Background
Veronica was referred to us by one of our awesome start-up clients. She needed a financial model that truly represented her business model and her vision.
She had a financial model previously made that was broken into multiple pieces, missing a logical flow, making it difficult to see the big picture. Potential investors and team members gave feedback that they didn't understand the model or the numbers, and it was truly difficult to envision the business roadmap, goals, and milestones.
Veronica also had a hard time explaining her business model, because she didn't have the support or back-up needed to do so. So, she reached out to us.
Our Approach
When we met with Veronica, we started by explaining the purpose of a financial model that every founder must know: a financial model tells your story. The flow takes you from the assumptions behind economics that are specific to you, it must align with your pitch deck, back up your claims, clearly represent your business model, and answer the 5 whys.
Then we determined the goal of the model. In this case, the number one goal was to raise capital. Veronica also needed to refine her business model and get clarity on her vision.
Deep-Dive Strategy Sessions
We set up two 60–90 minute deep-dive strategy sessions where we covered the following:
- ✓Overall business model
- ✓Established the total available market
- ✓Identified revenue streams
- ✓Demographics of the TAM
- ✓KPIs: % of app downloads, client conversion %, churn rate, yearly growth, CAC, LTV
- ✓Seasonality of the business
- ✓Cost of sales and inventory needs
- ✓Hiring needs and headcounts
- ✓Additional expenses needed to support projected revenues
- ✓Expected capital raises and/or debts
Building the Model
We didn't have every answer right away. After our discussions, our team ran market research to confirm the TAM and benchmark KPIs, then developed an organized plan and set up the financial model template, which flowed like this:
- ✓Assumptions (inputs)
- ✓Calculation of each section
- ✓Financial statements (projections) per month, with analysis
- ✓Yearly financials, the final presentation that goes into the pitch deck
The Result
Once the first draft was ready, we validated every piece of the model with Veronica and her team, made reiterations per their feedback, and submitted the final version. The results spoke for themselves:
- ✓Five months after we completed her new financial model, Veronica was approved into Techstars with her pitch deck and financial model submitted.
- ✓Veronica's network repeatedly said her new financial model was "the best they've ever seen."
- ✓Travelsist received its first-ever VC funding, a $250K investment from The Fearless Fund.
- ✓The company raised $800K in six months and moved on to raising its pre-seed round, targeting $2 million.