Spend less time buried in spreadsheets and more time building your business.
If the idea of a complex financial model gives you a splitting headache, you're not alone. Most entrepreneurs would much prefer spending time building their businesses rather than spending their days buried neck deep in spreadsheets - indeed as investors we prefer to back these types of people!
A financial model is an important part of any business, and start-up companies are no exception. Think of a financial model as the numerical version of your business plan. How profitable can we expect your company to be? How long will it take to get there? How much venture capital will you need to raise before the company can support itself? All these questions and more can be answered with the help of a financial model - and the good news is that it does not need to be super complicated either.
As investors, financial models help us identify how deeply an entrepreneur has thought about the future revenue and costs of the business, as well as the upfront investment required. A model also helps us identify the key financial risks to the business and to test the financial resilience of the company should growth be slower than expected, or costs be greater than originally thought. Many investors will view it as a red flag if a financial model is unavailable, incomplete, or unrealistic.
As you build you financial model try to strike a good balance between simplicity and detail. We have seen very simple financial models that have provided most of the key information we need about the forward business plan. We have also seen overly-complex gargantuan models that do nothing other than confuse and crash our laptops! Fundamentally, the financial model that best helps you communicate the financial and operational nature of your business is the best one to keep and maintain.
To get you started, we've created our Simple Financial Model Template which you are welcome to use 'as is' or as a starting point for you to build a financial model that meets the needs of your business.
We hope you find our template helpful and encourage you to share it with friends and colleagues who might find it useful too. We really look forward to hearing from you and learning more about your business. Please do not hesitate to contact us when you're ready!