features See the calculation How to use it Included in bundles

See the model in action

Walk through the inputs, formulas and valuation outputs.

See how capital structure, borrowing costs, taxes, market returns and beta combine into a WACC that feeds the discounted cash flow analysis.

Open the WACC calculator presentation

Use the presentation for a visual overview of the WACC calculation, sensitivity analysis and connected DCF schedule.

What the template includes

A guided cost-of-capital calculation with a connected DCF.

Use visible formulas and explained inputs to estimate the required return for a project or business, then test how the result affects present value.

01 / GUIDED WACC BUILD

Work through every calculation section

Move from the underlying debt, tax, capital structure and market assumptions to the final WACC with each component clearly presented.

02 / AFTER-TAX COST OF DEBT

Account for the interest tax benefit

The template automatically reduces the stated cost of debt by the corporate tax rate so the weighted calculation uses the after-tax borrowing cost.

03 / CAPM COST OF EQUITY

Connect market risk to the required equity return

Combine the risk-free rate, expected market return and beta to estimate the cost of equity through the capital asset pricing model.

04 / CAPITAL STRUCTURE

Weight debt and equity correctly

Apply the debt and equity percentages to their respective required returns, then combine the results into one weighted discount rate.

05 / WACC SENSITIVITY

Test changes in key market assumptions

Review how different combinations of risk-free rates and expected market returns affect the calculated WACC.

06 / 15-YEAR DCF

Use the WACC in a valuation schedule

The included discounted cash flow analysis references the WACC output directly and evaluates as many as 15 years of project cash flows.

07 / NPV SENSITIVITY

See how the discount-rate drivers affect value

Evaluate DCF net present value across changing risk-free rates and expected market returns to understand the valuation range.

08 / EXCEL + GOOGLE SHEETS

Use the file format that fits your workflow

The purchase includes Excel and Google Sheets versions. The Google Sheets version excludes the Excel What-If sensitivity tables because that feature is not available in Google Sheets.

How WACC is calculated

Translate financing and market risk into one discount rate.

WACC estimates the blended return required by debt and equity capital providers. A higher rate represents a higher required return and reduces the present value of the same future cash flows.

After-tax cost of debt

Start with the weighted borrowing rate and multiply it by one minus the corporate tax rate. For example, a 25% tax rate means 75% of the stated interest rate is used as the after-tax cost of debt.

Cost of equity through CAPM

Subtract the risk-free rate from the expected market return to calculate the market risk premium. Multiply that premium by beta, then add the risk-free rate.

Debt and equity weights

Multiply the after-tax cost of debt by the debt share of total capital and multiply the cost of equity by the equity share of total capital.

Final WACC and project value

Add the weighted debt and equity costs. The resulting WACC becomes the discount rate used to calculate DCF net present value and assess whether projected cash returns compensate for the modeled risk.

How to use it

Move from financing assumptions to a valuation range.

1. 01

   Define debt and tax assumptions

   Enter the borrowing cost, corporate tax rate and the debt share of the capital structure to calculate the after-tax debt contribution.

2. 02

   Set the equity-market assumptions

   Enter the risk-free rate, expected market return and beta to calculate the required equity return through CAPM.

3. 03

   Review WACC and sensitivity

   Confirm the debt and equity weights, review the blended cost of capital and test different risk-free and market-return combinations.

4. 04

   Apply the rate to the DCF

   Enter the project cash flows, review the 15-year discounted cash flow result and compare NPV across the sensitivity cases.

Who gets value from it

Built for people who need to explain the discount rate.

Business owners and founders

Estimate a risk-adjusted return threshold before evaluating the cash flows and exit value of a new venture.

Financial analysts

Build a visible WACC calculation that can be referenced by a DCF and updated as capital-market assumptions change.

Investors and acquisition teams

Compare the projected return of a deal with the blended return required by debt and equity capital.

Accountants, advisors and students

Follow the formulas step by step and explain the relationship among tax, leverage, CAPM, WACC, IRR and NPV.

Also available in these bundles

Need a broader valuation or accounting toolkit?

