Startup Financial Models
This excel template is great for those wanting a professional-looking forecast 10 years of financial statements, those starting out as an entrepreneur / small business, or looking at the financials of a potential business venture.…
Startup Financial Models are financial models, which are especially useful for Startups and address typical questions Startup businesses face: How much financing is needed? When does the company plan to reach break-even? How much cash is burnt per month (burn-rate)? What kind of returns investors in the Startup eventually can obtain? etc. Typical for Startup financial models also is that the companies do not have a financial history, they normally start with an empty balance sheet and no track record. Therefore, it can especially be challenging to put a forecast together, since there is no historical data to back up any of the assumptions taken. It is therefore important that a Startup financial model is built in a flexible way as most likely it will evolve over time and will also be needed to run a variety of scenarios to determine which scenario is best for the Startup and its founders.
A startup business is what you call a business that newly emerged venture that aims to take a stand within an industry. You could say that entrepreneurship works similarly since all new businesses, either being self-employed or businesses that don’t intend to grow. On the other hand, startup businesses are all new businesses with the intention to grow larger. So, as you can see, both are the same and also not the same.
But it’s not always as simple as it sounds. Unfortunately, there is a high number of competitions for startups thus, it led to high uncertainty and high failure rates of a startup business. Of course, those that survived the startup stage, even if it’s only a minority, has the chance to grow bigger and successful, hence, gaining a lot of reputation and influence in the industry.
There are two key points that a startup business must create: Financial model and Business Plan.
Reasons Why you need Financial Models for Startups
There are a couple of reasons why you need financial models for startups, such as:
- To manage the finances properly to avoid incurring losses as a startup
- To validate the business model if the business is financially viable
- To check the profitability of the project via IRR Analysis
- To know when to reach Break-even
- To know how much cash will burn per month or how much the funds will last
- To know how much funding is needed to execute the business plan
- To know how much to compromise the return to shareholders via Equity Share
- To realize different scenarios and its effects, thus, the need to create dynamic models to run different simulations with different assumptions and see the results
- To better understand how the business work
It is important to take note that you need to prepare a financial model first before creating a business plan since you need to know the financials first to use as your reference to be used in completing your business plan. Plus, with a financial model on hand, you will be able to create the business plan faster.
Business Plan for Startups
Due to the high possibility of not succeeding, a business plan became a critical factor that all startups must have. This not only helps with planning for the future but also to predict some cases that will either be beneficial or not to the business. The business plan for a startup business will serve as a great tool to aid the business to lessen the failure rate of success and also to develop new opportunities to grow.
Before you start anything such as spending money for the business, creating a business plan is much more important and takes the first priority. The following are the elements included in a typical business plan:
- Executive Summary
- Business Objective, Goals, Description
- Market Research
- Description of all Products and/or Services
- Management and Operational Structure
- Marketing Strategy
By making a business plan for a startup business, you will gain a lot of benefits such as having a better understanding about your business, increases the possibility of succeeding, can be used as a tool to raise funding for the business, and also raising the probability of growing compared to those who didn’t make a solid business plan for their business.
To understand better about the elements in a business plan, we’ll provide a brief explanation and some helpful tips to guide you as you create your own business plan.
Business Objective, Goals, and Description
Be transparent and provide a clear objective, setting a clear goal, and a proper description of the business as a whole. You can’t be ambiguous for this will lead to uncertainties and confusion in the future. Basically, you need to point out several factors such as:
- What kind of business? (business model)
- Where do you plan to operate? E.g. online, physical, both, local or global, etc.
- How will you operate?
- When do you plan to start operations?
- What are your reasons for going into business?
- What are your goals?
- What do you see your startup business will be in the future?
Such things need to be realized thus, it might seem tedious but, you don’t have to go thoroughly as you will cover the in-depth details as you write the rest of your business plan. You should always keep in mind that this part of the business plan is just a summary of what you need to prove and cover in your business plan. So, it is best to be concise and brief, with enough information needed.
Identifying the Target Market
Before you even start considering starting a business, you should do research about the current demand and see if there’s enough market to make it feasible to start a business with. So, it is undeniable that one should always identify the target market for your startup business to have a higher chance of being successful. Thus, you need to conduct a market research to determine your target market.
