Mistakes to Avoid in Financial Modeling

Your financial model can be used not only for fundraising, but also for running your startup.

Avoid these mistakes in setting up your financial model:

Tying your revenue to a factor that doesn’t actually drive revenue.

Figure out what actually drives sales and build your model around that.

Trying to identify exact numbers for factors such as conversion rate.

Instead, use a range of numbers to account for variations.

Skipping the research into companies in your sector.

Instead, spend time looking at similar companies to find out what drives their business.

Trying to include too many drivers in your business model.

Instead, focus on the top drivers that account for the majority of your sales.

Setting up the financial model for generating financial statements only.

Instead, set up the model, so it also calculates key performance indicators.

Design the spreadsheet for running the business in addition to raising funding. 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.