Your financial model allows you to validate your business model and show how you can operate a profitable and sustainable business.
Use your financial model to raise debt, equity or crowdfunding for your startup by calculating how much funding you need and when. A financial model is very useful for ensuring you have thought through financial questions that investors will ask. You can also create a valuation of your startup with your financial model.
Many startups fail because they run out of cash. An operational cash flow 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?