Conducting a market research means, you will have to do thorough research about the:
- Product or Services
Obviously, determining that your business has a viable market will be a great plus. Otherwise, those kinds of businesses that failed to conduct a proper market research tend to fail.
Analyzing the Competition
Another important element is to analyze the present competition for your startup business. Aside from conducting a market research, you will also need to conduct a competitive analysis to further implement the feasibility of your business plan. After all, it’s not always that one will start up a business that’s unique and with no competition. Thus, competition for startup businesses is usually too harsh and difficult to overcome.
Building up a reputation and obtaining the trust of customers takes time, thus, as a new entrée in the industry, you are already way behind the already existing businesses that survived for years. So, conducting the competitive analysis should be done together with your market research since you will need the information from it to base upon your conclusions and to plan out strategies for your business to stand out in the middle of countless competitions.
Creating a Budget Plan
If you want to succeed then you must budget your funds accordingly. One of the known reasons that startups fail is due to running out of money to fund the operations. Creating a budget plan is a critical part of a business plan especially when you don’t have the current capital and planning to secure funding from other sources. You need to plan out how much you need approximately to start your business and to be able to stay operational. By creating a budget plan, this will help with minimizing the crisis of insolvency.
Setting Financial Goals
Financing is a very important element for your business. Since startup businesses are basically new, you won’t have any historical values which you can do a comparison. But, you can still do a projection based on your market research and your expected sales rate. Thus, you will be able to determine your expected financial goal as a startup.
Financial planning is a great factor that will help you manage all your finances, keep track of the market and expenses, determining opportunities that can be taken advantage of, and this will also help to turn your business plan even more feasible. A financial plan can also be used to gain funding from investors, so it is clear to see, how important it is to create one.
Management and Power Structure
One of the elements included in the business plan is a proper organizational structure of your startup business. It is best to sort out as early as you can so that in the future, there won’t be any conflict rising and it will be clear who’s assigned to which tasks or who should they report to. It shouldn’t be too complex and there should be a clear line determining the proper positions of each individual.
Marketing is everything for a business. Without a proper marketing strategy, one would find it hard to yield something or even to stay operational. Of course, your marketing strategy can’t be planned out without conducting the market research and competitive analysis, aligning with the budget plan and financial plans as well.
It takes skill and time to earn your deserved position within an industry, thus, planning out a marketing strategy will give you an edge on obtaining a higher chance of succeeding.
Brief and Professional
It couldn’t be helped that one would think that creating a business plan is a very tedious task that will need a lot of your time and effort, but you also know how important it is to have one.
Though it sounds like the business plan requires a lot of details poured in, one shouldn’t get carried away and write a very long report. Yes, you want it to be detailed and thorough but one must always be brief with what you want to show. You want to make it as clear as possible and look professional. Why? Your business plan could be used for raising your capital so, you can’t possibly show them a very confusing report about your business thus, will lead to investors not investing instead.
It is undeniable that one feels excited with the thought of starting a business which you think is feasible and will do great in the future. One can get too carried away with just thinking what it could be, but the sad truth is, it’s not going to be easy. If you really want the things you want in the future, then you need to set things straight first and plan out everything, not just thinking, but writing it down in a structure which will guide you as you complete your plan.
The process that you have to go through is definitely worth it but if you’re unsure on how to properly create one, you can always ask for help and guidance to the experts or professionals that have a vast experience in that area. Especially with the advancement of technology nowadays, there are many existing tools that lessen the burden when creating a business plan for your startup business.
Financial Plan Templates for Startups
One of the best things about the internet is you can find many things that you need. Especially for running a business, there are countless tools nowadays that make the operation smoother and work a lot more efficient. Plus, the greatest factor of all is that most of these things don’t cost much at all! Compared to hiring a professional to do the work for you, just by simply acquiring these tools will save you a lot of money and time.
A great example would be the financial plan templates for startups. Creating a financial plan usually takes a lot of time when created from scratch thus, the emergence of these templates is a life saver for those in need which are usually constrained with time and money.
If you are in need of financial plan templates for startups, you can check out our list above and see which ones that fit your criteria. You don’t have to worry about the credibility of the startup financial models since they are made by experts in financial modeling with vast experience and knowledge of industry know-how. So, no more fretting about the tediousness of creating a business plan, acquire a startup financial model now to serve as a base for your business plan.