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Startup Financial Models

Numbers that Explain Your Startup’s Potential

Use our free startup financial models and free templates, or work with our experts to build a customized model for your company!

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Healy Jones VP of Financial Strategy
Healy Jones
Former VC and Startup Operating Expert, VP of FP&A at Kruze Consulting

Free Financial Model Templates

Free Financial Model Templates

Click here to jump to our free financial model templates that you can use on your own. If your company hasn’t raised funding yet, we recommend you use one of our templates vs. spending money on an outsourced financial modeling service. Our free Excel templates are designed to be used by founders who have some Excel experience - but who don’t need to be Excel savants. Of course, if you are an expert modeler, you should 100% customize our models for your company’s particular needs - they are designed to be easy to modify. 

Free Model Templates

Work with Kruze

Kruze Consulting clients have raised over $10 billion in venture capital funding. Many of them were able to DIY their projections using either one of our templates or one provided by their venture investor, but many worked with our financial modeling team to either proof their files or build them from scratch. If you don’t know how to build a financial model for your startup, click here to schedule a time to speak with Kruze about a modeling project.

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Why Build a Startup Financial Model?

A financial model is the numerical expression of your startup’s goals - how many customers you’ll have, how many people you’ll hire, how your margins will improve. The creation of a financial model should tease out the key metrics and assumptions that you will test as you execute your business plan. The best startup financial models are usually not “right” - but the differences between the projections and the actual results can drive insight into the company’s potential and the targeted industry’s dynamics. Understanding the difference between your projections and your actual results can also help your executive team make important business decisions.

Free Financial Models and Templates

We have created several financial models and model templates that you can use for free. These are Excel spreadsheets that will help you create projections for your startup, provide the information you need to your 409A valuation firm, think through your cash burn and more. You’ll find helpful modeling tips, how-to instructions and videos below on this page - click here to jump to the modeling help section below. Simply click on the financial model template you want to download to get started - they are free! And if you need help with your modeling project, reach out to us at Kruze Consulting and we’ll see if it makes sense to work with us on a consulting project.

What is a Financial Model for Startups

For startups, a financial modeling is a finance tool that should be the numerical representation of the startup’s strategy and vision. It communicates and forecasts the company’s revenues, customers, KPIs, expenses, employee headcount and cash position. 

More sophisticated companies will use the financial model as a budget, informing the different divisions within the organization of their projected hiring, major expenses and financial goals. For early-stage businesses, or simple ‘ideas,’ the financial model is a business plan that outlines the near-term expenses and goals for the company, and longer-term illustrates the startup’s growth potential. Companies raising venture capital funding will use the projections as a tool to communicate with the VCs, and it will often be an important part of finance due diligence. 

What goes into a startup model template?

Most projections that investors and experienced founders are expecting to see are pretty much the same template - revenue and expense projections, and a net cash position. Some templates have the three most important financial statements (the income statement, cash flow statement and balance sheet), but many templates simplify to just the income statement and a projected cash position. We tend to recommend that founders use a template without the balance sheet and cash flow statement, unless they are working with a professional like us. This is because the balance sheet can be tricky to model correctly - an unbalanced balance sheet is embarrassing, and can cause investors to lose faith in the modeling exercise. Since most early-stage companies don’t have complicated working capital, capex or loans, the balance sheet adds less to the analysis that you’d think. Thus, we recommend that founders DIYing their projections use a template that doesn’t bother with the balance sheet and cash flow statement. Although, when we produce projections our templates and outputs always have these statements - but again, we do this everyday, so it doesn’t take us meaningfully longer to get them right. 

Forecasting Best Practices for Your Startup

Let’s talk about forecasting best practices, that’s building a three-year model that’s dynamic.

You want your model to easily change assumptions for each year, and you want to include a waterfall throughout the entire sales funnel, that’s going to include conversion rates and unit economics.

This is a best practice that the best CEOs do, because it provides an understanding of resources and effort required to close a sale. You also want to remember to include delays due to sales cycle and customer collections. This is going to affect your cash flows.

Next, you want to stress test your model, conversion rates, growth rates and see what the impacts are. When these start to go sideways, you’re going to be prepared. If not, it can kill your cash. Next, your model should include a balance sheet, income statement, and cash flows. Finally, be honest with yourself in building your model.

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How to Create a Financial Model

We’ve outlined the steps to create a financial model for your startup.

  1. Determine the goal of the model

    Understand the goal of the model so that you can decide how complicated to make the project. In general, if you are market sizing or doing back of the envelope estimates, less complicated is better. The next level of complication is if you are raising capital - too detailed, and your conversations with investors will get bogged down in minutiae. But have enough detail to show that you understand the market. Finally, for a detailed cash flow model for an operating business, it is typical to have very detailed analysis.

  2. Determine the KPIs for your company

    Understanding - and organizing - your KPIs helps you prepare to organize your key assumptions and outputs. Ideally, these KPIs are numerical factors and assumptions that you will be able to track - KPIs in a model a useless if you can’t track how you perform against them! Use industry standard KPIs as a starting point. Understanding your KPIs and how you track against them is one of the most important reasons to build a financial model for a startup - so don’t skip this step. 

  3. Get a financial model template

    Existing templates almost ALWAYS make sense. Don’t start from nothing; building a working piece of Excel is time consuming and a waste of time. Use one of the many free templates - like the ones on this page.

  4. Merge actual results into the template

    Don’t forget your actual financial results. If you have an operating business, merge your actual results into your projections. It’s best to start with reality, so you can level set. Strange ‘kinks’ in the model where actual results meet projections is a sign that there is something off with your projections.

  5. Start forecasting revenue

    Work your way down the income statement, starting with revenue. When you think about how much revenue you’ll have, make sure you understand what’s driving that revenue. Is there a particular number of customers or sales people or marketing spend/activities that will cause that revenue growth? You’ll also want to think about your cost of goods sold as you project your revenue. Note that this does NOT make sense if you are projecting a hardware or biotech company with a long time to revenue. Instead, for those, map out the effort you’ll need to reach critical product development milestones.

