Methodology

Plain-language definitions and a map from each modelling area to its underlying methodology notes.

Key definitions

Terms used across the dashboard, KPI cards and workspaces.

ARR / merchant: Annual recurring revenue per merchant: monthly platform fee plus transaction fees, annualised. Excludes one-off implementation fees.
Gross contribution / merchant: Annual recurring revenue per merchant less the variable cost of delivering payments (card processing, PayTo, wallet, notifications, settlement, chargeback allowance).
Recurring gross margin: Gross contribution as a share of recurring revenue, excluding one-off implementation fees.
Transaction contribution: Transaction fee per successful payment less the estimated variable cost of that payment. Can be negative even when merchant-level contribution is positive, if the platform fee subsidises delivery.
Merchant ROI multiple: Quantified annual benefit to the merchant divided by recurring annual Sparelane fees. Quantified benefit includes operational savings and avoided bad debt, and optionally a configurable share of incremental recovered payment value.
Quantified vs non-quantified benefit: Quantified benefit drives the ROI multiple by default. Incremental recovered payment value and cash collected earlier are shown separately and are not counted as profit unless the recognition rate is increased above 0%.
Break-even merchants: Number of merchants whose combined annual gross contribution covers year-1 fixed operating costs (staff, sales & marketing, legal/compliance, other operating costs).
EBITDA: Gross contribution (including implementation revenue) less total operating costs for the year. A simplified, illustrative measure — not a statutory accounting figure.
Cumulative funding requirement: The peak cumulative external funding needed to keep the projected cash balance non-negative across the five-year forecast, given the opening cash balance and modelled funding events.
Valuation range (ARR multiple): Illustrative enterprise value scenarios calculated as ending Year 5 ARR multiplied by a configurable set of ARR multiples. Not a formal valuation, fairness opinion or investment advice.
Model health: A combined check across assumption validity, payment/recovery mix totals, five-year forecast array lengths, calculated-output sanity (e.g. negative contribution), and research-register evidence coverage. Surfaced in the header and on the dashboard.
Confidence and status (Research Register): Confidence (low / medium / high) reflects how trustworthy a source is. Status (working / validated / quoted / superseded) reflects how far an assumption has progressed from a working estimate toward a merchant- or provider-confirmed number.

Methodology by area

Each workspace has a dedicated methodology note in the repository docs folder.

Merchant ROI

Quantified vs non-quantified merchant benefit, utility presets, sensitivity analysis and credibility status.

docs/merchant-roi-methodology.md

Open workspace

Founder Model

Transaction vs merchant contribution, break-even analysis, payment-method mix and founder confidence status.

docs/founder-model-methodology.md

Open workspace

Investor Forecast

Five-year growth, revenue, EBITDA, cash/funding and illustrative ARR-multiple valuation scenarios.

docs/investor-forecast-methodology.md

Open workspace

Pricing Simulator

Package and pricing-model comparison, unit economics, sensitivity matrix and the constrained pricing optimiser.

docs/pricing-simulator-methodology.md

Open workspace

Model data format

JSON schema, versioning and import/export conventions for the commercial model.

docs/model-data-format.md

Open workspace

Conventions and disclaimers

Scope and limitations that apply across the entire model.

Currency: Australian dollars (AUD). Five-year forecast horizon.
Persistence: the model is stored only in this browser (schema version 1.0). Nothing is sent to a server. Clearing browser storage removes the data — export a backup regularly from the header.
Illustrative, not advice: figures are founder-planning estimates, not accounting, tax, legal or investment advice. Valuation ranges are indicative ARR-multiple scenarios only.
Working assumptions: payment-provider costs and several growth assumptions remain working estimates until validated or quoted — see the Research Register for current status.