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Succeed with a financial model

Validate your business model and make educated decisions for your business to maximise your profit and create a sustainably operating business

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Use your financial model to validate your business model and show how you can operate an economical sustainable business.


Use your financial model to calculate how much funding you need and to answer the tricky questions Investors will ask

Cash flow

34% of startups fail because they run out of cash. A Financial Model will predict when and how much cash you will need


Model the impact of different scenarios such as "what if I launch 3 months later" or "what happens if I double my prices" .

What is Financial Modelling?

Financial Modelling takes your financial forecast and simulates different scenarios to show how your business would perform in the future if specific decisions are taken or different internal and external events occur.

Financial forecasting is different to Financial Modelling.
Financial forecasting estimates how a business will perform in the future - for example future revenues, expenses and cashflow - based on historical data and future assumptions.

What is a Financial Model

A financial model is usually a computer program or series of excel spreadsheets which allow you to enter assumptions about your startup and see the impact they will have on your financial projections.

A financial model consists of  3 sections - input assumptions, calculations and outputs:

  • input assumptions - revenues, COGS, OPEX, staff costs, CAPEX, financing
  • calculations - built into the financial model these link the assumptions to the outputs
  • outputs - a 3 statement model consists of several financial statements
    - Income statement (Profit and Loss)
    - Balance Sheet
    - Cashflow
    A discounted cash flow is also a useful output - this is used to value a startup.
    The output section ideally includes KPIs (Charts and Graphs)

When you change the assumptions, the financial model will run the calculations and show you the impact on the outputs.

Creating a Financial Model

Your financial model will quantify your business model. Your business model will have a high level overview of your revenue and cost streams and your KPIs. Your financial model will build on these.

Although every financial model has the same structure (assumptions, calculations and outputs), each one has its own characteristics. Just as every startup in every sector is different, different models will prioritise different assumptions and look for different metrics. The way you build your revenue forecast will depend on your business model.

The challenge in creating a good financial model is substantiating the numbers you input into the model. For a startup you won't have historical data, so you need to make assumptions about the numbers your model is based on. For example, revenue forecasts are usually made using Top Down or Bottom Up forecasting methods. Assumptions can be based on market research, competitor benchmarking, web search volumes etc.

4 uses of a Financial Model


Use your financial model to validate your business model and show how you can operate an economical sustainable business.


Use your financial model to raise debt, equity or crowd funding for your startup by calculating how much funding you need and when. A financial model is very useful for ensuring you have throught thorough all the tricky financial questions that investors will ask. You can also create a valutation of your startup with your financial model.


34% of startups fail because they run out of cash. An operational cashflow for the next 12 months is crucial for the day to day financial management of your startup because it predicts when and how much cash you will need. Using your financial model for scenario modelling will help you understand the impact of business decisions on your cash flow.


Use your financial model to understand the impact of different scenarios on your financial projections such as : 

  • What if you launch 3 months later
  • What if your sales only reach 50% of your projections
  • What if you don't manage to hire all the staff you need

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Frequently asked questions

Should I build a bespoke financial model or use a template?

Whilst using a template to model the effect of your business assumptions is quick to set up, in practice we find every business is so different that a bespoke financial model is really needed to fully understand the impact of adjusting the assumptions.
If you are looking for a template solution, there are many out there which you can use, and often these can be a good starting point.

Should I use a Top Down or Bottom Up Approach?

A key driver for your Financial Model is your sales target. This can be estimated using top down forecasting, bottom up forecasting or a mixture of both.
Top down forecasting looks at the total size of your market (Total Available Market) and makes assumptions about the share of that market that you could service (Serviceable Available Market), and the likely volume that you could realistically capture (Servicable Obtainable Market). This is equal to your sales target.
Bottom up forecasting uses information specific to your startup such as manufacturing constraints, likely sales volumes by marketing channel etc to determine your likely sales target.
Top down forecasting is usually more optimistic than bottom up forecasting. At Cow-Shed we like to combine both approaches and use the bottom up forecast for years 1-2 of a 5 year forecast and the top down method for years 3-5.

How accurate will your Financial Model be?

Your financial model is based on assumptions so there will be a margin of error, but keeping it up to date will help it to be as accurate as possible. Things to remember :
Keep your financial model in sync with your business model
- Reflect changes to revenue projection and sales targets in the model
- Break down the costs as far as possible and provide details as to where the figures come from
- Be realistic about your resourcing plan
- Include gross, EBITDA and net margins.

Have more questions?

Just reach out, we’re always around to answer any questions.