
Ask HN: Guides to Financial Forecasting? - recorderplayer
I am putting together a financial forecast for my start up, as we are beginning to talk to investors.<p>Are there any good guides to building a financial forecast out there?
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mchusma
In my experience what the most helpful thing to investors and you will be
bottoms up understanding of how the business looks with a somewhat reasonable
set of assumptions. So make a tab full of your assumptions, number of
customers, cost per customer, number of engineers, churn rate.

When do you collect cash from customers? When do you pay bills? How fast can
you cycle cash? (Meaning if you pay back marketing over 2 years vs 2 months) a
LTV/CAC ratio of 1.5 is not great, but if you have a 1 month payback you
basically don't consume cash so that's cool (these can be signs of dads
though). But I would just look online for comps for the specific inputs into
your model.

If you want a template you can just look at PnLs online.

All forecasts for startups are wildly wrong. But I think of forecasting as a
way of valididating a strategy. Lots of people dislike the "if we get 1% of
the market we will.be huge" approach, but I like at least validating if that
is the case (it is not always the case).

Forecasting can also help you understand pricing. If your market size is about
10,000 buyers what do you need to charge to have a business.

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shoo
> When do you collect cash from customers? When do you pay bills? How fast can
> you cycle cash? (Meaning if you pay back marketing over 2 years vs 2 months)
> a LTV/CAC ratio of 1.5 is not great,

i recall seeing a talk from some saas company that was really driving home the
importance of how quickly the business can generate cash to pay for customer
acquisition costs. i think they talked about offering plans to sign up for 12
months in advance (with a fair discount) versus monthly, with the idea that if
enough customers sign up to the 12 month plan at a 20% - 30% discount then if
you still get enough cash in the short run to pay for the customer acquisition
costs, and enough cash in the long run to operate at a profit, you can start
to pour excess cash into customer acquisition

(apologies, dont remember the exact talk)

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mattrp
Are you seeking help in constructing the mechanics of a model or in taking an
existing model and projecting it into the future? Or both?

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recorderplayer
Both tbh.

I probably should have mentioned we are B2B in an industry with very long
sales cycles.

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terry_y_comb
If B2B, one way to do it is estimate how many accounts, and what size, you may
get on a yearly basis.

After you create your model, you can cross check it against similar company
s-1 filing (initial ipo filing). They will usually include their P&L few years
prior to the ipo.

You can reference their spent against yours to see if the model is realistic.

Feel free to reach out if you have more question.

