Relying on just any financial model template you found on Google is a sure way to set yourself up for failure.
But what if the said template seems impressively complex and contains a lot of financial data?
Even more risky. That doesn't have to be a good thing at all.
Let us explain.
Each stage of growth asks for different financial insights and projections. Early-stage startups should focus more on burn rate and funding needs, while mature companies can prioritize growth.
Using a template that doesn’t align with your revenue model or current priorities could lead to inaccurate projections and poor decision-making. Not to mention how time-consuming it can be figuring out advanced metrics that you don't even need (yet).
In this article, you'll find the right financial model template aligned with your startup stage, whether you're just starting out or you've already secured funding.
Financial modeling is the process of making a detailed financial model that shows your company’s projected earnings and expenses.
It's an essential part of financial forecasting for startups as it helps you predict how future events or decisions might impact the company’s finances.
Small business owners and startup founders use financial models for various reasons. Financial analysts typically use them to see how future events might affect the company’s stock performance.
We can illustrate it with an example. Let's say you're opening a new coffee shop in a busy part of the city. You'll need a financial model template to project revenue and expenses.
For example, if the shop expects 100 customers daily at $5 each and is open every day of the week, the projected monthly revenue would be $15,000.
With total monthly expenses estimated at $9,300 (including rent, salaries and ingredients), the monthly profit would be $5,700.
By adjusting assumptions – like increasing the number of customers to 120 – the model helps the owner analyze potential outcomes, guiding decisions on opening the new location and optimizing pricing or marketing strategies.
Every business and startup needs financial models, even those that are just starting out. However, the models and their complexity may depend on the stage of your business.
If you have a pre-seed stage startup, financial modeling is crucial in helping you make the right business decisions. It’s practical for business valuation, creating a budget and forecasting future financial performance. Also, remember that investors always want to see your financial model before deciding to fund.
One of the most common mistakes we see among startup founders is using complex financial model templates they find online. The justification is usually “the more financial data, the better” – but that's rarely true.
Those Excel templates you can find online are built for bigger companies with more historical data. They have too many tabs and assumptions you simply don’t need at this stage.
Even if you manage to fill them out, you won't be able to understand them properly (unless you're a financial expert).
Investors don’t just want to see professionally created financial models; they'll probably ask you multiple questions about it. That's why you have to know your financial model inside and out.
You need a model that matches your company size, your specific needs, your goals and your current stage.
Click here to discover what investors really want from early-stage startup finances and how to adjust your financial model accordingly.
Now that you're familiar with what financial modeling is and why you need it, we can dive into financial models for different investment stages of startup companies. In this section, you'll find recommendations for which startup financial model template you should use and how detailed it should be.
When creating financial models for pre-seed startups, keep things simple and focus on three main areas:
To build your financial model for seed round funding, start with high-level month-over-month predictions. Keep your estimates straightforward and don’t overcomplicate things. Break down your costs clearly and think about any new hires you might need as your business grows.
The goal for the pre-seed round is to create a financial model that gives you clarity about your financial situation, helping you make informed decisions about the future of your startup.
Now, you might wonder whether it's wise to do it alone or whether you should hire a financial expert to help out. At this stagel, our tip is to not overcomplicate things or waste money on costly outsourced financial services. You can do it yourself!
Scroll down to find our cheat sheet which will make it much easier for you.
A financial model for a seed round is a bit more complex and it should include all these metrics:
A positive aspect is that you already have data from previous periods to help you make more accurate assumptions.
At this stage, you can also begin to estimate your unit economics at a high level.
Unit economics gives you a high-level analysis of your business's financial health. Focus mainly on metrics like LTV and CAC.
LTV, i.e. lifetime value, is the total revenue you expect from a customer over their lifetime. CAC is the cost of acquiring a new customer. Understanding LTV/CAC helps you determine whether your business model is sustainable.
A positive LTV/CAC ratio means you're earning significantly more from customers than you spend to acquire them, indicating growth potential.
A negative LTV/CAC ratio means that you're spending more to acquire customers than the revenue those customers generate over their lifetime with your business. You can fix it by optimizing your marketing strategy, increasing prices or enhancing customer retention.
While you can create this model on your own using financial model templates (just like you did for a pre-seed financial model), it might be a good time to seek help from a financial analyst or a fractional CFO.
At the Series A+ stage, you’ll need to really drill down into the specifics:
This is high time to consider getting help from a financial expert. Handling all this data can be tricky. Give it some time, though – you should understand every number thoroughly. After all, no one knows your business better than you do.
Have an internal model for yourself, one that you fully comprehend. Use it to test different scenarios, such as “What if our customer acquisition costs double?” or “What if our revenue drops?”. This way, you can be better prepared for any uncertainties (unfortunately, those always come up, sooner or later).
Remember, don’t just create a financial model based on what you think investors want to see – build it primarily for your own understanding and needs.
Did you enjoy our tips above? Well, at Fuelfinance, we have much more where that came from.
Fuelfinance is an easy-to-use, cloud-based tool designed for small business financial management. It helps you understand your finances, track your metrics and create accurate financial projections that will help you grow wisely.
You can use it to create the right SaaS financial model based on your current investment stage. The tool comes with plenty of financial modeling templates, useful resources and unlimited help from our financial professionals.
Here are some of the handy features for startups and small businesses:
If you're one of the pre-seed startup owners just starting out and haven’t secured funding yet, we have something useful for you.
Check out our new free Bootstrap program. It’s a tool designed to help you manage your business finances and create impressive reports for potential investors. And all that – for free.
With the Bootstrap, you can:
Starting a business and having to create a robust financial model from scratch is scary, we get it. That’s where Fuelfinance comes in, a solution specifically designed for small businesses and startups.
Our easy-to-use platform simplifies financial management for startups, allowing you to handle your finances confidently, even without a finance background.
Fuelfinance can help you quickly and easily create a financial model that fits your investment stage, ensuring you have the right tools at your fingertips.
You can create and manage your financial plans confidently with unlimited support from our finance professionals.
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There are different ways to create a financial model, depending on the stage of your business and how complex you want it to be. The simplest financial model consists of listing your cash flow, expenses and revenue and creating month-over-month financial predictions and estimates. If you want to make it more advanced, you can also consider unit economics and financial statements.
There are the most common types of financial models:
However, financial models can also be grouped based on the stage of your business, just like we did in this article. In that case, it's essential to differentiate between a pre-seed, seed and Series A financial model.
Financial model templates are pre-built frameworks, often in the form of a spreadsheet, that help businesses organize and analyze their financial data such as revenue, expenses and cash flow in order to project their future financial performance.
You should format it from left to right, starting with inputs and assumptions on the far left and calculations, outputs and financial statements progressing toward the right. It's also common practice to differentiate between various data types with color coding. For example, formulas and calculations that shouldn't be altered are often black. On the other hand, inputs and assumptions are often blue, which suggests that they can be changed.