  6. Project headcount needs

    For most startups, headcount is the biggest expense (at least until marketing kicks in!) How many people will you need to achieve your goals, and how much will each cost? Don’t forget recruiting costs; even if you have a deep network, you’ll will likely need to hire in the out years.

  7. Estimate other expenses

    You can use examples from other successful companies to see how they’ve scaled their expenses. Remember to add in additional expenses as the company grows - this should also apply to your headcount expenses. Very few companies have over a 50% pre-tax profit margin, so make sure you are adding in expenses!

  8. Model working capital

    Working capital can be a surprisingly large driver of your model’s cash position. Read our section below. Basically, understand when your clients will pay you, and when you’ll need to pay big vendors.

  9. Review your projections

    Do a sanity check! Startup financial projections. Take a look at the summary. Does it make sense? Is the model telling the story that you envisioned? A sanity check is always a good idea.


KPIs Income statement

How to Format Financial Models

When it comes to building a financial model for your startup, formatting matters. A well-structured financial model is more than just a collection of numbers and projections; it’s a tool for storytelling and strategic planning. Proper formatting ensures that your model is not only easy for others to understand but also straightforward for you to update and manage. The best founders think of the numbers in the same way that they think about their pitch deck - it’s a means to explaining the strategy. 

How to Format Financial Models

Think of your financial model as a map guiding investors, team members, and other stakeholders through the financial landscape of your business. You don’t want to get bogged down in the minutiae of explaining how each formula works or where to find specific data. Instead, you want to focus on the bigger picture: discussing the implications of your financial data and the strategic direction of your business.

By investing time in properly formatting your financial model, you’re essentially streamlining future discussions and analyses. This approach saves valuable time and effort, allowing you and your stakeholders to concentrate on what truly matters - the growth, potential, and strategic decisions driving your startup. Let’s delve into how you can format your financial model for maximum clarity and impact.

Financial model formatting tips

  • Organize with Tabs or Top to Bottom
  • Use Cell Colors for Inputs and Assumptions
  • Maintain Consistent Formatting
  • Keep Naming Consistent
  • Include a Standard Income Statement Output
  • Output Key Performance Indicators (KPIs)
  • Consider Including Charts

Organize with Tabs or Top to Bottom
Effective Organization: Structure your model so that it’s easy to follow and find specific sections. One way to do this is with tabs for each major section. Another is by always having top-to-bottom layouts within any single sheet. Tabs can provide clear segmentation, while a vertical structure offers an easy scroll-through experience. 
Benefits: This organization aids in navigating through different financial aspects smoothly, whether you’re dealing with income statements, balance sheets, headcount planning, etc..

Use Cell Colors for Inputs and Assumptions
Color Coding: Assign specific colors to cells where inputs and assumptions can be modified. For example, blue cell fill with yellow text is a very common format for input cells. 
Visual Guidance: This technique visually guides users to areas where they can interact with the model, reducing the risk of unintended alterations in fixed data areas. You don’t want someone manually overwriting an important formula! 

Maintain Consistent Formatting
Uniform Styling: Use the same fonts, text sizes, and colors throughout the model. This consistency not only looks professional but also makes the model easier to read. 
Cohesive Appearance: Consistent formatting helps in maintaining a cohesive look across all sections, enhancing overall user experience.

Keep Naming Consistent
Uniform Terminology: Ensure that terms and labels are consistently used. For instance, if you use “R&D Expense” in one section, the same term should be used throughout the model. 
Clarity and Continuity: This consistency in naming prevents confusion and makes it easier for users to follow and understand the model’s structure and data. You don’t want someone trying to understand if “people” and “headcount” numbers are same thing, or if they are different topics. 

Include a Standard Income Statement Output
Familiar Format: Design your income statement in a standard, easily recognizable format. This familiarity allows users, especially investors, to quickly understand your financial position. 
Yearly Summaries: Include a high-level summary by year to provide a snapshot of the long-term impact of assumption changes. This is the place you can go when you make a major assumption change to see the long-term implications. 

Output Key Performance Indicators (KPIs)
KPI Display: Place critical KPIs, such as headcount, cash position, etc. below the yearly income statement output. This positioning aligns operational metrics directly with financial results.
Strategic Insights: These KPIs offer valuable insights into business performance and operational efficiency, crucial for strategic decision-making. Putting them right next to your yearly income statement summary makes it easy to diagnose what is causing major changes to the income statement. 

Incorporate Charts Alongside Numbers
Visual Representation: Use charts and graphs to complement numerical tables. This visual representation can make complex data more accessible and understandable. Engagement and Clarity: Charts can engage users more effectively and provide a clear visual interpretation of trends, patterns, and key metrics in your financial data. Putting them all onto a single page makes the model tabs cleaner, so consider having the outputs to models in their own section of the spreadsheet.

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Startup Financial Models - Tips and Terms

Startup deferred revenue

Deferred revenue, also called unearned revenue, matters to startups that get paid up front for service that they will deliver over time. Deferred revenue hits the balance sheet, and slowly converts to revenue, so really matters when creating a startup’s financial model.

A very important thing to know about deferred revenue is that, since balance sheets balance, the asset that goes on the balance sheet to balance out a new deferred revenue liability is cash.

So, why is deferred revenue a liability? If a company gets a payment in advance of delivering a service, you owe the service to the client. So it’s a liability because you owe that service to them. Let’s do a pretty simple deferred revenue example. Let’s say you’re a software as a service startup. A SAAS startup Your service is one hundred dollars a month and a client prepays for the full year, all 12 months.

