Build a financial model for your business

Create the Story for Your Business

To start this week, download the course's spreadsheet outline through Google Docs at http://bit.ly/t
To start this week, download the course's spreadsheet outline through Google Docs at http://bit.ly/tdavidsonspreadsheet (either put into your Google Docs or download and use in Excel, your choice), read the Readme, read the resources, and then start outlining your business model by answering the 2 questions in the Week 1 sheet.

Note: The spreadsheet is provided as a template. You can either add the Spreadsheet to our Google Docs or download to use in Excel. You are free to create your own template or structure as long as you pay attention to the best practices outlined in the template provided above. You will receive the Starter Model for free (via separate email) to provide you an idea on structure and best practices, but it is best if you create your own from scratch.
Complete the Week 1 tab in the course spreadsheet
Share your progress in your project section to get feedback from other students

Create Your Cost Projections

Complete the Week 2 tab in the course spreadsheet by creating your cost projections.
Complete the Week 2 tab in the course spreadsheet by creating your cost projections.
Complete the Week 2 tab in the course spreadsheet
Share your progress in your project section to get feedback from other students

Create User, Customer, and Revenue Estimates

Complete the Week 3 tabs in the course spreadsheet by creating your user, customer, and revenue esti
Complete the Week 3 tabs in the course spreadsheet by creating your user, customer, and revenue estimates.
Complete the Week 3 tab in the course spreadsheet
Share your progress in your project section to get feedback from other students

Class Wrap-up

Complete the Week 4 tab in the course spreadsheet by creating a summary of your financial projection
Complete the Week 4 tab in the course spreadsheet by creating a summary of your financial projections in the format of a simple income statement.

ADVANCED: Complete the Advanced Week 4 tabs and create a set of full financial statements and a capitalization table.
Complete the Week 4 tab in the course spreadsheet
Share your progress in your project section to get feedback from other students

Additional Resources

A great financial model isn't just a spreadsheet: it's an outline of your fundamental business model that can be used to understand your business.

The goal of this class to create a "minimum viable model" (leveraging the idea of the minimum viable product). This week, the goal is to outline your business model by setting up the model and outlining your business model. First, we outline, then, we'll start building the model.
- This course's spreadsheet template, Course Template Spreadsheet (and read the README)
- Read 7 Questions to Assess Your Business Model Design by Alexander Osterwalder
- Fred Wilson, Web and Mobile Revenue Models
- Business Model Generation, The Business Model Canvas
- Steve Blank, The Business Model / Customer Development Stack
The goal this week is to model how your business acquires users, customers, and sells your products and services. We’ll start by covering best practices in spreadsheet design, then talk about ways to project your users, customers, and sales.
- David Teten on Startup Financial Models: Best Practices in Spreadsheet Design
- Taylor Davidson on Three keys to building great financial models
- Fred Wilson, Forecasting
- Matthew Carroll on Quora aboutWhere can web startups learn about financial modeling that accounts for important metrics and costs?
- Joe Stump, How To: Spend your investor’s money
- Startup Nation, Estimating Startup Costs for a New Business
- Sharon Munroe, The Cost of Startup Up a Retail Shop
- Colleen DuBaise, How to Calculate Startup Costs
Note: Many of these links provides examples of specific types of business, and includes links to spreadsheets. Your task is to apply the same thinking for your own business, whether it fits the business models they discuss or not. Each link also provides links to other valuable resources that are worth reading.
Last week we created a cost budget for starting your business. But your cost projections won’t be complete until you are able to project your users and revenues, as many of your costs will vary depending on how many (and how fast) you acquire users, customers, and make sales. This week we’ll create user, customer and sales estimates to create your revenue projections. The resources adds to the resources covered in earlier weeks about business models, and provides more detailed examples of how to think about and model particular types of businesses. Leverage your business model description from the first week and the user estimates created last week to complete your revenue projections.
- Tim Berry, Creating a Sales Forecast
- Tim Keane, How to Prepare a Sales Forecast for a Business Plan
- David Skok, Modeling User Acquisition
- Andrew Chen, How to Create a Profitable Freemium Startup
- Andrew Chen, How to Calculate Cost per Acquisition for Startups relying on freemium, subscription, or virtual items business models
- Jonathan Balogh, Introduction to Cohort Analysis for Startups
- Fred Wilson, Revenue Models: Commerce
- Fred Wilson, Revenue Models: Advertising
- Matthew Toren, How to Forecast Your Sales
- Monica Parpal, Projecting Sales for a New Restaurant
- Sumwise, How to model a SAAS business model
It's important to understand how to present your projections. Remember, it all depends on your audience. What you would present to a potential hire, a potential angel investor in your first discussion, or a venture capitalist at your first board meeting, are all very different. And once you start talking to outside parties that are going to own a part of your company, it's important to know how ownership is outlined (i.e. how capitalization tables are structured).
- Venture Hacks, What Should I Send Investors: Deck
- Garage Ventures, Perfecting your Pitch
- Paul Graham, A Fundraising Survival Guide
- Bernard Moom, Startup Fundraising 101
- Mark Suster, Evaluating the choice between equity and convertible debt
- Fred Wilson, How to draw up a capitalization table
- Mark Suster on Want to Know How VCs Calculate Valuation?
ADVANCED: Financial Statements

For the advanced students, the goal this week is to take the cost, user and revenue estimates and package them up into financial statements, which is the most common way we communicate our financial projections. But it's important to know that financial projections, or at least the more technical components, are not the most important parts of understanding your projections. Start by understanding the key metrics and potential scenarios, and then build an income statement.
- Steve Blank, No Accounting for Startups
- David Skok, Designing Startup Metrics to Drive Successful Behavior
- Neil Patel, Nine Metrics to Help You Make Wise Decisions About Your Startup
- Dave McClure, Startup Metrics for Pirates
- SEC, Beginner's Guide to Financial Statements
- Plum Solutions, Understanding Scenarios and Sensitivity Analysis
Note: We are not going to cover balance sheet or statement of cash flows in this course. The model provides includes a sample of each, but these statements are not key to creating your first projections or talking to experienced angel or early-stage venture capitalists. If you need full financial statements, there are further materials explaining these components of financial projections throughout the web.

Dan Devine

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