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Financial Model Templates, balance sheet example

We created a template that covers everything discussed in our how-to post. Filled with sample data for an imaginary startup so you can take the time to understand how cash flows through the business and eventually translates into progress towards milestones. 

This template is an over-simplification designed to drive home the point that cash is the lifeblood of your startup. Fill it with your own information and add what you need so you can get a clear picture of what’s driving your business. 

Concrete Ventures Pre-Seed Financial Model Template

If you’re looking to level up your financial model, then check out some of these financial model templates below:

SaaS Financial Plan v2.0 by Christoph Janz

Use this tool to:

  • Create a simple plan for an early-stage SaaS startup with a low-touch sales model 
  • Includes support for multiple pricing tiers
  • Supports annual contracts with annual pre-payments
  • Great headcount planning section
  • Simple cash-flow planning
  • Plenty of built-in charts

Limitations 

  • Revenue/cost-based model (no balance sheet)
  • Month to month only (doesn’t account for annual plans paid up-front)

SaaS Financial Model, by Jaakko Piipponen

Use this tool to:

  • Upgrade your SaaS Financial Model to an operational tool that helps you make more informed decisions.
  • Build scenario-based forecasts to get ahead of the data instead of reacting to it.
  • Includes loans & investments 

Charlie Tillet Financial Template

Use this model to track:

  • P&L by year and quarter
  • Sales Plan
  • COGS
  • Staffing plan
  • Expenses
  • Balance Sheet
  • Capex and Cashflow
    • Which lets you account for investment

Cash Flow Projection Tool for Tech Companies | BDC.ca

Use this tool to:

  • Present past financial results and project cash flow for up to 24 months into the future
  • Automatically generate key SaaS metrics, for example churn rate, monthly recurring revenue, and customer lifetime value
  • Present financial information and growth forecasts to investors, bankers, and other partners

Use insights from the cash flow projection tool to:

  • Understand the amount of additional funding you need to keep your tech company on the right growth trajectory
  • Highlight shareholder investments and other financial inflows, such as grants, when applying for loans
  • Keep track of key SaaS metrics, such as MRR and churn
Creating your pre-seed financial model, including a balance sheet, to keep track of your cash.

Why we are talking about this:

As early-stage investors, we have seen plenty of financial models, balance sheets, budgets, & forecasts. Surprisingly, considering the importance of cash for any company, it doesn’t seem like there is a consistent “best practice” for financial modeling at the early stages of building a company. 

This post is for entrepreneurs who are just getting started. Maybe you have an idea, an MVP, or even one or two customers. If you already have significant revenue then the finance function of your business will look very different than what we present here, as it should. So with what appears to be an endless amount of advice for budding entrepreneurs, we wanted to create something that would help you cut through the noise and focus on the one thing that truly matters: cash.

We have seen pre-seed startups doing everything from 5-year models, discounted cash flow valuations, and complex scenario analysis. But for a business with little to no revenue, and maybe an MVP, do you really know what your finances will look like in 5 years? How confident are you in that model? 

As investors, the most important things we look for in pre-seed financials are 1) where the cash is coming from, 2) where it’s going, and 3) how that translates into progress towards meaningful milestones. We believe that as an entrepreneur, those three things should resonate with you as well. 

Where is the cash coming from?

The title tells you everything you need to know. The first section of your model should be all about what cash is coming into the business and where it’s coming from. 

Cash sources could be revenue, investment, grants, loans, or any other substantial funding. Breaking out the sources of all your cash line by line helps provide a clear picture of what is really keeping the business alive. Is revenue your main source of cash? Investor capital? non-dilutive funding or grants? 

A common pitfall we have seen is the desire to lump everything into “revenue”. From the accounting perspective, this may be correct in some cases. But it doesn’t provide the insights you need to properly manage your cash.

For example, a business with $500,000 in revenue being sourced by selling products to customers is much more sustainable than a business with $500,000 in “revenue”, with no customers. 

Where is the cash going?

It’s important to get a grasp of where your spending is coming from. Creating a balance sheet and listing all your major expenses line by line can help give you the visibility that you need. 

It’s important to use “fully loaded” costs here. For example, with employees, you must also pay the employer portion of CPP,  EI, vacation pay, benefits, etc. What this means is that the software developer you hired with a monthly salary of $7,500 can end up costing more, depending on your local labor laws. 

