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Where can web startups learn about financial modeling that accounts for the important metrics and costs?

Vanessa Kruze, CPA, is a leading expert in startup taxes and tax compliance. Her team at Kruze Consulting has filed thousands of tax returns for companies that have raised billions in VC funding, and her work has been diligenced by leading VCs, attorneys, and M&A teams at the largest technology companies.
Vanessa Kruze, a highly-experienced CPA, brings valuable tax expertise to startups, drawing from her rich background at Deloitte Tax and as a financial controller for a $20 million startup. As the leader of Kruze Consulting, recognized multiple times in the Inc 5000 list, she specializes in navigating the complex tax landscape for startups. Her firm is known for delivering precise and strategic tax solutions, delivering tax credits utilizing advanced tools to ensure compliance and optimize tax benefits for startups throughout the United States.

Table of contents

When it comes to learning about financial modeling, I’ve outlined some key points below. While you may be able to start with a template, keep in mind that your business is unique, and therefore your metrics and costs will be as well. You won’t need to start from scratch if you’re working with a professional (whether that be your VC firm, your CFO, or a seasoned angel investor/advisor in your industry): they’ll know the important metrics and average costs. 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 projection and then resets the future accordingly.

Don’t show an investor a financial model that shows smooth growth “up and to the right.” No company’s growth is without bumps. 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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