
Startup financial models – Templates compared for SaaS - warpech
https://www.stephnass.com/blog/startup-financial-model
======
refrigerator
Great roundup! I'm one of the founders of Causal —
[https://causal.app](https://causal.app) (#12 on the list).

We have 2 different SaaS templates built by Taylor Davidson (whose Excel
template is #6 on the list):

\- Starter version:
[https://my.causal.app/models/1269](https://my.causal.app/models/1269)

\- Advanced version:
[https://my.causal.app/models/162](https://my.causal.app/models/162)

They're not good if you need to do a bottom-up forecast based on actual deals
(e.g. for high-value enterprise sales), but are hopefully useful for a more
marketing-driven biz. The main differentiator vs spreadsheet models is that
you can easily bake uncertainty into your assumptions. E.g. churn rate can be
"2% to 6%" instead of just "4%".

We've looked at a tonne of spreadsheet models, and Taylor's (#6 on the list)
is, imo, a masterclass in spreadsheet design. It's super flexible and modular
— you can easily dissect it and add/remove parts without accidentally breaking
the whole thing. Even if you don't need a financial model right now, I'd
recommend checking it out just to see what a great spreadsheet model looks
like: [https://foresight.is/standard-financial-
model](https://foresight.is/standard-financial-model)

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xbeta
Casual is awesome! I would like to learn more, Do you guys also hire?

~~~
Lukas1994
*Causal :D We just hired our first (non-founder) engineer. If you shoot me an email (lukas@causal.app) I'll let you know when we're making the next hire.

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wensing
Hi, I’m the founder of Summit. Honored to be included among great and smart
company.

Happy to connect anytime to talk financial planning or support usage of the
product.

Long-time HN’er, had the idea for Summit while fundraising for my first
startup (Stormpulse, recently acquired).

For the forecasting geeks and curious: this video lays out the tech behind
Summit’s forecasting engine (password: everest3):
[https://usesummit.wistia.com/medias/fd3pk1fuvz](https://usesummit.wistia.com/medias/fd3pk1fuvz)

~~~
Pandabob
The "Out of Beta" podcast which you co-host (and document your Summit journey)
has been a blast. Thanks for that and good luck with Summit.

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Silhouette
These documents all look very smart, but how does anyone have any idea whether
the numbers in them are even close to realistic? I can make up some cute
hockey stick numbers for any of my businesses, but why should anyone trust
them? Particularly for businesses that _haven 't even launched yet_ and
therefore have _literally zero_ hard data on whether customers will actually
pay them money or how much or for how long. How many startups in that
position, with no financial data and no evidence of product-market fit, can
credibly predict even a year ahead that they won't pivot to some completely
different plan, never mind 3 or 5 years out?

When I started my first B2C, a long time ago now, it was actually the bank
where we opened our business account who asked these kinds of questions. We
sat down, put our best guesses at plausible numbers into a spreadsheet for
things like acquisitions and churn, worked out the money that would result.

Barely any of the key assumptions we made were within an order of magnitude of
reality, and they were _all_ in the wrong direction. For example, we have far
higher churn than any example startup business plan I have ever seen just from
card charges that fail with no obvious explanation each month where we don't
subsequently recover and continue that subscription. That problem remains one
of our biggest pain points to this day, and that effect alone has turned many
an otherwise profitable month negative and reduced that business to a fraction
of the size it would otherwise have been by now if everything else was held
constant. No-one here saw that coming. No example plans or startup guides or
financial advisors we consulted even mentioned the possibility, never mind
giving any concrete figures for what we might expect.

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JaakkoP
I can only speak on behalf of my model (#3), but that's meant entirely for
companies who want better visibility in their existing operations. Say, they
want to figure out how much cash they have in the bank in 6 months, or can
they afford to hire 3 more ppl next quarter.