When it comes to expenses, don’t feel obligated to list every expense item. Some things like software subscriptions you can lump together to make it easier to read. Especially if the amounts are small. Once certain expenses get over a certain monthly threshold perhaps revisit breaking them out (i.e. paying $2,500 a month for HubSpot). 

Understanding the end result: Your cash balance 

On a monthly basis, you want to understand how much cash you are forecasting to have at the end of the month, as well as how much runway you have remaining. The math is simple: (cash in – cash out) + previous month’s balance. If you’re not yet profitable, you will notice your cash balance continues to decrease. For profitable businesses, this number will increase. 

As the months go by, filling in the “actual” numbers for your cash-in and cash-out items on your balance sheet gives you a glimpse of how your cash balance will change in the future. For example:

  • Slow revenue growth may mean that cash-out is closer than anticipated. Perhaps you hold off on hiring that SDR and customer success rep to help extend runway.
  • In a tight labor market, the cost of great talent may have been higher than you planned. Again, this will reduce the time you have until cash-out. 
  • A favorable scenario – perhaps revenue growth exceeded expectations and you want to know if you can hire the customer success rep 3 months sooner. How will this impact your cash?

Milestone Progress 

Milestones are what define the progress your business is making. Proper milestone identification is a topic on its own. At a high level, it’s important to lay out your roadmap alongside your financial model. 

Being able to see your milestones on the same page your budget allows you to ask some key questions:

  1. Am I spending money on the right things, at the right time?
  2. Will I run out of money before achieving all my milestones? 
  3. Do I have extra time to achieve milestones if things take longer than expected? 

This also helps both you & investors understand how spending ties back to milestone attainment. 

Best Practices

As your business grows, revenue tends to become more predictable. When that time comes, you can start to plan on longer time horizons, which increases the complexity of your modeling. Picture driving a bus, when going slow you don’t need to see too far ahead of you. But once you are traveling at 100km/h you need to see pretty far ahead. The same can be said with financial planning. 

For a pre-seed company with little to no revenue, it’s almost impossible to predict where you will be in the next 24 months. Sure, it will look nice in the spreadsheet and give you some confidence, but will you be right? Unlikely. Will you need to make significant changes? Almost certainly.

Planning for the next 12-18 months is what most early-stage investors are looking for. Answer the question, “what gets us to a seed/series A round?” and then show that from a numbers perspective. 

You don’t need multiple tabs, with tons of variables and complex calculations, and you certainly don’t need a discounted cash flow valuation. 

In addition, you don’t need to plan 3-5 years out, not yet. 

At the early stages of your business, all you need is a bulletproof understanding of where the cash is coming from, where it’s going, and how that translates into progress. 

We gathered a few different financial model templates to get you started

Cap Tables with Carta: Best Practices for Startup Founders

One of the first steps in forming a startup should undoubtedly be creating your cap table. But cap tables can get complicated quickly. It sounds simple, but without a good one it is far too easy to make bad equity decisions when raising money and hiring which can become costly and difficult to fix.

Whether you’re new to this topic or need a refresher, it’s often best to learn from examples and the people that think about this every day. As investors we have seen hundreds of cap-tables both good and bad – but to layer even more insights we spoke with the folks at Carta in our webinar about the topic. This post will share the learnings. 

Here is what we will cover:

  • What a cap table is and why it’s important for all stages of company building.
  • How prospective investors will look at your cap table. 
  • Key terms to dive deep on. 
  • Common cap table mistakes and how to avoid them  
  • How to think about managing your cap table and tools available to you.

Structuring Your First Cap Table

A capitalization table is a tool used by startups to show the overall capital structure of their company, manage the ownership stakes of each equity holder, and keep track of every security their company has issued as well as who holds them. In short, the cap table represents your startup’s investable story.

So why should you care? Cap tables are important for many reasons:

  • They help you raise money on better terms and understand your dilution.
  • The cap table can help you land and retain key talent.
  • They communicate what each investor and employee holds from an equity perspective. 
  • Clean cap tables can accelerate your VC financings.
  • Your cap table will grow and expand in both size and complexity as your company grows.
  • Lastly, they are a centralized repository – everyone’s source of truth when it comes to equity. 

