Startup financial model - Finance City Center

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Unlock the benefits of financial modeling

A startup financial model is a vital tool for successful fundraising. Your startup financial models show potential investors what they want to see in your project. It also helps them know that you understand the key financial drivers of your business.

It quantifies your business plan , your assumptions and expands your vision to understand all the technicalities of your business model. It also helps you find out if you can turn your business idea into a sustainable and functional business.

A well-designed startup financial model tells you what is feasible and what you can expect from your business. It addresses the size of the market you want to capture and elaborate your ambitions to your investors.

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Why do you need a startup financial model?

A well-written startup financial model is your tool for early-stage funding.
This helps you answer tricky funder questions as they dive into your business model.
It helps you correctly calculate the amount of funds you actually need to turn your business idea into a profitable venture.
Some funders require minor details, but most want the high-level data of your business plan and a startup finance model serves it best.
How much financing do you really need if you don’t plan your business needs properly. The seed financial model helps you calculate the essential funding your idea needs.
You need a benchmark set to compare how your business is doing, and without any starter financial model, you can’t set a benchmark.
It provides your finance with the goals and it can judge whether you are doing what you promised.
The first essential document that any bank requires for a loan is the startup financial model .
It gives you a clear view of your assumptions, categories, prices, growth rates and the risk factors involved.
It helps to anticipate your business future without spending much. You can use various scenarios that can affect your business model to get a five-year picture of your business.

READ: Starting a Boat Travel Business: Costs, Profit, and Tips

Approaches for Startup Financial Models

Building a startup financial model needs to answer a few questions to adopt the appropriate strategy. These questions include, how do you forecast your sales? What is the size and strength of the market you are addressing? And how much do you expect from your marketing?

Top-down forecasting and bottom-up forecasting are the two methodologies you can adopt to answer these questions.

Top-down forecasts

The top-down approach deals with the predictions you make about the market share you expect to capture within a specified time frame. In the top-down method, you start from the macro perspective to micro levels.

The implications of the top-down forecasting model is the Tam Sam Som model. In the Tam Sam Som model, you capture the market at three levels. TAM represents the total available market for your products or services; Sam denotes the market available in service based on your geographic location, and SOM indicates a market available in service. In this model, SOM equals your sales target, representing the market share you expect to capture.

The disadvantage of this method is that you have to forecast optimistically. Most of the time, you take SOM as a random market percentage without considering its actual achievement.

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Bottom-up forecasts

The bottom-up approach starts from a micro view and builds the hypothesis towards a macro perspective. This means in this approach; The assumptions are based on the main drivers of your business value. Because of this feature, the bottom-up approach is less dependent on market share.

Implementing the bottom-up approach not only keeps you within realistic targets, but also allows you to think about the right ways to use your resources. And all revenue, expense, and investment assumptions are based on on-hand resources and company data.

The downside of the bottom-up approach is the lack of optimism needed to convince investors of your company’s potential. For a startup founder looking for fundraising, the bottom-up approach is not suitable. Investors generally seek faster growth and heavy returns while investing in any business, and the bottom-up method does not show this.

Keeping in mind the pitfalls of both top-down and bottom-up approaches, it is advisable to use a methodology that combines these two strategies, especially when the business objective is to hit the steep growth curve using external funding.

This combination allows you to define your short-term goals very well, examining your resources and your long-term objectives according to the desired market share and the ambitions of the investors.

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What should you consider in a startup financial model?

There are many free templates available on the internet claiming to serve as a startup financial template . The common thing in all of these templates is your expertise in Excel or Google Sheets. If you don’t know how to use Excel, you should go for any other option.

When selecting a startup financial model, you should consider the following tips to maximize your efforts.

Make sure your financial model has the ability to show monthly data for three to five years.
Cash flow should be the primary focus, including balance sheet and profit and loss statement.
Provide a detailed cash flow statement, cost of goods and expenses.
Investors are unfamiliar with technical terms, so your financial model should present the data easily to investors.
Instead of difficult values, use Excel formulas so your investors can understand the logic behind your projections.
Make sure your ideas stay consistent in your financial model so your investors have a clear view of your growth potential.

Best Startup Financial Model

Now you have understood everything about the startup financial model and you know its importance for creating your business model. You must now be eager to ask what is the best startup financial model you should choose that can customize your work with your needs.

Carefree! We have developed a start-up financial model capable of meeting all your business needs. Unlike the financial models available in the market which only have predefined models, our financial model is fully customizable according to your needs. It doesn’t focus on pre-made templates; Instead, it focuses on your assumptions.

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What are assumptions?

Assumptions are the numbers that can validate your predictions; This could be web search volume, market research, price validation, historical sales, material bills, website traffic, etc. It doesn’t matter which approach you use. Still, your assumptions need to be backed up with numbers. Investors are generally interested in knowing the reasoning behind your assumptions, so your assumption should be clear enough to define a certain scenario.

Characteristic of our start-up financial model

Since each client, company or business is different, having its own needs and requirements. So, a good startup financial model should be able to customize based on customer requirements.

From a customization perspective, our startup financial model has the ability to customize to each client’s needs. It is able to manipulate five-year forecasts based on your assumptions and various scenarios. The good thing is that you get the output in real time without delay or extra processing time.

Every good financial model should contain financial statements, operational cash flows and KPI overviews. Our financial model contains all of this; Plus, it has everything in a time-saving dashboard to swap pages for basic financial information.

