Are you thinking about how to build your startup‘s financial model?
A financial model is going to be the foundation and north star of your startup business. It’s going to affect everything else you do. How do you get started building one that will fuel your success?
Financial Models For Startups
As a startup, your financial model serves many purposes, including:
- Proving this is a commercially viable business model
- For identifying weaknesses and strengths
- Giving yourself and your team unified goals and direction
- Providing investors insights into your game plan, and their potential returns
Get Clarity On Why You Are Building This Financial Model
As you are wondering how to build your startup‘s financial model you need to ask yourself what is this specific financial model for? Why are you creating it? How will it be used for your startup?
Startup financial models can serve a variety of purposes. Your main current purpose may dictate your choices as you go through the rest of the steps.
You might end up using this for all of the above-mentioned reasons. Though, as your venture develops, you can and will adjust it and build on it. You may add more depth and breadth as you gain more data and scale. Though it is also important to create a base financial model that you can keep updating, rather than starting from scratch. Barring any hard pivots on the way, of course.
With this in mind, it pays to build your startup’s financial model in a dynamic spreadsheet or tool which can be easily adjusted. You can always extract this data or insert it into other document formats. Like Word-based business plans, and PowerPoint pitch decks.
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Decide On Your Key Metrics
As a young startup, you probably have limited data and metrics. That can change a lot very quickly. Some will want to see the math behind the big numbers. Yet, it pays to keep things simple too. You don’t want readers or yourself getting bogged down unnecessarily. There are going to be plenty of other distractions that do that for you.
Selecting just the most important metrics will keep everyone focused, help streamline your business and progress, and make it much easier when it comes to fundraising. You don’t want to be hopping to different data points every time you raise or meet with your team. It will confuse them.
See How I Can Help You With Your Fundraising Efforts
- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them