The WACC Calculator is also included in the Valuation and Accounting template bundles.

Valuation Templates Bundle

Explore DCF, comparable-value, transaction and investment-return tools for analyzing businesses and projects.

View Valuation Bundle

Accounting Templates Bundle

Get models for financial analysis, costing, accounting schedules, valuation inputs and business planning.

View Accounting Bundle

Related financial models

Continue from the discount rate to cost, value and return analysis.

Absorption Costing

Allocate manufacturing overhead through a structured absorption-costing framework.

Explore the absorption-costing model

Activity-Based Costing Model

Trace activities and cost drivers to products, services or operating segments.

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Score the operating and financial factors that can affect a business sale.

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LBO Model with T12

Underwrite an acquisition using historical performance, leverage and investor-return outputs.

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General Leveraged Buyout Model

Evaluate acquisition financing, debt repayment, exit value and equity returns.

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Test how changing performance and valuation assumptions affect a small business estimate.

Explore the valuation-sensitivity model

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Estimate enterprise and equity value using EBITDA and selected market multiples.

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Monthly DCF Analysis

Discount monthly project or business cash flows to calculate present value.

Explore the monthly DCF model

DCF with Sensitivity Tables and IRR

Compare DCF value and investment returns across changing assumptions.

Explore the DCF sensitivity model

Gordon Growth Model

Estimate terminal value from a continuing cash flow, discount rate and perpetual growth rate.

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Interest Rate Swap

Model fixed and floating interest cash flows under an interest-rate swap structure.

Explore the interest-rate-swap model

IRR Targeting Template

Determine the cash flow or exit value required to reach a selected investment return.

Explore the IRR-targeting model

Supporting valuation concepts

Review the assumptions behind the calculation.

CAPM Calculation Helper

Review how the risk-free rate, expected market return and beta combine into a cost-of-equity estimate.

Review the CAPM calculation

Choosing a Discount Rate

See how risk and required returns affect the discount rate used in a financial model.

Review discount-rate considerations

Questions before you buy

A few useful details.

What does WACC measure?

Weighted average cost of capital estimates the blended return required by the debt and equity used to finance a business or project. It is commonly used as the discount rate in a DCF analysis.

How does the model calculate the cost of debt?

The template applies the corporate tax rate to the stated borrowing cost so the WACC uses the after-tax cost of debt.

How is the cost of equity calculated?

The CAPM section uses the risk-free rate, expected market return and beta. The market risk premium equals the expected market return minus the risk-free rate, and beta scales that premium before the risk-free rate is added back.

What sensitivity analyses are included?

The Excel version shows WACC sensitivity and DCF NPV sensitivity across different risk-free rates and expected market returns.

What is the difference between the Excel and Google Sheets versions?

Both versions include the main WACC and DCF calculations. The Google Sheets version does not include the sensitivity tables because Google Sheets does not provide the same native What-If Data Table feature used in Excel.

Is the model included in a bundle?

Yes. The WACC Calculator is included in both the Valuation Templates Bundle and the Accounting Templates Bundle linked above.

Put a reasoned discount rate behind the valuation

Connect capital structure, market risk and DCF value.

Build the WACC step by step, test the major assumptions and apply the result to a 15-year discounted cash flow analysis. One-time purchase for $45.

Get the WACC Calculator

How to Come Up with a Discount Rate when Financial Modeling

The discount rate is the main input of a discounted cash flow analysis. I put that in nearly every single financial model you see on the site as well as have standalone templates just for performing DCF analysis work. What people always ask is how to come up with the right discount rate to enter in to the model. Let's dive in.

Update to Preferred Equity Financial Model - Non-compounding of Unpaid Preferred Return

 This is one of the most popular joint venture cash flow waterfall distribution templates I've built. After getting about five requests from different customers for this update, I have decided to integrate it to the main template version. See more below.

REIT Investment vs Direct Real Estate Property Investment

 Comparing the average returns between investing in REITs and direct real estate investment over the long haul can be challenging due to various factors, including market conditions, location, property type, and individual investment strategies. Here are some general insights on the historical performance of these investment approaches.