Personally, I have found it hard to work with pre-revenue companies,
especially if they come to me with a plan to hit tens of millions in revenue
in just a couple of years since launching. Maybe a small percentage of them
do, but given how many don't make even a single dollar I've tried to steer
clear of pre-revenue startups. Companies with real revenue and growth seem to
be a much better fit.

~~~
stephnass
I feel like there 2 very different use cases for financial models:

\- Early-stage fundraising. The numbers are wrong, everybody knows it, but you
have to show that curve going up and right.

\- Later-stage (maybe 1-year post-revenue?) when there is some level of
robustness behind the numbers, and you do it because it's useful to pilot the
company

~~~
JaakkoP
Agree 100%. Very different needs with the two lots.

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Silhouette
Also agree here.

Rational financial planning is, of course, essential for managing a business
sensibly.

However, vague intuition + random luck generator + huge uncertainty != a
useful financial plan. I feel like a lot of startups could summarise their
financial slides with something like "We anticipate an outcome somewhere
between failing within three months and becoming the next Facebook, with
somewhere between Ramen profitability within six months and a unicorn exit at
8-10 years being most likely."

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alexbrower
Having built many these models, it's now my opinion that if you are at the
stage where you're needing a template for a business plan, you better have a
product that fits a real need and that delivers a product with margins. Too
often in early stage companies, the model is built top-down to meet someone's
expectations about a previous company they sat on the board of, helped found,
etc. If a template engenders a more thoughtful, fact-based approach to
operating the business, that's healthy stuff. Otherwise, set short-term goals.
Try to hit them. (And in today's environment, find a path toward gaining
customers without having to raise capital). $0.02

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lpolovets
Great list. FWIW, a lot of SaaS companies use the second template from
Christoph Janz when they're raising their seed rounds.

If anyone's interested in additional content about financial modeling, I
described ~10 common mistakes I see in financial models a few months ago:
[https://twitter.com/lpolovets/status/1188979329935409152](https://twitter.com/lpolovets/status/1188979329935409152)

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ignoramous
> _I described ~10 common mistakes I see in financial models a few months ago:
> twitter.com /lpolovets/status/1188979329935409152_

Mirror:
[https://threadreaderapp.com/thread/1188979329935409152.html](https://threadreaderapp.com/thread/1188979329935409152.html)

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say_it_as_it_is
If 90% of startups fail, and they are all putting in effort trying to create
financial models, what is the point of this exercise other than to follow a
broken tradition? The remaining ten percent undoubtedly have deviated far from
their seed stage model.

VCs need to own this mistake and kill the financial model requirement. Stop
wasting entrepreneurs' time.

~~~
einarvollset
So your argument is.. what exactly? 90% of startups fail, so let’s not make
any attempts at understanding the trade offs inherent in decisions such as
whether to hire, what price to put on things, which sales channel to pursue,
what debt instrument (if any) makes sense?

JESUS TAKE THE WHEEL!

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stephen_greet
Couldn't have said it better myself. To justify that financial models are a
waste of time by saying "90% of startups fail" is aken to saying that
professional athletes shouldn't train because "99.9% of athletes don't become
pros".

Do you think that the remaining 10% of successful startups aren't utilizing
forecasts and testing their assumptions? People love to be contrarian just to
be contrarian on this site sometimes.

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JaakkoP
Thanks for putting so much work into comparing all these models! I'm the
author of #3, and a founder of a financial modeling software company (the
latter not reviewed here)

One thing I'd add for anyone comparing these models for their own use: Make
sure the model you're going to use covers the authors #1-5 criteria for the
parts _you need._ More features isn't always better. For example, if you run a
marketing driven SaaS company, it doesn't matter if the model in question
can't handle complex enterprise sales.

I have a big update coming to the model this coming week. All of those changes
have been made in the actual model template already if were planning to take a
look - it's just the update to the documentation that's still missing.

~~~
gk1
Shortcut to template: [https://docs.google.com/spreadsheets/d/1nj0LtyG6Q9HhXk-
iaj9-...](https://docs.google.com/spreadsheets/d/1nj0LtyG6Q9HhXk-
iaj9-3taT9gwWpF8XnxYahpn--to/edit#gid=268326096)

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yeldarb
A friend of mine created this one and hosts a half-day seminar every few
months to go through how to use it (and what the numbers mean/why you may want
to do different things).

I found the seminar quite useful and plan to use his model for our startup
once we have enough data to make estimates for the inputs within an order of
magnitude.