In addition, prospective investors will look at your cap table to answer many questions that will help determine whether they will invest:

  1. What is the ownership percentage of the founders and key employees, and how vested are they?
  2. Are there any founders or key employees who have moved on? What is the story?
  3. How much is left in your option pool? Does it need to be topped up?
  4. What is the turnover within this company? Are there cultural issues?
  5. Who are the other investors in this company, and what do they hold?
  6. Are there any surprising preferences or obligations I can see?

Investors tend to zero in on points 1 and 5. 

Key Cap Table Terms Defined

When talking about cap tables, there are a number of terms either your lawyer, investor, or other startup folks will use. Knowing the jargon is helpful in understanding what exactly people are talking about. Let’s take a look at a few terms:

Common stock: Ordinary shares of stock, typically held by founders and employees.

Preferred stock: Shares of stock with special protections including a preference, meaning investors holding them will be paid back first in an acquisition before any common shares receive proceeds. If you ever negotiate a term sheet with an investor, you are likely negotiating the term of the preferred class of stock.

Pre-money valuation: Valuation assigned to the company for purposes of pricing new shares for investors.

Post-money valuation: Pre-money valuation for a financing round, plus the amount of new cash invested in that round. When you think about dilution, you want to know what the post-money ownership of everyone will be. This is the ownership you will have after the investment round.

Price per share: For an investment round, typically the pre-money valuation is divided by the fully diluted cap (# shares) just before that new round. Fully diluted is the key term here. It assumes all outstanding options/warrants, etc. are converted into shares. Therefore the fully diluted share count is likely higher than your current number of shares outstanding (more below). 

Stock Plan allocation (option pool): Known as your ESOP, these shares are reserved for issuance to employees under a stock plan.

Fully diluted capitalization: All shares that have been or are reasonably likely to be issued, including, all shares that have been issued and remain outstanding; plus all that could be issued under outstanding options; plus the remaining available option pool.

Common Mistakes in Cap Tables and How To Avoid Them

One of the most common and most avoidable mistakes involving cap tables is not having all your documents in order. It is important to keep data organized and documents on hand. Critical documentation may include any of the following: incorporation documents, stock purchase agreements, stock plan (option pool) documentation, any convertibles you’ve issued (SAFE/KISS), and any relevant board actions (e.g. written consents). 

Another common mistake involves poor planning. Take a backward design approach by delving into the critical factors that may affect cap table creation and your goals. Think about the answers to the six questions posed earlier in the article: what are investors looking for here? Share your plan and finalize your understanding of ownership with your co-founders, a well balanced cap table has many benefits. It can help founders be intentional about growth and distributing equity to employees. 

As investors, one of the biggest problems we come across is when founders don’t have their cap-tables up to date. As an entrepreneur, you should manage your cap table in an offensive manner. Be ready for the next financing or hire. Don’t manage it in a defensive manner, by cleaning things up upon request. There is nothing worse than having to spend a few hundred or thousand dollars cleaning things up because you didn’t keep the cap table up to date. Mistakes like this can often kill financing deals and render your company “uninvestable”.

Structuring Equity Compensation

Understanding equity compensation is critical to attracting and retaining key talent. Equity compensation plays a critical role in building a company culture that is positive, supportive, equitable, and growth-oriented. Everyone is an owner. 

The most common way of providing equity to your employees is through the option pool or ESOP. This pool represents a piece of the company that is reserved for employees. Investors will often ask you to “top up” the ESOP prior to a new financing so that there is enough equity for the key employees you need to hire post-money. 

Investor communication and issuances

Certain investors may have information rights as part of their agreements. This means that they will likely ask for periodic updates about your business, including cap table equity details. To ensure clear lines of communication you can:

  • Set up a cap table sharing if you are using a cap table management software
  • Make it a habit to send out quarterly or biannual investor updates
    • In addition to the cap table, send KPIs, financials, projections of business, etc

When building your cap table, you have to think about how you are going to manage it and the tools that are available to you. There are two main options: you can build your cap table from scratch or use cap table management software. 

If you are building it from scratch, you have the benefit of building it to your precise specifications, but it can be difficult to build, collaborate on and maintain (remember, you want to be offensive, not defensive). Cap table software is the easiest way to keep your cap table updated. It does cost money but likely saves on costs in the long run.

For more on this topic, you can watch our webinar with Carta below: