A startup financial model holds an assumptions tab, a revenue build, a cost build (salaries, overheads, cost of sales and capex), the three financial statements, a cash runway and scenarios. Each tab reads from the one before it, so when you change one assumption, the change flows all the way down to your cash.
Here's the idea in one line. 400 customers paying $50 a month is $20,000 of monthly revenue. If the team costs $43,200 a month and everything else adds $8,000, the company burns about $31,000 a month, and a $750,000 raise lasts about 24 months. A good model shows each of those steps on its own tab, so an investor can check any one of them.
Below is every tab, in the order we build them, with the question an investor asks of each.
The tabs
The tabs, in order
Twelve tabs cover almost every startup. Smaller models merge a few of them. Bigger ones split revenue or costs by product or country.
| Tab | What it holds | The question an investor asks |
|---|---|---|
| Assumptions | Every input in one place, like prices, conversion rates, pay and start dates, each with its source | Where did this number come from? |
| Revenue | Customers, price and conversion, month by month | How do you win customers, and what do they pay? |
| Cost of sales | What it costs to deliver each sale: hosting, payment fees, materials, delivery | What's your gross margin, and does it improve as you grow? |
| Salaries (hiring plan) | Each role, its start date, its pay and the cost on top of pay | Who do you hire with this money, and when? |
| Overheads | Rent, software, insurance, legal and accounting, marketing | What does it cost to keep the company running? |
| Capex | Equipment and other assets you buy, and how they wear down over time | What do you have to buy before you can sell? |
| P&L | Revenue less costs, by month and by year | When do you make a profit? |
| Balance sheet | What the company owns and owes at each month end | Does it balance every month? |
| Cash flow | Cash in and out, including when customers pay and when you pay suppliers | When is cash at its lowest? |
| Runway and use of funds | Months of cash left, and where the raise goes | How long does this round last, and what does it buy? |
| Scenarios | Base, upside and downside cases run from the same model | What happens if sales come in at half the plan? |
| Summary and KPIs | The headline numbers and charts that go on the deck | Do these match the slides? |
The P&L, balance sheet and cash flow are the three statements. A model where all three link up is called a three-statement model, and it's what most investors expect from seed onwards.
Costs
What costs go in a startup financial model
What costs go in a startup financial model? Four groups, and each one gets its own tab. Founders tend to forget the cost of a hire on top of their pay, and the small monthly bills that add up.
Salaries
Salaries are usually the biggest cost in a startup. Each hire gets a row with a role, a start date and a monthly cost. That cost is more than the pay. Payroll taxes, pension and benefits sit on top, and the amount depends on the country. We use 20% in the example below. Tie start dates to what the business needs. A second salesperson starts when the first one has a full pipeline. Our hiring plan case study shows how to tie hires to bookings.
- Role, start date and monthly pay
- The cost on top of pay, as a % of pay
- Recruitment fees and a laptop for each new hire
- Pay rises, usually once a year
Overheads
Overheads are the costs you pay whether you sell anything or not. They're often called opex. Each line is small, so they're easy to skip, and together they're often the second biggest cost.
- Rent and utilities
- Software subscriptions
- Insurance, legal and accounting
- Marketing that isn't tied to a single sale
Cost of sales
Cost of sales is what it costs to deliver each sale. It rises and falls with revenue. Revenue less cost of sales is your gross margin, and investors compare it across companies in your sector.
- Hosting and cloud costs for software
- Card and payment fees
- Materials and manufacturing for hardware
- Delivery and customer support
Capex vs opex
Capex is money spent on things that last, like machines, vehicles or a product you'll sell for years. The model doesn't take the whole cost in the month you pay it. It spreads the cost over the asset's life as depreciation. Cash still leaves on the day you pay, so the cash flow tab shows the full amount. Getting this split right can change how your profit looks. Our capex vs opex case study shows one company where it did.
Assumptions
Where the assumptions come from
The first thing an investor asks about a number is how you got it. Every assumption comes from one of four places.
- Your own data, like past sales, sign-ups and conversion rates
- Quotes and contracts, like a landlord's quote or a signed customer price
- Public benchmarks, like typical churn or pay for a role in your city
- Labelled guesses, for anything you haven't tested yet
The rule is simple. Put every assumption on one tab, and write its source next to it. A guess is fine if it's labelled as a guess, because an investor can test a guess. A number with no source makes them doubt the rest of the model.
| Assumption | Value | Source | Label |
|---|---|---|---|
| Price per customer | $50 a month | Current price list | Actual |
| Trial to paid conversion | 4% | Last six months of sign-ups | Actual |
| Office rent | $2,500 a month | Landlord's quote | Quote |
| Monthly churn | 3% | Public SaaS benchmarks | Benchmark |
| New customers per $1,000 of ads | 5 | Our estimate, to test next quarter | Guess |
Revenue
Revenue: drivers, not a growth rate
The weakest revenue line in any model is "+20% a month." It can't be tested, and it can't be explained. Build revenue from the things that drive it instead: how many customers you win and what each one pays.