What Types of Manufacturing Businesses Benefit the Most from Performing What-if Analysis?

There are numerous types of manufacturing businesses, as manufacturing encompasses a wide range of industries and products. Managing them can also involve different approaches. Several types of manufacturing businesses can benefit from performing what-if analysis. Here are a few examples:

Made to Order Manufacturing: 10 Year Financial Model

SmartHelping / Manufacturing / Excel

Made-to-Order Manufacturing Financial Model

Forecast customer orders through production, shipment and collection while keeping working capital and complete 10-year financial statements connected.

10-year forecast 10 product categories Cash or accrual accounting Two Excel versions included

$125 One-time purchase / two Excel downloads

Add Manufacturing Model to Cart

Immediate download after purchase. By purchasing, you agree to the Terms of Service.

Watch the walkthrough Explore the features Review the accounting logic See the workflow View recent updates Included in bundles

See the model in action

Walk through the order-to-cash forecast and financial outputs.

Review the operating assumptions, accounting logic and financial outputs before configuring the template for your own manufacturing business.

Open the model overview presentation

Use the presentation for a visual tour of the model's key forecasting and accounting components.

Inside the model

Built around the full order-to-cash cycle.

The model follows customer demand from the original order through production, shipment, revenue recognition and final cash collection.

01 / PRODUCT CATEGORIES

Forecast orders by product category

Enter monthly unit orders for up to 10 separate product categories, each with its own operating assumptions.

02 / PRODUCTION TIMING

Model production and shipping delays

Define the average number of months between the original order and shipment for each category.

03 / CUSTOMER COLLECTIONS

Configure cash collection timing

Spread customer payments across as many as five collection periods relative to the order month.

04 / RAW MATERIALS

Build detailed material costs

Configure more than 20 potential raw material inputs, purchasing timing and the number of months of materials purchased at a time.

05 / LABOR AND OVERHEAD

Add direct labor and variable overhead

Enter per-unit direct labor and manufacturing overhead that can be spread across the expected production period.

06 / ACCOUNTING METHOD

Select cash or accrual accounting

Choose the accounting basis and allow revenue, expense and working-capital logic to update accordingly.

07 / WORKING CAPITAL

Track operating balances automatically

Accounts receivable, accounts payable, inventory and unearned revenue respond to the timing assumptions entered.

08 / VALUE AND RETURNS

Analyze financing, value and returns

Review three statements, line-of-credit activity, financing, DCF value, IRR and an optional exit scenario.

Manufacturing accounting

Orders, shipments and cash are separate events.

The model determines the accounting treatment based on whether customer cash arrives before, during or after shipment.

Order received

An order establishes future activity but does not by itself create revenue or a double-entry accounting event.

Cash before shipment

Payments received before shipment increase cash and create unearned revenue until delivery.

Product shipped

Revenue and cost of goods sold are recognized when units ship under accrual accounting.

Cash after shipment

Uncollected amounts create accounts receivable, which decreases as later payments arrive.

Forecast workflow

Move from product assumptions to financial results.

Configure the operating engine before reviewing working capital, funding, financial statements and investor returns.

1. 01

   Configure products

   Enter pricing, raw materials, labor, overhead and shipping timing by product category.

2. 02

   Forecast monthly orders

   Enter monthly unit volume for each product category across the forecast.

3. 03

   Set cash-flow timing

   Define customer collections, material purchases and working-capital assumptions.

4. 04

   Review the results

   Analyze financial statements, cash needs, financing, valuation and investor returns.

Current features and updates

Recent improvements are included.

Both downloadable versions include the current labor, manufacturing overhead, waste and financing updates.

Direct labor and variable overhead

See how per-unit costs are spread across the production period. Read the update.

Updated waste logic

Waste reduces revenue and collections while the related accounts-receivable logic updates automatically.

Line of credit and alternative version

Review the financing feature and the version that automates price increases and fixed-expense growth.

Who gets value from it

Useful for new and established manufacturers.

Made-to-order businesses

Model deposits, production timing, shipments and final customer collections.

Made-to-stock businesses

Treat units ordered as units produced and shipment timing as the expected sales period.

