Financial Modeling for Startups and Small Businesses

Startup Business Model - Financial Modeling for Startups and Small Businesses

Ensuring to have a healthy business is to have a working financial plan that will help with managing the business to make the right strategic financial decisions. Especially for startup businesses, creating a financial plan is a critical factor for the business’ survival against countless competitors and other risks that one might encounter especially for startups that’s new to the industry. The best way to present the financial plan is to build a financial model which will help answer questions that you need an answer for to ensure your business’ financial feasibility and profitability. This is why financial modeling skills becomes handy for entrepreneurs. Not all startup businesses have the financing so, creating a financial model is the best tool to attract potential investors. Therefore, financial modeling for startups and small businesses is very important as well as a great factor to raise financing.

There are certain components that completes a startup financial model which is done accordingly in a sequence to avoid going back and forth through the sheets.

  1. Sales forecast – create a sales projection over the course period (whether for short-term or long-term planning).
  2. Expenses Budget – create an expense budget plan as you need to have a better understanding to the cost you will expend to make the sales forecast plausible and feasible.
  3. Cash Flow Statement – develop a cash flow statement to track the flow of cash in and cash out of your business operations, partly basing it off your sales forecasts, balance sheet, and other assumptions.
  4. Income Projections – or the so-called revenue forecast for the upcoming years by using the sales forecast, expense forecast, and the cash flow projection.
  5. Balance Sheet Projection – deal with assets and liabilities that weren’t included in your income projection to project the net worth of your business at the end of fiscal year, especially for startups.
  6. Breakeven Analysis – conduct a breakeven analysis after mapping out the whole projections, this is to assess if the business’s expenses match the sales or service volume. The analysis is conducted as to measure when the business will reach the break-even point which is an important key for potential investors to refer to if the business is financially feasible and a good investment.

Altogether, it completes a basic startup financial plan model. The process may look simple and easy, but of course, the process is more than it seems. A lot of time is needed to be set aside just to build a financial model for your startup business. Not to mention that you at least need to have an acceptable amount of industry know-how to make the financial model reliable and work as it should be. To help you with how to build a complete model, you can read it here: Building a Financial Model.

Startup Business Models – Examples

As you can see, you can’t just blindly build a financial model. Financial modeling for startups and small businesses can also vary depending on what type of startup business model you are referring to. The following are startup business model examples that you can use as a reference in deciding what kind of startup business you want to start in the future.

  • Subscription-based business model – the customers will need to pay a subscription fee to gain access to the product or services offered. It used to be a business model for magazines and newspapers, but nowadays, it is used by many businesses and websites, providing services or products that requires the customer to pay in a subscription basis.
  • Product-based business model – every store or shop selling physical products, such as clothing, jewelry, cars, etc. are all businesses that apply this kind of business model. It is considered as the most commonly used business model for startups since it is very straightforward and an easy choice to start a business with.
  • Service-based business models – this business model works the same as the Product-based business model except, instead of selling physical products, offering services that consumers need, is the main agenda. The best examples that use this kind of business model are the hotels, restaurants, consulting firms, etc.
  • Retailing – considered as one of the most common business models that entrepreneurs often start with. It is a business model where a retailer purchases the products from a distributor or wholesaler and sometimes directly from the manufacturers, then proceed to sell the said products to the market.
  • Manufacturing – a common business model where it focuses on taking raw materials and produce products out of it. This can also apply to companies that assemble finished products from premade parts. The products are then distributed to either the wholesalers or retailers and sometimes, even directly selling to the masses.
  • Distribution – goes hand in hand with retailers and manufacturers. A startup business model that plays a role in-between the provider or manufacturer of products and the masses or to a retailer which will then distribute to the mass consumers.
  • Niche business – a startup business model that is not completely that rare but not that common either. The main focus is on the needs of a market niche and service it in a way with products and services that a larger business can’t. An example of this would be special boutiques, agencies, etc.

The list above is just the most basic startup business models that one can proceed on. There are, of course, many more that you can choose. You can check out more thorough list of business models here: Business Model Examples.

Download Financial Plan Template for Startup Businesses

To ensure that you are prepared for the unknown as well as manage your finances, the need to have a working financial plan is very important. Just by simply having a financial plan for a startup business will make a huge difference for it can help with the management of the financials as well as be able to make the right strategic financial decisions and avoid certain risks that will affect the business in the future. This is why creating a financial plan is a critical factor for a startup business’ survival against countless competitors that already existed and other risks that one might encounter especially for startups that are new to the industry. Hence, it is very important to create a financial plan for startups.

It’s a good thing that it is possible to build a financial model for a startup business without having to spend a lot of time and money. One does not need to be a professional either to be able to model a Startup Financial plan model. To create a startup financial model for your business, you do not need to be a finance expert for what you need is the right set of tools, such as a financial plan template for startup business to simply get started. By utilizing these available templates for download, you can acquire a template to use as a starting point for your financial model.

Downloading a financial plan template for startup business is very convenient as well as provides a nifty tool to help the financing for a startup business. So, if you’re interested and in need of a financial plan template for startup business, you can take a look here at eFinancialModels for more financial model templates for startups, as you freely choose from which industry your preferred startup business model fits.

Rest assured, our financial model templates ensured with the best quality from different financial modeling experts and are ready-made to be used by any kind of users such as executives, bankers, agents, entrepreneurs, etc., from different countries such as the USA, UK, Canada, Australia, Japan, Germany, France, and many more countries all over the world who are looking for ready-made financial plan templates to support them in completing their financial modeling and analysis tasks.