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How do you model 2 and 3 year growth for financial projections of a mobile tech startup?

Vanessa Kruze Kruze Consulting

Vanessa Kruze

CEO and Founder of Kruze Consulting

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I’m a CPA, and my firm is the accounting partners and interim CFO for 700+ startups (a few of which are mobile tech/apps) and I’ve helped many of my companies build financial models that have gotten the thumbs up from top VC firms and the pickiest of investors/board members.

While you may be able to start with a template, keep in mind that your business is unique, and therefore your model should be as well. Here are some common points that you’ll want to include in your financial model:

  • 3 Years of Projections. Occasionally investors will ask for more/less, but start with 3 years.

  • 3 Statement Model. Include a Profit & Loss Statement, Balance Sheet, and Statement of Cash Flows. Each should balance and tie back to each other (this gets tricky).

  • Your KPI’s should be your Drivers. Every company has a dashboard of metrics that they track growth and success by. A few examples include number of users, customers, margin, customer acquisition cost, Twitter followers, website traffic, etc. Look to the past and show that there is a correlation between X (could be # of Sales Reps) and Y (could be your revenue), then use this as a driver towards the future projections.

  • Churn Customers will leave. Account for this.

  • Waterfalls. Your financial model should be dynamic. Waterfalls show how you actually performed against your budget and then resets the future accordingly.

Focus on explaining your company’s strategy using numbers. For a mobile app, this means you’ll be spending on customer acquisition costs, focusing on product let sales, etc. Startup financial projections for a mobile company that has a subscription element really are similar to a SaaS company, so showing new users, existing users, churn, net users, etc. is what a VC will expect to see. We have free financial models available, and also have a page dedicated to explaining SaaS accounting - check them both out. These models take a lot of time to build and are highly personalized, so it really is best to consult with a professional. If you’re planning on raising $3M+ you should come prepared with a well thought out financial model.

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