How do I Create a Financial Model for my Startup?

I'm going to run through how to create a simple financial model for startups in Excel. This is something you'll need for investors, funding, and for you to assess your financial position and the plan feasibility.

Effectively, you'll make assumptions about items you consider feasible and reasonable (don't work backwards from 1% of the world market) and project them. Then apply scenario analysis. You can download the Excel file below.

Startup Model.xlsx

Download XLSX • 14KB

There's at least two caveats to consider. First, unlike what I did here, you should probably break things down by product line. Second, you'll notice the assumptions embed growth. Sales start slow but as you gain recognition, increase advertising efforts, and so on, they should pick up.

Additionally, this was just an income schedule. The rest of the information should follow the same logic. Provided you link everything correctly, then, if your assumptions are reasonable, then your models should be reasonable.

So, in this model, we assume the bakery will start getting 15 potential customers to walk through per day and 50% of them will make a purchase. Every month, you aim to get 10 additional potential customers to walk through per day. We assume the product gets sold for $5 and costs $2 to make.

From there, we model the products sold per month and derive revenue and cost of goods sold (COGS) to get gross profit and margins.

Finally, we add a data table (typically I use the button, but I've already used it everywhere, so data tables are another alternative to consider and are easier, though less flexible, for most people). The data table here calculates annual revenue as price sold and additional customers added vary. You may want to vary other inputs and assumptions at your discretion.

For all this to work, you do need to link all the calculations and forecasts back to the assumptions. Make sure you do that.

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