How to Create a Startup Financial Model

To be able to ensure a healthy business, it is to crucial to have a working business plan that will help with dealing the business to make the sound financial decisions. Especially for startup businesses, building a financial plan for a startup is a critical factor for the business’ survival against myriad of competitors and other risks that one might encounter, especially for startups that are new to the industry. Hence, it is imperative to create a financial plan for startups.

Specific components complete a startup financial model, which is done accordingly in a sequence to avoid going back and forth through the sheets.

1.    Sales forecast – you will need to generate a sales forecast over a period of time (whether for short-term or long-term).

2.    Expenses Budget – to create an expense budget plan so that you can have a better understanding of the what are the costs you will spend to make the sales projection plausible and practicable.

3.    Cash Flow Statement – developing a cash flow statement will help with tracking the flow of cash in and cash out of the business processes, partly basing it off your sales forecasts, balance sheet, and other assumptions.

4.    Income Projections – also known as the revenue forecast for the upcoming years by using the sales forecast, expense forecast, and the cash flow projection.

5.    Balance Sheet Projection – deals with assets and liabilities that are not included in your income forecast to project the net worth of a business at the end of the time period, especially for startups.

6.    Breakeven Analysis – conduct a breakeven analysis after mapping out the whole forecasts; this is so that you can assess if a business’s expenses match the sales or service volume. The analysis is conducted to measure when the business reaches the break-even point, which is an essential key for potential investors to refer to if the business is financially feasible and a good investment.

Altogether, it completes a basic startup financial model. The whole process may look simple and easy, but it is still a task that requires more skills. A lot of time is required to be set aside just to build a financial model for your business or investment. Not only that, you will at least need to have an satisfactory amount of industry know-how to be able to make a financial model that is reliable and work as it should be.

Utilizing a Financial Model Template for Startups

If you want to create a financial plan for your startup business, try to use a startup financial model template first to help familiarize yourself with how to build financial models for startup businesses. You can check out a copy from here: Startup Financial Model Templates in Excel to use as a base to start with as you create a financial model for your startup business.

You can also utilize other industry-specific financial model templates at eFinancialModels if you need financial model templates with different use cases. eFinancialModels is a platform that offers a wide range of industry-specific financial model templates created by financial modeling experts with vast experience and know-how when it comes to financial modeling.

Help yourself save time and resources by taking advantage of ready-made tools that you can use as a base to start with or as a reference for building your very own startup financial models.