Common questions about methodology, calculations, and results.
Everything in a development appraisal is interconnected. Changing your sale price affects GDV, which affects profit, margin, RoC, IRR, NPV, scenarios, and sensitivity. This is by design — it shows you the true impact of each assumption. A properly built appraisal model should propagate changes through the entire calculation chain, because that is how real projects work.
Profit is the final number: revenue minus all costs. Cash flow is about timing — when money comes in and goes out. A project can be profitable overall but still run out of cash during construction because costs come before revenue. Understanding this distinction is critical for managing financing and avoiding liquidity crises.
The center cell is your base case. Moving away from center shows what happens when two variables change simultaneously. Green cells indicate profitable outcomes, red cells indicate a loss. The more green cells visible in the heatmap, the more resilient your project is to changing conditions. Pay special attention to how quickly the colors shift from green to red — a sharp transition means thin margins.
It depends on your perspective. Margin tells you how much of each euro of revenue you keep. IRR tells you how efficiently your capital is working over time. A 6-month project with 10% margin might have higher IRR than a 3-year project with 25% margin. Developers often prioritize margin for absolute return, while investors focus on IRR for capital efficiency.
Check three things. First, the downside scenario: if it shows a loss, there is real risk. Second, the sensitivity analysis: if small changes push you into red, margins are thin. Third, peak funding: if it is close to your available capital, there is no buffer for the unexpected. A project that fails on all three tests is almost certainly too risky.
Finance costs — interest payments and arrangement fees — are a real project cost. Higher interest rates increase total costs, which reduces profit. Longer project timelines mean more months of interest accrual. Even a 0.5% rate change can significantly impact profitability on larger projects where debt is substantial.
Industry benchmarks vary by market and project type, but generally: 15% or above is acceptable, 20% or above is good, and 25% or above is excellent. Below 15% may not justify the risk, effort, and opportunity cost of development. However, these thresholds shift based on local market conditions, project complexity, and the developer's risk appetite.
Profivo uses Newton-Raphson iteration on monthly cash flows, annualized to give yearly IRR. This is the same method used by banks and institutional investors for their own internal calculations. The mathematical accuracy is very high. The overall accuracy of the result, however, depends on how realistic your timing assumptions are — garbage in, garbage out.
The break-even month is calculated from your cash flow model. It is only as accurate as your sales timeline assumptions. If sales are slower than expected, break-even shifts later — and that means you need to fund the project for longer. Treat the break-even month as a best-estimate indicator, not a guarantee, and always check what happens if it slips by a few months.
If you have not entered any revenue or costs yet, there is nothing to vary. The sensitivity analysis needs actual project data — unit prices, build costs, and a timeline — to show meaningful variations. Enter your project assumptions first, and the sensitivity heatmap will populate with real values showing how changes in two variables affect your chosen output metric.
LTV (Loan to Value) equals Debt divided by GDV — it measures leverage against the end value of the completed project. LTC (Loan to Cost) equals Debt divided by Total Costs — it measures leverage against what you actually spend. Banks typically have maximum limits for both, commonly around 65% for LTV and 75% for LTC. Both must be within the lender's parameters for financing approval.
Scenarios give you three clear outcomes — pessimistic, base, and optimistic — with custom assumptions for each. Sensitivity systematically tests combinations of two variables across a range of values. Use scenarios for stakeholder presentations where you need to tell a clear story. Use sensitivity for deeper risk analysis where you want to understand exactly which variables matter most.
It depends on your jurisdiction and project type. Profivo lets you choose — VAT included in price, excluded, or exempt. For residential developments in many EU countries, VAT applies to the sale price. For commercial properties, VAT may be reclaimable by the buyer. Consult your tax advisor for your specific situation, and model both scenarios if you are unsure.
Peak funding is the maximum negative cumulative cash flow — the most cash your project needs at any single point before revenues start paying back costs. This is the minimum amount of equity and debt you need to have available. If your peak funding exceeds your available financing, the project cannot proceed without additional capital sources.
Profivo offers PDF reports with a professional, branded layout suitable for lenders and committees. Excel exports include full data tables for further analysis. CSV downloads are available for integration with other tools. All export formats contain the same calculations you see on screen — nothing is hidden or simplified in the exports.