Build a Quick Financial Model

Whenever I talk to an entrepreneur about an idea, I like to ask about the financial model. Now, I don’t expect them to have the exact pricing down (I know pricing changes a ton — see here, here, and here) or to have a complex financial model, as that’s not a good use of time. What I do want to know is that they’ve thought through things as they currently stand.

Here’s what a quick financial model might look like:

Column 1

  • Revenue
    – Sales reps
    – Customers added
    – Customers lost
    – New monthly recurring revenue
    – Total monthly recurring revenue
  • Payroll
    – Cofounder 1
    – Cofounder 2
    – Engineers
    – Sales
    – Commissions
    – Other employees
    – Taxes
  • Expenses
    – Office
    – Infrastructure
    – Marketing
    – General
  • Cash
    – Cash on hand
    – Total Revenue
    – Total Payroll
    – Total Expenses
    – Monthly cash flow
    – Remaining cash on hand

With these items in column 1, the next 12 columns represent the next 12 months with the corresponding values either manually inputted (like number of sales people) or dynamically calculated (like remaining cash on hand). This entire financial model should be built in less than an hour from scratch and updated on a regular basis as new information about the business model is learned.

What else? What are some other thoughts on a quick financial model for startups?

2 thoughts on “Build a Quick Financial Model

  1. How about the other startup assets such as inventory, furniture, equipment, prepayment etc. In term of expenses, legal cost of registration can sometime be material. I normally group cost into 3 categories: pre-operating expenses, startup assets and recurring cost.

  2. I am at this point now & your list really helps put something visual to what I’m working with. If a new business or veteran business does not have a financial model they are pretty much just guessing what their profits & expenses are & the further you go without a model the more difficult it will be to fix it in the future. This is great information. Thank you for your post.

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