The clients pays the startup twelve hundred dollars. In month one, the startup is able to recognize 100 dollars’ worth of revenue. so they deliver one hundred dollars’ worth of their service to that client. Now the deferred revenue balance was that full cash amount that they received the twelve hundred dollars. And then the recognized revenue of $100 is deducted. At the end of that first month, there is an eleven hundred dollar deferred revenue balance for this client. And this will continue over the life of the contract until the last month when the last one hundred dollars is recognized and this startup has a zero-dollar balance in their deferred revenue account.

Deferred revenue can cause some confusing impacts to a startup’s cash position. This video will help explain deferred revenue, and how to model it into your startup’s financial forecast.

Startup Financial Modeling 101

Top 3 considerations when building your startup’s first financial model: Know the goal to the model, as in, why are you building a model? Are you doing a back of the envelope financial validation of your idea? Or are you raising venture capital? Or does your team need to know their budget? Each of these requires different levels of detail. What are your business’ KPIs, as in what are the key performance indicators that will show you if your company is on the right track. These don’t just have to be accounting related, they could be about the product release schedule, the number of clients, etc. Don’t start from scratch, use an existing spreadsheet template. The act of connecting the cells and putting in the basic formulas is not going to help your startup grow - don’t spend the time on it. Take an existing, free model - like the one we offer, and use it.

Kruze Consulting Simple Startup Financial Model

This is a model that we’ve created and we provide for free on our website. We’re giving this away because there are a number of startup executives who want to build a simple financial model for their startup and who are comfortable enough with Excel to do this on their own.

And we also know that there are a large number of very early stage startups for whom hiring somebody like a Kruze Consulting to build a model just doesn’t make sense. This model is a very simplified version of one of the model templates that we use when we create financial models for our clients.

This free financial model has three main tabs. There’s a summary tab, there’s a graph tab, and there’s a model tab.

The summary tab is a high-level output that shows the income statement in cash and some of the KPI’s of the startup. We’ve seen that CEOs really like to use this to try to understand the macro level growth and expenses of their startups. And this is also the output that a number of our clients have used in their pitch decks when they go on to raise venture capital. We know this-this output works well because our clients have raised over 10 billion dollars in seed and venture capital. So, this is something that we really do believe resonates well during the fundraising process.

The graphs page is a graphical representation of some of the KPI’s of the startup like revenue growth headcount growth. Cash burn. It’s a really nice way to visually show what’s happening and the impact of the financial projections.

Finally, the model tab is the tab where all the magic happens. It’s in here that you can enter your projections, your headcount, your expenses, for things like marketing. It will output your cash and your cash balance in the cash balance section which is down at the bottom of this tab. Use the instructions tab for the detailed instructions and how to run the model tab.

We hope this free resource is helpful. We do offer financial modeling as a service to startup executives who are looking to get help when they’re putting together their financial model. So, contact us if that’s something you’d like to learn more about and to find out if engagement with Kruze makes sense.

Startup Budgeting

Having a solid budget helps your startup hit its goals without prematurely running out of cash. A number of us here at Kruze Consulting have worked in fast-growing startups and we’ve compiled our tips on how to make this budgeting process work. The most important thing is you need to understand or have a vision of what your long-term strategy is and what you need to do to achieve those goals. You’ll want to bake your budget around what your strategy is, and the budget is actually the financial representation of that strategy. You got to make sure your team knows what the strategy is - what your financial goals are in terms of the revenue that you need to hit and the cash need to burn. Or what features need to be built and then you’ll want to start to pay careful attention to the key parts of the budget. So, for most early-stage startups, the biggest part of burn is headcount. So, you want to pay careful attention to your headcount projections over the coming year and because you’ll put this together with your team and your team will have their headcount projections. It will really help them manage their team in a particular know when they need to start recruiting so they’ll know when they

should be able to bring on additional heads. You should have a very strong opinion on what the revenue should be over the next year. So for example, if you’re a SAAS company you should know what your next milestone needs to be in terms of recurring revenue so that you can successfully raise your next round. And then you’ll want to build your plan and your budget around what it takes to get there. You want to be very careful around your burn rate. So you want to know how much money you’re burning so that you don’t prematurely run out of money. And then you’ll want to know what your monthly burn is at the end of the year like the burn of the exit with at the end of the year so that you can project your cash out date.

You want to make sure you’re not… You want to make sure that you run out of cash when you expect to run out of cash which hopefully aligns with you being worth more and raising more capital. Once you’ve got all this put together you can make sure that it’s carefully shared with your department leaders so they can come back and build their detailed budgeting plans with you. And also, they can very clearly understand what their goals are.

How to record Equity Investments on the Balance Sheet

There are two ways that startups might want to record equity investments that they get, like venture capital rounds, on their balance sheet.

1) The Official GAAP way - probably overkill for most startups 2) The way investors like to see it

The GAAP way wants your equity section to have three accounts, Common Stock, Preferred Stock, and Additional Paid-in Capital. The hardest part of this is to calculate the Additional Paid in Capital is like the (Issue Price – Par Value) * Basic Shares Outstanding. Financing Costs are netted against this account.

Investors prefer to see each new fundraising round as a new equity account. If you use this method, you’ll have Common Stock, Seed Series Stock, Series A, Series B, etc. You’ll subtract your financing costs against each rounds amount. In this method, if you haven’t really calculated APIC, don’t include it on your Balance Sheet - you don’t want to give the impression that you are doing things on a GAAP basis when you are not. Notice that once fundraising round is closed, new funds aren’t added to it. New funds are placed in a new fundraising Equity account.

Why do venture capitalists prefer to see the Equity section in the non-GAAP, simpler method? Because it’s cost effective (from a cash-burn spent on accountants perspective) and it’s easy for them to understand how much the company has raised at each round of financing.

Budgeting tips

Here are a few tips for you as you’re building a budget for your startup.

  1. Headcount is going to be your primary expense in most cases, so this is the place to focus the most. Understanding why your different team members get hired, and how they help you get to the next milestone, is very important.
  2. You should have a really strong opinion on the amount of revenue and the amount of cash burn that you’ll have in the coming years. Don’t ask your department heads what they want to spend - tell them how much is available and ask them to work within the constraints.
  3. Match the amount of cash you need with the size opportunity of the company that you’re trying to build. If you are building a company with modest potential, don’t burn millions of dollars!

