Financial Modeling

As Steve Vilkas from Prepare4VC said after my workshop, “A financial model is not a prediction of the future. It is a statement of how you will make your vision real. It shows how your strategy will be executed—what you’ll build, when you’ll hire, where you’ll spend, how you’ll earn, and why an investor should believe in you. If that model cannot be defended with logic, backed with assumptions, and tied clearly to your go-to-market and operational plans, then all the traction and storytelling in the world won’t matter. You will not pass due diligence. You will not secure the check.” Read the blog to find out what the financial model really is.

A financial model isn’t just rows of numbers—it’s your story, told in the language of strategy, discipline, and execution. The strongest models don’t just support your pitch—they are your pitch. They show investors not only what you believe is possible, but how you plan to get there. To tell a compelling and credible financial story, your model needs six key ingredients.

Founders frequently seek financial tips for pre-seed/pre-revenue companies. In this blog, we’ll explore four key areas: 1. Developing your initial bootstrapped budget 2. Ensuring that your unit economics are sound 3. Determining the number of customers needed to cover operating costs 4. Calculating the sales and marketing budget necessary to achieve your sales targets

For any early-stage startup founder, there are several key moments that mark the trajectory of the company’s growth and serve as a testament to the founding team’s hard work. To name a few, there are the MPV launch, your first customer, and, of course, your first term sheet. Raising money is a daunting and outright scary task for any first-time entrepreneur, and thus getting that first term sheet from a professional investor is an incredible validation of your vision, product quality, and persistence.

A financial model is a quantitative representation of the company’s business plan. In a way, it is the company’s brain, demonstrating how its strategic decisions affect different functions and translate into financial results. For that brain to work properly, we need to correctly create the step by step instructions of what happens with the company as a result of its strategic decisions, or financial model assumptions. The process of creating such assumptions and logic is the expertise of The Startup Station and the crux of our unique methodology. The final step is the implementation of this logic, and this requires knowledge of Excel. In this article we discuss four most useful Excel tricks you can use for modeling a variety of business scenarios.

“Why create financial projections when it is all a guess?” That is a question I hear all too often. Many entrepreneurs and small business owners have trouble making estimates and reducing the uncertainty in which they operate to a limited set of variables within a structured model.

There is a lot of misconception in the startup community about what a startup financial model represents and, especially, how accurate it is. When I discuss the importance of financial analysis with entrepreneurs, they push back arguing that there is no validity to the numbers not verified by the market.

If you are a founder in the process of creating financial projections for your pre-revenue company for the first time, most likely you have two thoughts. Thought # 1: “This is hard”, and Thought # 2: “This is futile because, without any data, I can only guess what my sales would be!” Well, you are HALF right.

Having reviewed hundreds of financial models across more than fifteen industries, I’ve identified five most common mistakes entrepreneurs make when creating their financials. In this article and the corresponding video, we discuss each of these mistakes in more detail so that you can learn how to model your company correctly and get funded faster.

For pre-revenue companies, forecasting demand is very challenging because there is no financial history. To overcome that problem, some startup founders use random number generation as a tool to “logically generate” demand for their product or service. In their minds, this strategy is their best bet because they have no idea how to estimate demand otherwise.