Financial Model for Startups

Financial Model

A financial model for startups is simply a tool that’s built-in excel to forecast a business’ financial performance into the future.  The forecast is typically based on the company’s historical performance, assumptions about the future, and requires preparing a statement of revenue, business expenses, key ratios, sensitivity analysis and supporting schedules. 

Download the worksheet here.

WHY DO WE NEED A FINANCIAL MODEL FOR STARTUPS?

Startups are concerned about the future of the business and hence, they keep the financial model in handy which act as a vision document to drive the business in this competitive environment. It is extremely important to have an eye on the future growth (or lack of) prospectus of the business to keep the target and achieve best results for the company.

Every startup is in need of a financial model to calculate the risk and rewards for the upcoming experience. To fulfill this need, they need to consult with the professional/advisors to estimate the future outcome.

WHAT DO WE BRING IN OUR FINANCIAL MODEL?

To ease the effort, Treelife is sharing a sample format of the financial model which assists the founders/others to work out the outcome at one go.

WHY SHOULD YOU USE A FINANCIAL MODEL?

The output of a financial model is used for decision making and performing financial analysis, whether inside or outside of the company. Inside a company, executives will use financial models to make decisions about:

• Raising capital (debt and/or equity)
• Making acquisitions (businesses and/or assets)
• Growing the business organically (e.g., opening new stores, entering new markets, etc.)
• Selling or divesting assets and business units
• Budgeting and forecasting (planning for the years ahead)
• Setting Targets/KRAs for Employees (especially including for those to whom ESOPs are granted)
• Capital allocation (priority of which projects to invest in)
• Valuing a business

HOW TO USE OUR FINANCIAL MODEL?

It is an Excel based format which asks for the information to be filled in every particular sheet with ease. Charts are linked to the table. You just need to insert the figures and relate it with total/main column. 

CONCLUSION

The financial model is utilized in a number of stages in the operations of the entities. It combines finance, accounting, and business metrics to create a mathematical representation of the growth prospects of the entity. Financial modeling is a highly valued tool and benefits the entity in numerous ways

Please feel free to reach out to us in case of any clarification at [email protected]

Treelife Team