Where to start your Model

So you’ve got the great idea, and maybe even have the team put together. Heck, maybe you even have a client or two! Now you want to put together a financial model to figure out if you can raise capital, or how long you can last with your existing investment. How do you start that model? There is no single answer to the best way to get going, but here are a few places to think about at first:

  • How big is the market, and if you capture a small amount of it, do you have enough revenue to have a real business? VCs often ask this question - and it’s a good one for you as you try to decide how to formulate your business. Are you looking at a $100 million revenue opportunity in 3, 5 or 7 years? Or if you get a meaningful percent of the addressable market, will you only have a $5 or $10 million business? This will help you size how much venture funding you should think about raising (and how much you should burn in the near term).
  • How many people do you need on the team to get to your first milestones? If you need a developer or engineer, is that you or one of the other founders? Or will you need to have cash on the balance sheet to afford to pay a salary for an engineer? You’ll want to model out and project the salary requirements for the business in the first few years pretty carefully, as this is usually the majority of a startup’s cash burn at first.
  • Understand your product’s unit economics. How much will your clients pay, and what will your costs to deliver it be at first, then at scale? The goal is to understand when the company has a viable cash flow positive product. It’s totally OK, and normal, for a company to lose money on every sale at first, but you do eventually want to have positive cash contributions from your sales.

SaaS user metrics modeling tips

SaaS companies have specific financial modeling needs. In particular, a SaaS company wants to have a strong understanding of its user metrics. This includes how many users are acquired, churned, upgraded in a given period (we usually model it monthly.) Secondly, the length of time of contracts, and how your company is paid, matter for SaaS companies. Annual contracts that are paid up front can create deferred revenue, which is great for cash flow but does present some challenges from a modeling perspective. Finally, many SaaS models that we create have different pricing tiers to help the SaaS company understand the influence and impact of different pricing plans on the company’s top line growth and profitability.

Modeling Customer Acquisition Costs (CAC)

What are Customer Acquisition Costs and how do you model them? CAC looks, on a per new unit (i.e. customer basis) how much you pay to get a new customer. So, if you spend $10,000 on sales and marketing and get 100 new customers, your CAC is $10,000 / 100, or $100. The costs that go into CAC usually have two components, fixed costs, and variable costs. Examples of fixed costs would be costs that don’t increase as your company grows. The salary for your demand generation team would be a clear example of a fixed cost - if they are scalable, then you can acquire 1 user or 100 in a period and still have the same salary cost. Some software costs don’t vary much as the company grows, such as the cost of SEO software. Variable costs move up as the company acquires more customers. Clear examples of variable costs include some online marketing costs, such cost per click advertising. The cost of a sales team can also be variable, as you likely need to hire an ever increasingly large sales team to help your company close more and more new clients.

Tips for optimizing a startup’s runway

Managing a company’s burn and the runway is a constant challenge for an early-stage, funded company. Having helped hundreds of companies manage their burn, Kruze Consulting’s view is that the companies who have a well-developed budget are the ones who best manage their runway.

You need to have a vision of what your long-term strategy is and what you need to do to achieve those goals so that you can build a budget to manage your burn and optimize your runway.

Why do you need a budget? Because knowing where you want to spend, and how those choices impact your burn, is critical to managing your runway. Plus, you need something against which to measure your burn - and that’s called your budget!!

Your budget may have money coming in - other than venture capital money, that would be from revenue. Revenue may or may not be an important part of your projections. If you are something like a SaaS company, you’ll likely need a particular set of revenue and revenue growth numbers to raise your next round. Build your budget based on the targets you need to hit - and then you can modify your hiring and other burn based on how closely you hit your spending.

Money goes out of your company’s expenses. Every very early-stage startup spends >80% of their money on 3 things: Payroll, Rent, and Contractors. You may also have some large legal expenses from your recent fundraise, so ask your attorney if you haven’t already. Controlling these expenses give you levers you need to manage your runway.

Payroll: people are expensive. Hire the very best people that you can and pay them well. Always take the quality of people over quantity. As David Barrett highlights in this article, more people does not equal more output, it means more overhead.

Rent: Rent is expensive, so consider having some remote people, using a WeWork or headquartering in a city other than San Francisco or New York.

Contractors: Contractors are expensive… but less so than employees. You don’t have to manage additional rent/desk space, equipment, or training. You will also feel less likely flexing their hours/spend, although, in turn, they may give you less loyalty.

Projecting working capital

Working Capital is effectively the delta between a startup is paid by its clients and when it needs to pay its vendors. A more technical definition of working capital is the difference between current assets and current liabilities on a company’s balance sheet.

Working capital matters for startup financial models because understanding working capital becomes important for being able to project cash flows. Not all clients will pay immediately. Not all vendors need to be paid immediately (although some may be paid ahead of time).

Critical factors to think through when modeling the impact of working capital in a startup’s financial model include: how long it takes to get paid (especially if selling into the enterprise); if any revenue will be collected up front (creating deferred revenue and putting cash onto the balance sheet); which vendors are being pre-paid; how long the payment will be on other vendors.

If you are modeling a very early stage startup, it’s OK to assume you pay your vendors in the same month and defer your revenue collection 30 to 60 days. Later stage companies will likely need to have a more detailed working capital model built into their balance sheet and cash flow projections.

Calculating the cost of an employee in your model

When you are analyzing the cash flow of each new employee, you need to look beyond their core salary. Things like benefits, commissions, computer setup and more should be taken into account. Roughly these costs add on about 33% to the employee’s base salary, although with the huge amount of international hiring that we’ve seen, this can be lower in some non-US locations.

