Mon, 14 February 2022
Best Practices for Building a Financial Model
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Here are some best practices in building a financial model for your startup.
Consider setting up the model to use for managing the business as well as the fundraise.
Design the layout so you can test assumptions and scenarios.
Capture your assumptions into the model so you can change them when the business conditions change.
Use conditional features of the spreadsheet to highlight in color the status of the metric or result.
Highlight key numbers such as revenue, margins, and cash flow.
Embed metric calculations into the spreadsheet, so it automatically calculates often-used metrics.
Set up the spreadsheet so you can have multiple scenarios.
Apply checksums to verify your spreadsheet is accurate.
Be sure to use a standard font and a clean design throughout the spreadsheet, as investors will correlate a clean-looking spreadsheet with accuracy of numbers.
While these practices will take a little more time, the benefits outweigh the cost.
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