[https://www.startupmodels.com](https://www.startupmodels.com)

~~~
colwellm
Thanks Brad. For those interested, the complete seminar is available at
dsmpartnership.com/financialmodel. This is available free of charge

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mmaunder
Seems like the goal is to impress investors. Unless you’re going into the
business of financial modeling, focus on how you’ll provide a service that’s
worth more to customers than it costs them. Less experienced investors are
going to want to navel gaze with you at this shit. Those who know how value is
created will focus on the fundamentals like path to market and your value
prop, differentiators and moat.

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mikorym
Having gone through the process of starting to think about my own business and
how to start generating revenue, the one interesting thing is that in the USA
vs. some other countries you have _venture capital_ vs. _immediate
profitability_.

So, just as an example, in Southern Africa almost every person between the
ages of 18 and 50 is trying to start a company (with the key word there:
"trying"). But the approach is much different. You are basically just trying
to get some kind of revenue stream and if your revenue stream happens to be
large enough then, congratulations, you are a business owner.

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spyckie2
Thanks for writing this up!

I'm the author of model #22 on the list, which is built from my vast
experience collecting SaaS models and writing articles on it. I'm honored to
be included in the list even though my model is only available in open office
format.

If anyone's interested I've written about how to model investor traction to
your model, sort of a metamodelling framework for startup founders. You can
see it on my twitter and instagram, if anyone's interested.

~~~
spyckie2
On a more serious note:

The best way for engineers to get into modeling is to understand it from the
data up rather than from the model down. Engineers don't really need to model
out the future and they tend to be bad at that. Instead, they just need to
know what their important metrics are.

Even if there are less than 10 paying users in your app, you still have enough
data to create the foundation:

1\. Define "new user acquisition" with several categories as a funnel towards
paid users. "Signed up -> has project -> is active monthly -> paid" is an
example. Define the qualifications that can be programmed in to bucket a user
into the category. Write code to pull this data out into high charts and see
your current state of users.

2\. Churn is usually harder to get the right data unless you have your events
stored in log format, so approximating churn by looking at the deltas each
week or month is fine to start. Create a database to snapshot your weekly or
monthly metrics so you can know the deltas. Put it in your roadmap to get the
data cleanly later.

3\. Over time, capture the average lifetime churn as a percentage, and past
quarter churn as a percentage to start, in addition to % change in users for
each category over time. These are your growth rates / churn rates. You can
then open gsheets and do simple modeling (no need for a Saas template yet) via
a simple google search for how to start.

4\. Pick the number of users that you want to have in 3 years. Take your
gsheets and extend it to 3 years, and then freely move around with your growth
and churn rates until that number is hit. You want to get a sense of high
churn and low churn scenarios (what kind of growth rate you need to have).

5\. For each scenario, how far is it from your current numbers? What will you
do to move the growth rate and churn rate towards the numbers you ideally
want?

You'll probably get a lot from doing the above then buying a template unless
you're well beyond this stage.

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tjbiddle
How neat! Is there something like this for e-commerce?

~~~
refrigerator
Taylor Davidson's Excel model (#6 on the list) is actually general enough to
be applied to SaaS or e-commerce: [https://foresight.is/standard-financial-
model](https://foresight.is/standard-financial-model)

He's also built a free e-commerce model template in Causal, alongside his SaaS
ones (#12 on the list):
[https://www.causal.app/ecommerce](https://www.causal.app/ecommerce)

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gloryless
Nice work. I really appreciate acknowledging the landscape and sharing that
work before putting your own into the mix. Underrated step

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ttul
Whether you use a purchased model or build one yourself, IMHO having a good
model that allows you to run scenarios to predict potential futures for your
company is absolutely essential. I live in my model every day, running
scenarios to test out ideas for financing and to gauge downside risks.

Without a decent model, I would be absolutely lost.

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seekingnames
While most of these financial models seem decent for tracking the operating of
a SaaS company, if you are looking for a model that PE, investment banks and
VC firms actually use to value a business, check out Private Equity Models:

[https://privateequitymodels.com](https://privateequitymodels.com)

~~~
rfrey
$179 for an excel template, in case anyone is curious. $10,000 value though!