Another important metric to add to the cost of an employee in your model is wage inflation. We are seeing wages go up 10% to 25% a year at the moment for many technology employees, so don’t forget to include a salary increase annually. Our free templates have an assumption area where you can easily input this wage increase. 

What financial statements do startups need to produce?

All startup projections should have an income statement and a running cash balance. You can also have the three, traditional financial statements in your model if you’d like; those are:

  • Income statement
  • Balance sheet
  • Cash flow statement

Having all three does increase the complexity of your projection work - remember, the balance sheet should balance, the cash flow’s ending cash amount should equal the cash position on the balance sheet, and the cash flow statement and the income statement are intricately linked! So we don’t recommend that level of complexity for your seed stage model - just the IS and the cash position (maybe working capital or inventory).

How to set up realistic financial projections for startups

Silicon Valley-style technology and biotech startups, by their very nature, have extreme financial projections. No venture capitalist wants to invest in a highly-risky company where the management has modest projections! But how should a founding team set up realistic projections that are still aggressive enough to explain the massive opportunity and get VC’s interested in investing?

Step 1: make sure the projections capture the size of the market; bigger markets lend themselves to bigger projections and estimates, higher growth, etc.

Step 2: if you are projecting big growth/big top-line revenue numbers, don’t forget to have big expenses to go along with them. In particular, we see time and time again founders who have projections of reaching $50 million or more in revenue with just a handful of employees. It would be very unusual to not have a lot of headcount growth to reach a huge revenue size. And VCs will doubt your credibility if you show them a company that has 80% pre-tax margins at scale - this is, generally, pretty unrealistic. So scale up your expense projections alongside your revenue growth.

Step 3: Focus on the assumptions behind your unit economics. Make sure these make sense from your target customers’ point of view. The average consumer can’t pay $50,000 per year for a new product; the average small business can’t either. So, understand the customers’ willingness to pay, and then how that impacts your margins and growth.

Step 4: Research similar companies’ business models and financial statements. For example, if you are in the social media space, look at Facebook and Twitter - see how their financial statements changed over time. The same is true if you are an eCommerce business - plenty of eCommerce companies have gone public and shared their data.

Step 5: Don’t model yourself out of a deal! If you are truly focusing on a huge market opportunity with tons of potential customers willing to pay for your product, don’t be so conservative that your projections don’t look interesting to potential investors, co-founders and employees.

What projections needs to go into a VC pitch deck?

There are two types of standard financials that are needed in a VC pitch deck. and they can usually be shared in the same summary slide.

The first is for companies that already have real operations, so a pure “startup” with no operating history doesn’t really need this. But if your company is in business, you’ll want to show the historical financials in a summary format. And these should “roll” into the projections, which is the second thing you’ll need to show. Note that it makes sense to do this either quarterly or yearly - too much detail isn’t helpful in a deck.

The second is that the best pitch decks also have financial projections. Again, you’ll want to integrate these into the historical projections, and in most cases show them all on one slide. Keep in mind that the VC is trying to understand 1) what the company will look like when it raises the next round of funding; 2) how “big” the founders think the business can get; 3) how much capital the business will need; and 4) do the founders have a good grasp of the financial implications of their business model.

Comparing Projections to Actual Results

Budget versus actuals is one of the best tools in your tool belt. Budget vs actuals is when you take your financial model or projections and compare them every month to your actual results. The reason why this is so powerful is it brings a lot of scrutiny and discipline to your company. Especially as a founder, you need to know what your expectations are and how you’re doing against your expectations.

If you spend a couple of hours a month doing budget to actuals, it’ll pay for itself ten-fold.

Benefits of Budget VS Actuals:

  • Brings real accountability and scrutiny to your organization
  • Measures how you’re really doing vs. expectations
  • Gives visibility to where you are leaking money by coming in over budget
  • Displays where spend is not that effective
  • Ensures you’re hiring correctly

How to calculated cash out date

You will always want to know your startup’s cash out date. Your cash out date is the day your startup will run out of money in your bank account and you essentially will no longer be able to run the company. It is a day all startup founders fear and it is a day you should work toward never getting too close to.

How to Calculate Your Startup’s Cash Out Date

  • Average Cash Burn Rate / Cash on your Balance Sheet = # of Months to Cash Out Date
  • For “average cash burn rate”, use a 3 or 6-month average
  • You must know, there are different versions of restricted cash and things like that.
  • So if you have a lot of cash tied up with your landlord that you’re not going to be able to access, then don’t include that in your cash on your balance sheet
  • Because it can give you a false sense of security that maybe you have more cash than you actually do.

Cash Out Date Tips:

  • Ideally, you always have 12 months of cash in the bank
  • When fundraising, we recommend startups raise 18-24 months of cash
  • Provide Cash Out Date to investors… Don’t surprise your investors. Be visible and always communicate this number with your BOD. You don’t want them to have a confidence issue with you, the founder.

How to calculate your startup’s burn rate

Burn rate is one of the most important metrics you can actually calculate or monitor at your startup and it is effectively the amount of money you are spending every month. There are a couple of different ways or metrics in this. There’s also a couple of different time periods that you will want to think through when you’re calculating your startup’s average burn rate. We’ve also got a burn rate calculator you can use based on your recent bank account balances to estimate your startup’s burn rate.

2 Burn Rate Accounting Treatments:

  • Income Statement Burn Rate
  • Net Income on Income Statement is your burn rate
  • Cash Flow Burn Rate
  • Important for companies with alot of capital expenses
  • Operating Cash Flow + Investing Cash Flow = true cash flow burn
  • Then Think about the Average Time Period to Use To Calculate thesenumbers?
  • We recommend calculating a 6 month burn rate
  • Some founders prefer a 3 month burn rate

PROTIP: Look at your burn rate every month & share this in investor meetings. This builds confidence with your BOD.

Do startups need a financial model?

