Financial Modeling for startups: the spreadsheet that made us profitable

You have one job as a CEO: don’t run out of money.

Being on top of your Financial Model and business budget can make the difference, and allow managers and founders to make game-changing decisions. The decision to delay a hire or a marketing campaign can get you over the edge, or save somebody’s job.

Where to build it?

All financial models are spreadsheets, and my best suggestion is to go with Google Sheets, which will not only allow you to keep int in sync with other teammates but to automate certain tasks and data inputs based on your other spreadsheets in the cloud.

Financial Model Sections

Summary Spreadsheet: this is a custom page that you should build based on your most immediate needs. No formulas should be calculated here; this should just reflect important lines and results for your current company status: if you’re running low on cash, this should be very focused on your bank statements. If you’ve just raised money, then this should be modified to look into your expansion budget.

Getting the spreadsheet to work for you

Obviously, this is a blank canvas since all businesses behave differently, and it probably looks like a lot of (boring) work to get from here to a fully working document. Well, that’s true.

PREDICTABLE REVENUE:

Predictable Revenue is one of the reasons why I love SaaS businesses: once you have a good idea of your CAC and your Churn, you can pretty accurately estimate you much money you are going to be making in X amount of time or increasing your marketing budget by Y. These values are tracked in the Revenue Spreadsheet.

  • CAC: Cost of Acquisition as well as,
  • CAC Trend: as your budget grows, your CAC will tend to increase, and you should account for that in your model.
  • Max/Min CAC: maximum and minimum Cost of Acquisition.
  • Marketing Budget: The estimated marketing spend for a given month (this data is imported from the SG&A spreadhseet).
  • Marketing Budget Scale: how much is the budget climbing month over month; this is usually a percentage increase.
  • Churn Rate: expected cancellations every month.

Marketing Budget x CAC = New MRR

Monthly MRR = Previous month MRR + New MRR — Churned MRR

Now, you’ll want to play with different scenarios regarding Marketing Budget, Cost of Acquisition and expected Churn Rate. This is where the Summary Spreadsheet comes handy, you can create a quick Dashboard with the most relevant variables:

  • MoM Marketing Budget increase: 10%
  • CAC Trend: +$5 per user (monthly increase).
  • MRR Churn: 5%

Predictable Staff:

The Payroll section of your SG&A Sheet is divided into two parts. Above, you have the actual cost of your employees and below you have the number of employees for each task (Headcount). Some of them, like the CEO, are unique, and the number will hardly ever go above 1, but for some others, like Graphic Designers or Customer Success Representatives, you may have more than one team members of the same type.

Capital Requirements:

This model has a smart addition to the Financial Statement Sheet; a ‘Capital Requirements’ and a ‘Runway’ line.

Aditional Resources: Startup Financial Model Templates

1- Subscription Business Financial Model

A built, fully-editable financial model for subscription businesses in general, specialized to Software as a Service (SaaS) startups.

Get this template

2- Mobile App Financial Model

A financial model for businesses that generate revenue via in-app purchases, subscriptions, and ads.

Get this template

3- Marketplace Financial Model

A built, fully-editable financial model for companies connecting buyers to sellers.

Get this Template

4- eCommerce Financial Model

This financial model includes projections for sales/marketing and automatically estimates the cost of the products, shipping, and estimated margins.

Get this Template

5- Hardware + Subscription Financial Model

A financial model for businesses that distribute hardware devices, and offer a subscription for their customers.

Get this Template

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