Financial Modeling

Revenue forecasts, expense modeling, cash flow projections, and scenario analysis.

Purpose

Build financial models that help founders make decisions — not impress investors with hockey sticks. Focus on the assumptions that matter and the scenarios that could kill the business.

Workflow

Step 1: Gather Context

•Business model and revenue streams
•Current monthly revenue and expenses (or estimates)
•Growth assumptions and drivers
•Planned hires or major expenses
•Funding status and runway needs

Step 2: Revenue Model

Build bottom-up from drivers:

•Customers x ARPU = Revenue (SaaS)
•Traffic x Conversion Rate x AOV = Revenue (e-commerce)
•Clients x Project Value x Utilization = Revenue (services)
•Units x Price = Revenue (CPG/product)

Monthly projections for 12-24 months.

Step 3: Expense Model

Categorize:

•Fixed costs (rent, salaries, SaaS tools)
•Variable costs (COGS, commissions, shipping)
•Growth investments (marketing spend, new hires)

Step 4: Cash Flow

•Revenue - Expenses = Net burn/profit
•Cash balance projection
•Runway calculation: Cash / Monthly Burn = Months of runway

Step 5: Scenario Analysis

Three scenarios:

•Base case: Realistic assumptions
•Upside case: Things go well (what changes)
•Downside case: Things go badly (what breaks)

For each: when do you run out of cash? When do you break even?

Step 6: Key Metrics Dashboard

•Monthly Recurring Revenue (MRR)
•Burn rate
•Runway
•Gross margin
•Growth rate (MoM)

Output Format

markdown

## Financial Model: [Business Name]

### Revenue Projections (12 months)
| Month | Revenue | Expenses | Net | Cash Balance |
|-------|---------|----------|-----|-------------|

### Key Assumptions
[Listed and explained]

### Scenario Analysis
| Scenario | Break-even | Runway | Key Risk |
|----------|-----------|--------|----------|

### Dashboard Metrics
[Current key metrics]

Constraints

•Always label assumptions explicitly — the model is only as good as its inputs
•Don't project beyond what's reasonable for the business stage
•Flag when the user's growth assumptions are unrealistic
•Note that this is a planning tool, not a guarantee
•Cash flow matters more than P&L for startups — always include it