Yes, startups need to have a coherent financial model. Not only can a financial model help keep a startup from prematurely running out of cash, it is a useful device for managing an early-stage company’s cash, burn and progress against important KPIs. If your startup is going to raise venture capital funding - or even seed financing - you need a financial model to explain to the investors how much capital you’ll need, what you will spend the investment on, and the position that the company will be in at its next fundraise.

How to create a financial model for a startup

  1. Determine model’s primary goal (fundraising, managing cash, etc) 2. Determine the KPIs for your company 3. Grab a template off the internet, like ours 4. Merge actual results into the template 5. Start with revenue 6. Project headcount needs 7. Estimate other expenses 8. Model working capital 9. Review your projections

Free financial models for startups - What to look for?

Looking for free financial models for your startup? Look no further - we’ve got free model templates available above for your download. Look for files that do the bulk for the infrastructure work for you - you don’t need to spend time building fancy formulas, let the template do that for you.

Option Pool Modeling

Option pools are one of the most important items a founder needs to project and model, but many founders don’t understand the importance of this exercise.

Option decrease the founder’s ownership - every extra point of option pool comes at the cost of existing shareholders, most of which will be the founder(s)!

And venture capitalists will ask founders to eat that dilution before they invest - in effect, reducing the pre-money valuation they offering at a financing round.

So understanding how many options will be needed prior to a fundraise is important.

The right way to project a pool is to build out a robust hiring plan as part of the overall financial planning exercise. Once you’ve built out your overall hiring plan, you can use our template above to right-size the employee stock option pool. We’ve written an entire article on how to model an option pool here. So download that free template above and protect your ownership!!

Option Pool Modeling

When to Use Zero-Based Budgeting

Zero-based budgeting can be a useful tool for organizations that are looking to improve their financial performance and increase their efficiency. It can help them to identify and eliminate waste, and to allocate their resources in the most effective manner. 

Zero-based budgeting is a method of budgeting that starts from a “zero base” and involves analyzing the needs and costs of every function within an organization. One key advantage of zero-based budgeting is that it can help to identify and eliminate waste. By thoroughly reviewing all activities and expenses, an organization can identify areas where resources are being used inefficiently and take steps to reduce or eliminate these expenses. This can help to improve the organization’s financial performance and increase its efficiency. 

This makes it a particularly useful tool for startups experiencing a difficult economic environment. 

Setting Financial Objectives

A key issue we’ve seen multiple times (and maybe even made once or twice early in our career) is when a founder simply asks the department leaders “what will you do next year” - essentially, giving them an open book to request huge hiring and expenses and now dictating what the company needs to do to survive. Establishing clear boundaries for cash burn rates and revenue objectives are critical starting points that should be communicated to all departments before a budgeting process begins.

A common pitfall occurs when CEOs consult each department—be it sales, marketing, or R&D—about their respective needs and plans without first setting financial limits. Summing up these requirements often leads to unsustainable cash burn rates, placing the company at risk.

The smarter approach is to begin with clearly defined financial parameters. This allows your go-to-market teams to know precisely what their revenue goals are and the budget they have to achieve them. Similarly, rather than granting your R&D department an open budget, allocate a specific annual spend to help them reach their milestones.

Basically, the CEO should know what revenue targets need to be for the startup to remain default fundable. And the CEO should also know how much capital the company can burn comfortably. Giving these constraints to the teams helps avoid painful rebudgeting exercises. 

By initiating the planning phase with financial constraints, startups are better positioned to create a strategy that minimizes cash burn and maximizes the likelihood of hitting revenue targets.

What Kind of a Financial Model do you Need for a Venture Capital Pitch?

A financial model is an important step for most venture capital fundraises - however, the level of complexity and importance vary by the company’s stage. Very early stage companies can usually get by with a simple operating plan that says what the company will spend, how it expects revenue to grow and what it will look like at the two next fundraises. Later stage companies - starting with the Series B, but sometimes at an A if the round is large enough, will require more detail projections that have information on expected customer count, CAC, and headcount projections and more.

Should you use the same projections for a 409A as you do to raise VC funding?

NO! A 409A valuation is an essential part of a startup’s financial framework. This valuation, provided by a third-party accredited valuation provider, establishes the strike price for employees’ stock options. It is crucial to maintain a conservative 409A financial model to prevent overpricing and to ensure employees are motivated by fair stock option pricing. Founders often use the same financial models for their 409A valuation as they do for their venture capital pitches, which can lead to problems as these models are typically more aggressive and optimistic to attract investors. However, third-party 409A providers cannot discount these optimistic projections, resulting in potentially inflated valuations. Therefore, founders should develop realistic financial projections for their 409A valuations to avoid overvaluing their company and overpricing employee stock options. Use a more conservative, easier to attain set of projections for your 409A projections. 

Startup revenue model template - What goes into one?

If you are a SaaS business, download the free startup revenue model template on this page! What typically goes into a revenue model depends on the stage of the company that you are modeling. Companies already generating meaningful revenue, with multiple clients, can start to get pretty sophisticated with their pricing projections, average revenue per client and client retention, reorder, basket size, etc. Pre-revenue startups, or early-stage companies that don’t yet have a deep understanding of how they will charge clients, what pricing will be, retention/basket sizes, etc. should typically opt to be more extrapolated in their revenue modeling. For example, instead of having multiple features that result in dozens of possible pricing permutations, go higher level and estimate the number of clients you expect to have at one or two average price points.

Financial Plan vs Financial Model - What's the Difference?

What is the difference between a financial plan vs. a financial model? Venture capitalists tend to use these two terms interchangeably. Just like any good plan, when putting together a financial plan for an early-stage startup, a founder needs to have a clear vision of the company’s long-term strategy and goals. Fundraising needs should be part of that vision. 

Why use a template for your financial model?

We highly recommend you start with a financial model template instead of starting from scratch. While it can be tempting to start with a blank slate, most founders will benefit from using a model that already flows correctly and that doesn’t require a lot of basic infrastructure to get up and running.

