WS-Prep 3-statement Question - Segment Growth Setup

Hello,

I have a novice question for modeling the segment portion of the IS. For those of you who took the WSP course, the example of Apply breaks down the segment section into 3 part - Products, Units, and ASP(Average Selling Price). By forecasting the growth in both Units and ASP, the new projection in Products becomes available, which goes back to filling everything else. My problem is that I don't understand how to set up the segments for other companies. For example, I'm researching Starbucks, and its segments are by region (not product), so how would I set that up? I have thought of doing it by the growth rate of operating income of each region, but I'm not sure if that makes sense. I don't really care about being correct, just want to understand how it all works. How many parts does the segment need to be to get something like Apple : a/b=c? I am not looking for the growth rate, just how to set it up. Thank you for the help.

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Comments (3)

Best Response
Oct 11, 2017

OK so this is really foundational stuff. Financial models are a) only as good as their inputs and b) versatile.

Apple sells iPhones,iPads, Macs, etc and you can quantify the number of units sold and a very flat sales price per unit. Starbucks, on the other hand, really only sells drinks and food and they're not going to break those up. So you really can't build off product but you can off region.

Now as to how you'd project the regions, you'd probably want to tie it to the growth of disposable income or some similar metric for each region.

You can model anything really; from one product or service in one location to global companies like Apple. You can make it as detailed or as general as you want.

Oct 11, 2017

Thank you for the reply. I know that it's up to be to decide how to model it, I just don't get how to tie them all together to come up with revenue.

I'm trying to use the information that's available to me. Disposable income statistics are not on the 10k. The modeling for Apple did include the necessary info, but on Starbucks I can't find anything that I can connect to each other. I have same store growth %, number of transaction/ticket growth, and number of stores by region. If I understand correctly, I need to somehow arrive at a projected revenue value (ex - for Apple you would multiply Units X ASP to get Revenue for each Product).

I'm just trying to understand the general flow of the 3 statement model, maybe I should try another example?

Oct 11, 2017