Now each part has an owner. Marketing owns leads and sales owns conversion. The customers you lose each month are your churn. If an investor thinks conversion is too high, you change one cell and the whole model updates. Our churn rate case study shows what happens when that one number looks too good.
Worked example
Worked example: a 6-person SaaS start-up, month 12
This is a made-up company with round numbers, so you can follow the arithmetic. It sells software for $50 a month and has just raised $750,000.
| Line | Working | Month 12 |
|---|---|---|
| Customers | From the revenue tab | 400 |
| Monthly revenue (MRR) | 400 × $50 | $20,000 |
| Cost of sales | 10% of revenue, for hosting and payment fees | $2,000 |
| Salaries | 6 people × $6,000 × 1.2 for costs on top of pay | $43,200 |
| Overheads | Rent, software, insurance and other | $6,000 |
| Total costs | $2,000 + $43,200 + $6,000 | $51,200 |
| Net burn | $51,200 - $20,000 | $31,200 a month |
| Runway | $750,000 ÷ $31,200 | About 24 months |
Illustrative only. In a real model, revenue and costs change every month, so the real runway comes from the cash flow tab.
Break-even
Break-even and runway
Investors look at two dates in every model. The first is when the cash runs out. The second is when the company stops needing more cash.
In the example, fixed costs are salaries plus overheads, $49,200 a month. The gross margin is 90%. So the company breaks even at about $54,700 of monthly revenue, which is about 1,100 customers at $50. It has 400 today.
Runway tells an investor when you'll need to raise again. Break-even tells them whether you'll need to. If break-even comes after the cash runs out, the model should show where the next round comes from. A monthly view matters here, because a yearly total can hide the month when cash is lowest. Our guide on how many years financial projections should cover shows how.
Model vs plan
What a financial model is not: business plan and pitch deck
Founders often ask for one when they need another. Here's the difference.
| What it is | Who reads it | |
|---|---|---|
| Financial model | A spreadsheet that turns your plan into numbers, month by month | Investors and their analysts, lenders, your board |
| Business plan | A written document on the market, product, team and strategy | Banks, grant bodies, some early investors |
| Pitch deck | The short version for investors, about 12 to 20 slides | Every investor you approach |
The deck's numbers should come from the model. When they're typed in by hand, they drift apart the first time the model changes, and an investor who reads both will spot it.
Checklist
Checklist before you send your financial projections
Run these six checks before any investor opens the file.
- Every input sits on the assumptions tab, with its source
- No numbers are typed straight into formulas
- The balance sheet balances in every month
- Cash on the cash flow tab matches cash on the balance sheet
- Base, upside and downside cases all run from the same model
- Every number on the deck matches the summary tab
For a longer list, see our financial model review checklist for seed founders. If you'd rather hand it to someone else, we also do a financial model review.
Your questions
Questions founders ask
What should be included in financial projections for investors?
Most investors expect monthly projections for at least the first 12 to 24 months, built from one assumptions tab. Include revenue built from drivers, the cost build (salaries, overheads, cost of sales and capex), the P&L, balance sheet and cash flow, the runway and use of funds, and base, upside and downside scenarios. Each number should trace back to an assumption with a source.
What costs go in a startup financial model?
Four groups. Salaries, with the cost on top of pay and a start date for each hire. Overheads, like rent, software, insurance, legal and accounting. Cost of sales, which is the cost of delivering each sale. And capex, the equipment and other assets you buy, which the model spreads over their life as depreciation.
Where do financial model assumptions come from?
From four places: your own data, quotes and contracts, public benchmarks and labelled guesses. Keep every assumption on one tab with its source next to it. A guess is fine if it's labelled as a guess, because an investor can test it. A number with no source makes them doubt the rest of the model.
What is the difference between a financial model and a business plan?
A business plan explains the business in words: the market, the product, the team and the strategy. A financial model turns that plan into numbers, month by month, so you can see revenue, costs and cash. The pitch deck is the short version for investors, and its numbers should come from the model.
Can I build a startup financial model in Google Sheets?
Yes. Google Sheets handles a full three-statement model with scenarios, and it's easy to share with co-founders and investors. Excel is still common with banks and larger funds. Whichever you pick, keep one file as the master and send copies, so the numbers don't split into versions.
Next step
Get one built
We build the model first and the pitch deck from it, so every number on a slide comes from a tab. See the pitch deck and financial model service.
Still choosing who should build it? Compare your options.