As a founder, you have a million things to do - making a balance sheet balance, or changing a gross profit margin cell to a percentage format isn’t one of them. Many, many of the startup founders we work with can easily build their projections starting from a blank spreadsheet. But the best don’t, because they know that they get no ‘points’ for starting from scratch. Save the time, and use an existing financial model template like the ones we have for free on this page!

Explore Our Comprehensive Suite of Free Startup Financial Model Templates

Kruze has helped over one thousand startups with their accounting and finances, and we offer an exclusive collection of free financial model templates tailored to meet the diverse needs of emerging companies. Navigate through our suite of templates designed to empower startups with the tools necessary for solid financial planning and analysis.

Simple Startup Projection Model

The Kruze Simple Startup Projection Model is a battle tested template for technology startups aiming to streamline their financial planning process or impress a VC with thoughtful projections. This model is designed to be straightforward, enabling startups to effortlessly project their revenue and expenses. It’s an ideal starting point for founders who require a no-frills approach to financial forecasting.

Key Features:

  • User-friendly interface
  • Customizable revenue and expense categories
  • Ideal for early-stage technology startups

Startup Budget Template

The Startup Budget Template is crafted to accommodate the complexity of managing finances across multiple departments within a startup. We built this based on a financial model template that we used to help a client that had several departments, each spending several million a year - and that client eventually got acquired by one of the largest tech companies in the world! This comprehensive tool assists in budgeting for both hiring and non-FTE (Full-Time Equivalent) expenditures, ensuring that financial planning encompasses all facets of your growing business.

Key Features:

  • Department-wise budget allocation Integrated hiring plan
  • Suitable for startups with diverse operational units

SaaS Income Projection Model

Over 60% of our clients are SaaS businesses. This adaptable template is engineered to aid SaaS startups in forecasting revenue based on user count and other critical metrics, offering a robust framework for revenue projection and financial planning.

Key Features:

  • Scalable user count projections
  • Monthly and annual revenue forecasts
  • Tailored for SaaS startups seeking flexibility and precision 

Why Choose Our Templates?

  • Expertise-Driven Design: Developed by a team with deep insights into the VC funding landscape, including former VCs and seasoned CPAs.
  • Customization and Flexibility: Templates designed to be easily adaptable to the unique financial landscapes of different startup models.
  • Comprehensive Financial Planning Tools: From budgeting to equity management, our templates cover all critical aspects of startup financial planning.

How to pick a startup financial model template

When choosing a startup financial model template, there are a few key elements that founders should keep in mind:

  1. Free Financial Model Templates: The internet offers a plethora of free startup financial model templates. Don’t feel compelled to pay for one when there are high-quality, free options available. Ensure to choose a template from a reliable source to ensure accuracy.
  2. Excel and Google Sheets Based Templates: Excel and Google Sheets are universally used and recognized software. Choosing a financial model template compatible with these platforms ensures accessibility and ease of use for you and potential investors. VCs really expect to be able to play with your assumptions and model, and are likely to want to copy paste your numbers into their own template or into a section on their investment memo. So make it easy for them by providing a file format that they are familiar with.
  3. Income Statement and Cash Position Focused Templates: Select a template that emphasizes the income statement and projected cash position. These elements are critical for investors to understand the potential profitability and liquidity of your startup. The income statement shows how you’ll generate revenue and what your expenses will be, and then a simplified cash position will let the investor know when you need to fundraise again. In the earliest stages of companies, so pre-seed, seed, and even Series A, the balance sheet and cash flow statement often introduce unnecessary complexity, so we advise founders that are DIY’ing their startup’s financial model to just focus on the income statement and cash projection. 
  4. Customizable Financial Model Templates: Each startup is unique. Ensure the template you choose is easily customizable to reflect your startup’s specific circumstances and business model. But, it’s ideal if you can start with one that is focused around your specific business model - check out our SaaS financial model template, for example. 
  5. Easy to Get to Startup KPIs and Metrics: Look for a template that makes it easy to track key KPIs. The template may not actually produce these metrics, but it should make it easy for you to either add them in or let a VC back into them on their own. Remember, if you put in metrics that you can’t actually measure/track, it’s going to be hard to keep the model updated!

Some other tips for getting the most out of a startup financial model template include picking one that is easy to update - ideally, you can simply copy and paste you historical results into the template to update it. 

Modeling Cost of Goods Sold - Tips for Startups

When building a financial model for a startup, it’s crucial to accurately forecast the Cost of Goods Sold (COGS). Not only will investors focus on the profitability of delivering revenue, you, as a founder, should care deeply about how much of the company’s revenue creates gross profit, which is used to fund the rest of the business’ activities.

For product-based startups, forecasting COGS involves calculating direct material, labor, and overhead costs, considering economies of scale and vendor relations, and accounting for inventory management. Software and SaaS startups, on the other hand, should focus on server and infrastructure costs, third-party services, support staff, and possibly allocate a portion of development costs to COGS, reflecting the direct costs of service delivery.

In any financial model, COGS forecasting should be based on historical data, align with industry benchmarks, and be adaptable to changing business conditions. Regular updates and variance analysis are vital for maintaining accuracy. Understanding the relationship between COGS, pricing strategies, and cash flow is essential, especially for startups looking to scale. An accurate COGS forecast not only informs pricing but also provides investors with a clear picture of operational efficiency and potential profitability. 

Modeling Credit Card Expenses to Match Monthly Financials

One question we get from founders is around how to project their credit cards, which can sometimes have large balances. It’s crucial to handle credit card expenses in a way that mirrors your monthly income statements. This makes it easier to compare historical figures to projections and spot any discrepancies or trends. So we suggest using your existing chart of accounts, instead of having a dedicated line on your projections for credit card bills.

In practice, this means modeling expenses on an accrual basis, recognizing them in the month they were incurred regardless of when the credit card bill is actually paid. Of course, anyone who’s used a credit card will realize that this could result in a timing difference between expenses and cash outflows.

