Roy2U
Thanks for your thoughts on the ACV-to-revenue ratio. I had realised that my 50-50 ratio needed tweaking, but the rest of my model was so questionable, that I put the tweaking issue aside. The model below uses my half-&-half approach, which I may change in future.
Earlier today, and before I had read your post, I had decided to progress my notion of relative market potential of NA vis-à-vis ANZ, and I created a new spreadsheet that would help me wrap my mind around the the growth potential of both geographies. You wrote, “I have assumed the rate drops off slowly but steadily from 26.8% in the last half year of FY21 to 20% per half-year by the end of FY24.” For the half years FY22H2 and FY23H1, I had plugged in bi-annual growth of 27.00% and 25.5%, then I reduced the following half years growth by the same ratio – that is, multiplied each subsequent half year growth percentae by 25.5/27 of its preceding half year percentage. The result is interestingly close to what you did.
Pefore I cut and paste my metrics, I'll comment on some issues that follow from grjohnson posts.
North America – $A or $US
Apart from the fact that NA metrics are easier to find, my reason for using $US in my model is that NA has its own growth dynamic, which I want to consider without exchange rate interference. Either way (using $A or $US), exchange rate variations interfere with ACV forward projections. If my focus were on financial history, I would use $A, but looking forward, I prefer to work on NA in $US. When I convert the calculated results to $A, I use 1.38 as the exchange rate, the reciprocal of which is 0.7246376812, or circa 0.725.
NA and ANZ – relative market potential
I used a low growth for ANZ of 3% compounded every six months, which is (1.06 x 1.06) - 1 = 12.36% per annum – perhaps too high in the longer run. NA's growth was covered earlier in this post.
The NA-to-ANZ population ratio is about 13. I used a multiple of 6.5 to factor in the fact that, relative to ANZ, NA's population is less concentrated in centres that have a population of over a hundred thousand. This is conservative, but other factors like competition, incline me to stick to 6.5. The purpose of this relativity is to get a feel for the growth of NA for a few years.
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 0 {colgroup} 1 {col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col}{col=86x@}{/col} 2 {/colgroup} 3 $ Xchange 1.38 4 Sizing factor 6.5 5 6 ACV for ANZ Each 6 mths Population Per 1m folk ACV for NA Each 6 mths Per 1m NA equivalent Per 1m NA equivalent NA:ANZ relativity 7 $A million $US million $US million $A million 8 -Jun15 24.900 9 -Dec15 29.700 19.28% 1.0 10 -Jun16 34.400 15.82% 1.5 50.00% 11 -Dec16 37.000 7.56% 24.19 1.530 3.1 106.67% 0.020 0.027 1.78% 12 -Jun17 40.000 8.11% 24.358 1.642 5.3 70.97% 0.033 0.046 2.81% 13 -Dec17 43.300 8.25% 24.526 1.765 8.5 60.38% 0.053 0.074 4.17% 14 -Jun18 48.800 12.70% 24.696 1.976 12.9 51.76% 0.080 0.111 5.61% 15 -Dec18 53.300 9.22% 24.868 2.143 17.6 36.43% 0.109 0.150 7.01% 16 -Jun19 57.900 8.63% 25.040 2.312 22.7 28.98% 0.139 0.192 8.32% 17 -Dec19 61.000 5.35% 25.213 2.419 24.9 9.69% 0.152 0.210 8.67% 18 -Jun20 64.500 5.74% 25.388 2.541 28.8 15.66% 0.175 0.241 9.48% 19 -Dec20 66.600 3.26% 25.564 2.605 35.1 21.88% 0.211 0.292 11.19% 20 -Jun21 69.000 3.60% 25.741 2.681 44.5 26.78% 0.266 0.367 13.69% 21 22 ACV for ANZ Each 6 mths Population Per 1m folk ACV for NA Each 6 mths Per 1m NA equivalent Per 1m NA equivalent NA:ANZ relativity 23 $A million $US million $US million $A million 24 -Dec21 71.070 3.00% 25.920 2.742 56.515 27.00% 0.335 0.463 16.88% 25 -Jun22 73.202 3.00% 26.099 2.805 70.926 25.50% 0.418 0.577 20.57% 26 -Dec22 75.398 3.00% 26.280 2.869 88.008 24.08% 0.515 0.711 24.78% 27 -Jun23 77.660 3.00% 26.462 2.935 108.025 22.75% 0.628 0.867 29.53% 28 -Dec23 79.990 3.00% 26.646 3.002 131.231 21.48% 0.758 1.046 34.83% 29 -Jun24 82.390 3.00% 26.830 3.071 157.856 20.29% 0.905 1.249 40.68% 30 -Dec24 84.861 3.00% 27.016 3.141 188.103 19.16% 1.071 1.478 47.06% 31 -Jun25 87.407 3.00% 27.203 3.213 222.143 18.10% 1.256 1.734 53.96% 32 33 Total ACV Est Revenue 34 $A million $A million 35 -Dec21 149.061 139.735 36 -Jun22 171.080 160.071 37 -Dec22 196.849 183.965 38 -Jun23 226.735 211.792 39 -Dec23 261.089 243.912 40 -Jun24 300.231 280.660 41 -Dec24 344.443 322.337 42 -Jun25 393.965 369.204 43 44
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