Existing manufacturers

Build forecasts for expansion, equipment investment, refinancing or bank financing.

New manufacturing ventures

Estimate startup costs, production economics, funding requirements and long-term returns.

Also available in these bundles

Need additional operating models?

This made-to-order manufacturing template is included in the following SmartHelping collections.

Manufacturing Model Bundle

Get this template alongside additional manufacturing, costing and sensitivity-analysis models.

View Manufacturing Bundle

Industry-Specific Model Bundle

Access a broader collection of financial models covering many different operating industries.

View Industry-Specific Bundle

Related financial models

Expand the manufacturing toolkit.

Manufacturing Plant Financial Model

Forecast higher-volume manufacturing activity across as many as 10 SKU types.

Explore the manufacturing plant model

Manufacturing What-If Analysis

Test price, volume, cost and productivity assumptions using 21 data tables.

Explore the what-if model

Absorption Costing Template

Allocate manufacturing costs and analyze the full cost of production.

Explore the absorption-costing tool

Warehouse Fulfillment Operator

Model warehouse sizing, density, fulfillment activity and operating performance.

Explore the warehouse model

Questions before you buy

A few useful details.

Can the model be used for an existing company?

Yes. Enter assumptions based on the existing operation and use the financing and equipment sections for new loans, investments, equipment purchases or expansion costs.

Can it work for a made-to-stock manufacturer?

Yes. Treat units ordered as units produced and use the shipment timing assumption as the period when units are expected to be sold.

How many products and materials can I configure?

The model supports up to 10 product categories and more than 20 potential raw material inputs.

How are customer payments handled?

Payments can be spread across as many as five collection periods. The model determines whether collections create unearned revenue, reduce accounts receivable or arrive during shipment.

Can I choose between cash and accrual accounting?

Yes. The selected method flows through the operating forecast and resulting financial statements.

What is included in the download?

The standard model and an alternative version that automates price increases and fixed expenses over time are both included.

Put the full order-to-cash cycle in one model

Connect manufacturing activity to the complete financial picture.

Forecast orders, production, shipments, collections, working capital, financing and investor returns. Two Excel versions included for $125.

Get the Manufacturing Model

A Review of Airbnb Industry and Some Strategies for Airbnb Hosts

We are looking at some general Airbnb stats and a few strategies that hosts often employ in their short-term rental businesses. Note that specific statistics may change over time, and strategies can vary depending on the location and individual circumstances. It's always a good idea to conduct further research and consult with local experts for the most up-to-date information and tailored advice.

Strategies to Manage Inventory at Multiple Locations

 Managing inventory at multiple locations can be a complex task, but with the right strategies in place, you can ensure efficient inventory management across all your locations. 

Calculating the Profitability of Airbnb Homes

 The price for an Airbnb home can vary widely depending on various factors such as location, size, amenities, and demand. This is your most important starting point when reaching profitable and sustainable operations. You can have a great home for a bad price and a not-so-nice home for a great price. You have to think about all aspects of the deal. Lets take a look at all the considerations for how to calculate profitability of Airbnb homes.

Lending Activity, Inflation, and the Fed

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Why FIFO Accounting Methodology is So Hard to Automate with Excel and Google Sheets

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What Makes or Breaks a Manufacturing Business?

 The most important thing that can make or break a manufacturing business is its ability to consistently deliver high-quality products to customers on time. The longer it takes to deliver products, the less satisfied customers are and the less they are likely to purchase in the future. Also, if the products are not made with consistent quality, customers will leave and distributors will stop selling what you are manufacturing.

Types of Businesses that Utilize Volume Discount Pricing

A service-based business (auto repair), a luxury brand, the hospitality industry, and the vending machine business all would not care about volume pricing. So, what businesses do care about this and implement strategies to maximize profits by optimizing pricing to incentive bulk purchases?

Maximizing Laundromat Profitability

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Sales Tracker: 12 Month Budget vs Actual

 I don't do these that often, but here is a free template that was built in Google Sheets. It is not very complex, but I do believe it is effective and really simple to use.