To account for this, assuming that you’ll be running big credit card bills, you can include a “Credit Card Payable” line or a “Credit Card Liability” item in the liabilities section of your model’s balance sheet. This represents the outstanding balance you owe on the card. You can project this balance as a percentage of monthly expenses, as it will likely stay relatively constant over time.

However, there may be instances where you make large, one-time purchases on the card, such as a 12-month prepayment for an annual software subscription. In these cases, you’ll still recognize the full expense in the month of purchase on an accrual basis. But you’ll want to manually adjust the credit card payable balance to spike upward, then decrease as you pay off the card. This helps illustrate the cash impact more accurately, and will help you get a more accurate bank account balance.

How Working Capital Can Impact a Startup’s Cash Flow

Functionally, in a startup’s financial model, working capital is the difference between when the company collects revenue from when it pays its vendors. Technically, the definition is the difference between current assets minus current liabilities.

For many companies, clients do not pay immediately. Sometimes it can take 30, 60, 90 days - or even more - to collect payment for goods and services already delivered. Startups selling into Fortune 500 or large enterprises (or governments!) need to be aware when generating their cash projections that revenue can take quite some time to collect. 

Make sure to consider what type of organizations your startup will be selling to when modeling your cash flows!

Information for Every Startup

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Experts in Financial Modeling

This is our team who wrote the information on this page and who authored the financial models share on the page.

Healy Jones helps run the finance team at Kruze Consulting, and love helping founders explain their vision through financial models. His clients have raised over $1B in VC funding.

Healy Jones blends his venture capital experience with operational knowledge to support startup financial strategies. With a background in investing in over 50 startups and holding executive roles in VC-backed companies, Healy has been featured in major publications like the New York Times, Wall Street Journal, and TechCrunch. His efforts at Kruze have been crucial in helping startups collectively secure over $1 billion in VC funding, showcasing his ability to effectively navigate financial challenges and support startup growth.

Scott Orn is Kruze Consulting’s COO, and he is a CFA. A former VC, he has invested in and worked with clients that have gone public and that have exited for hundreds of millions via M&A to public tech companies.

Scott Orn leverages his extensive venture capital experience from Lighthouse Capital and Hambrecht & Quist. With a track record of over 100 investments ranging from seed to Series A and beyond in startups, including notable deals with Angie’s List and Impossible Foods, Scott brings invaluable insights into financing strategies for emerging companies. His strategic role in scaling Kruze Consulting across major U.S. startup hubs underscores his expertise in guiding startups through complex financial landscapes.

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We're huge fans of Vanessa and the folks at Kruze Consulting. They set up our books, finances, and other operations, and are constantly organized and on top of things. As a startup, you have to focus on your product and customers, and Kruze takes care of everything else (which is a massive sigh of relief). I highly highly highly recommend working with Vanessa and her team.

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Pequity's Head of Operations & Legal

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Avochato has been growing rapidly in the past year – in fact, too quickly for us to keep up with books, taxes, and budgeting for growth. Partnering with Kruze Consulting has been fantastic to manage, track, and analyze our finances while we continue focusing on building our customer base. Kruze’s team knows what startups need.

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About Us

A CPA Firm Specialized in Startup Accounting & Finance

A CPA Firm Specialized in Startup Accounting & Finance

Startups are our niche, and our passion. Our clients have raised over $15 billion in VC funding. We are one of only a few outsourced accounting firms that specialize in funded early-stage companies - we only offer financial and tax services to fast growing startups in the Pre-Seed, Seed, Series A, Series B and Series C stages.

The Right Accounting Partner for Your Startup’s Next Round

The Right Accounting Partner for Your Startup’s Next Round

We know how to de-risk your startup’s next venture capital round. Our team makes sure you are ready to fly through your next VC’s accounting, HR and tax due diligence. And when you use us as your bookkeeper, we set up and keep up-to-date a due diligence folder so you can get that next round of fundraising.

A Leader in Cloud Accounting Software

A Leader in Cloud Accounting Software

Our practice is built on best of breed cloud accounting software like QuickBooks, Netsuite, Gusto, Rippling, Taxbit, Avalara, Brex, Ramp and Deel. Technology makes us more efficient, saving our clients money and letting us offer higher value services like FP&A modeling, 409A valuation, and treasury advice. Startups deserve to work with CPAs using modern software.

Trusted by Top Venture Investors

Trusted by Top Venture Investors

Top angel investors and VCs refer Kruze because they trust us to give the right advice. Our clients are portfolio companies of top technology and Silicon Valley investors, including Y-Combinator, Kleiner, Sequoia, Khsola, Launch, Techstars and more. With us, your books and taxes are in order when it’s time to raise another round of venture financing.

What types of startups does Kruze Consulting usually work with?

What types of startups does Kruze Consulting usually work with?

Kruze Consulting works with funded Delaware C-Corps. Our clients have secured Pre-Seed to Series C or Series D funding. We look to partner with our clients, going beyond the typical outsourced accounting relationship and seeking to provide a higher level advisory role. We feel honored to be a part of making the world a better place, even if it’s one debit and credit at a time.

Accounting, Finance, Taxes, & Payroll all in one solution

Accounting, Finance, Taxes, & Payroll all in one solution

Startup CFO services, startup accounting and bookkeeping services, startup annual taxes, expense reports, payroll, state sales taxes: we've got you covered. Our software provides custom tailored dashboards that can be provided weekly or monthly, depending on your preference and plan. Founders are often so busy building their company that they don’t have time to take care of their finances. Traditionally, these companies have had to work with a basket of people to get their work done, including bookkeepers, accountants, AP clerks, CFOs, consultants, and tax accountants. At Kruze Consulting, our founders have one point person, saving time and money.

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Viz AI

$250M+ VC Funding Raised


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Startup Venture Capital Assistance

With former venture capitalists on staff, our team is here to help you navigate the fundraising process and manage your board of directors

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Clients who have worked with Kruze have collectively raised over $15 billion in VC funding.

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