Karan Kumar
2 min
Updated: Jan 6, 2021
We are almost coming to the end and you need to nail the last part of your plan.
|
The one that investors are most keen to be a part of.
|
The monetary backbone to your financial existence.
|
THE FINANCIAL MODEL
Your idea, your model, and your strategy should be backed by measurable targets that you want to achieve in the next 5 to 7 years.
|
Ensuring alignment between operational plans, GTM strategy, revenue model, and an estimation of your asset needs (manpower or otherwise) are paramount in a good financial model.
|
A strong financial model also allows you to be able to identify the core metrics you want to achieve and how you plan to lay out milestones to measure progress over time.
What should a good Financial Model convey?
Key metrics
Identify relevant metrics for your business and showcase what you want to achieve in different phases for your plan
|
Key milestones
Summarise the critical milestones of your organization.
when are you likely to break-even operationally? When will you start generating surplus cash flows?
Don't do these
1. Do 30k feet mathematics and expect investors to get clarity
2. Say that the financial model was prepared by an advisor and you don't know what's inside
3. Use DCF to say your valuation is in $Bn
4. Underproject costs to please investors - they don't care about a few thousands
Here is what I know works
1
Modern-day investors might not prefer traditional goals like revenue growth, EBITDA, etc. They would look for actionable KPIs likes user growth, CAC, LTV, MRR, and so on.
2
Be conservative while projecting revenue and aggressive while estimating cost. Doing better in actuality is always a bonus.
3
This slide should ultimately showcase that you are investable and you have a big enough story, in monetary terms as well.
4
Plan well with proper professional assistance. This can usually break an otherwise good investor conversation if you are unclear on what you need and what you plan to use it for.
Posts in this series:
Step 1: Mastering the hook
Step 2: Getting a valued proposition
Step 3: Modeling the future
Step 4: Go to market strategy
Step 5: Getting the math right
Step 6: Designing the right Ask