Build a financial model for your business idea

Create the Story for Your Business

Create Your Revenue, Cost and User Estimates

Share a First Draft of Your Financial Model
Share your progress in your project section to get feedback from other students

Understanding your Business and Building Financial Statements

Presenting your Financial Model and Building Capitalization Tables

Class Wrap Up

Share your final financial model
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.

To start this week, download the course's Google Spreadsheet (either put into your Google Docs or download and use in Excel, your choice), read the Readme, read the resources below, and then start outlining your business model in the Week 1 sheet.
- This course's spreadhseet template, Course Template Spreadsheet (and read the README)
- Taylor Davidson on Three keys to building great financial models
- David Teten on Startup Financial Models: Best Practices in Spreadsheet Design
- Matthew Carroll on Quora about Where can web startups learn about financial modeling that accounts for important metrics and costs?
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.

Note: Examples of financial models can be found under "More Resources" at http://unstructuredventures.com/build.html
The goal this week is to model how your business spends money to acquire users and sales. What that equates to in the financial projections are our cost budget, user acquisition estimates, and revenue estimates.
- 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
- Sumwise, How to model a SAAS business model
- Jonathan Balogh, Introduction to Cohort Analysis for Startups
- Dave McClure, Startup Metrics for Pirates
Note: Each 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.

Week 2 Assignment

Build out the Week 2 tabs on the course template spreadsheet for your business. The template is a starting point for your model, a shell: read the resources as a guide on how to do certain calculations for your business. This week's resources provide examples of financial models, so download their sample models, and view my Example Model (at http://bit.ly/examplemodel ) to provide ideas on how to do the calculations as well. There are many right answers here, not one single right answer.

Most importantly, while creating your financial model, don't lose sight of the driving question: "How do you spend money to acquire users and sales?"

Week 2 Discussions

Per the asignment in the Project Brief, share your Business Model (Week 1's assignment) and Cost, User and Revenue Model (Week 2's assignment) in this Discussion thread, and follow the instructions. Feel free to ask 1-3 questions about the main questions you're trying to solve.

If you do not want to share your model with everyone, then please post what you are willing to share.
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 statment.
- 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
- 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.
- Fred Wilson, The Profit and Loss Statement
- Fred Wilson, The Balance Sheet
Week 3 Assignment

Build out the Week 3 tabs on the course template spreadsheet for your business. The template is a starting point for your model, a shell: read the resources as a guide on how to do certain calculations for your business.
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).
- Fred Wilson, How to draw up a capitalization table
- Mark Suster on Want to Know How VCs Calculate Valuation?
- Venture Hacks, What Should I Send Investors: Deck
- Garage Ventures, Perfecting your Pitch
Week 4 Assignment

Build out the Week 4 tabs on the course template spreadsheet for your business. The template is a starting point for your model, a shell: read the resources as a guide on what to create. The assignment is to create the applicable financial summaries to use to present to people you need to convince. That could be investors, employees, or even yourself.

The resources provide examples, but not the answers that fit your exact need and goals with your business at the moment. There are many right answers here, not one single right answer.
Once you've finished building a financial model, it doesn't end there. Always remember that the best financial models are an outline of your business model, and it's important to always be building and testing your fundamental business model.
- Business Model Generation, The Business Model Canvas
- Steve Blank, The Business Model / Customer Development Stack
And while this class doesn't cover the topic of fundraising specifically, it's impossible to leave this class without some questions about the mechanics of fundraising. Here's a start:
- Paul Graham, A Fundraising Survival Guide
- Bernard Moom, Startup Fundraising 101
- Mark Suster, Evaluating the choice between equity and convertible debt

Nic Santana

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