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All in one dashboard

Our startup financial template is equipped with this powerful all-in-one dashboard that allows you to enter certain financial inputs. At the same time, it reflects crucial financial reports both in absolute numbers and in graphical mode. Unlike other financial templates available in the market, where you have to switch to various templates to collect your required information, it saves time and effort for such information.

This powerful dashboard gives you a complete picture of your financial model, including key financials, revenue breakdown, profitability forecast, cash flow, and cumulative cash flow data.

Summary of Financial Statements

This tab gives you a quick look at your Summary financial statements and provides you with a better understanding of the income statement, balance sheet and cash flow. It also gives you a monthly view of a financial year and a yearly view of the five-year forecast of figures and graphs.

Better earnings

This tab is a nice graphical representation of your annual income. For better understanding, you have a separate representation for various earning modes throughout the week.

Top expenses

This tab reflects the highest scopes of your financial system. This tab can save time and you can manage these expenses.

Profitability Analysis

This is another powerful yet useful tab in our financial model . It reflects your overall expenses and income. Further, it manipulates this data to discover the break-even forecast for five years. It provides a quick understanding to your investors on how your business will grow to achieve the promised goals.

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Assessment

This tab provides you with another useful feature of our financial model This reflects the estimated value of your business on the reduced cash flow method. With this tab, you can convince your investor of your progress and business value and get more funding to expand your business.

Financial charts

To convince your investors and the banker for more financing, you can display the financial figure of your company through graph charts on this tab. It includes revenue breakdown, cash flow from operations, cash balance, EBITDA and EBITA for 24 months and five-year monthly forecast.

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Operational charts

This tab reflects your business and workforce productivity for 24 months and five years forecast in graphical representation.

Reference KPIs

This tab reflects five-year benchmarks and key performance indicators that convince your investors of your company’s growth and performance.

Sources and uses

This tab gives your investor great confidence to see the full picture of their funds and their appropriate uses in your trading system. It also attracts more funding to your business.

Income calculation

This tab reflects all the revenue generated by your business based on your assumption for the next five years. It also includes the sales of separate products and their sales per week.

Fixed costs

This tab allows you to enter all your fixed expenses and their annual growth rates. You get fixed expenses calculated in real time for the next five years on the same tab. A great feature to analyze whether your business can handle said expenses or not.

Wages salaries

This tab helps you record the number of employees, their salaries, annual salary rates, monthly bonuses, and tax rates applied to their salaries. Also, you get the five-year salary forecast at the bottom of the screen. It helps you decide whether to hire or fire your employees to pay the expenses.

Variable expenses

Another important tab that allows you to enter the assumption of variable expenses and their rates for five-year assumptions. Like other tabs, here you get the calculated five-year forecast of variable expenses at the bottom of the screen.

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Development costs

This tab allows you to enter your business model development expenses. Plus, you get the five-year calculated forecast of development spending at the bottom of the screen, which helps you plan for an extension in your business.

Capitalization table

This tab is very important from an investor’s point of view. It allows you to record shareholder assets. According to their trump, their ownership dilution is calculated here. And you get the five-year forecast on investors to share according to their investments.

book assets

This tab allows you to check the internal calculation of asset depreciation and their closing book values. It provides you with the updated value of your assets for a five-year asset projection.

income statement

The income statement is a basic document of any financial system and reflects the profitability of any business. The bottom line of any forecasting model is the revenue statement. This shows the profit of the business based on your assumptions. This tab provides you with five-year forecasts based on your assumptions regarding gross margin, EBITDA, EBIT, net profit before tax and net profit after tax. You get a complete cash flow picture on one page, including your income, COG, and expenses.

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Cash flow account

This tab provides you with a complete Monthly Cash Flow statement. You can track all cash transactions made by the business on one page. Depending on your assumption, you also get a five-year forecast of your cash flow.

Balance sheet

The balance sheet is a complete picture of your business at the end of the specified period, and it can be monthly, quarterly or annually. This tab reflects your company’s crucial financial data in the form of a balance sheet. It is the beauty and power of our financial business model that it provides you with a five-year forecast of your balance sheet keeping your assumption input.

Our financial business model can display monthly balance sheet forecasts for five years for your convenience. This helps you determine whether your assumptions are sustainable or not.

Capital

This tab keeps a record of all your debts and grants that make up your trading capital. It also records the repayment schedule and interest repayments according to the plan. You don’t need to remember the repayment schedule; Instead, our financial model does it for you.

Outputs

This report reflects a five-year forecast for revenue and COG. You get this report month calculated for each product with different intervals.

Benefits of our startup financial model

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Easy to use

Our software engineers have created the financial model in such a way that you don’t need to know the difficult financing terms. It’s easy to use and we’ve used everyday terms so anyone with a bit of computer knowledge can benefit from this versatile financial model.

We do the math for you.

You don’t need to do the complex math or remember Excel formulas when using our financial model. We define everything for you. Open it and start enjoying the powerful features of our financial model.

Nothing to install

Our year-proven startup financial model is Excel-based, and you don’t even have to install any other software to use our financial model. Just download it and start using our ready-to-use template according to your business need.

Without delay

Unlike other financial templates, you don’t have to wait for your copy. Once you make the payments, you get the download link in your inbox. Click the download link and enjoy our starter financial template.

Always updated

You don’t have to worry about updating the software. Once there is an update, it is delivered instantly to your inbox and you can download these updates with a single click.

24/7 customer service

Once you purchase this software, you become part of a large community with thousands of satisfied users of our financial system. You can get help online twenty-four hours a day, seven days a week. Even if you lost your copy due to a computer accident, you could get another one without putting your job at risk.

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