Two Hour Financial Model is an excel-based template and series of videos that will help you learn to create a financial model quickly. For students, entrepreneurs, CFOs, and business owners. Checkout our website and Udemy video series.

1. Best practices
of financial modeling
TwoHourFinancialModel.com
for startups

2. Why build a financial
model?
TwoHourFinancialModel.com

3. To communicate your
business
TwoHourFinancialModel.com

4. Businesses take, need
and
make $$$
TwoHourFinancialModel.com

5. $$$ is counted with numbers
not words, or pictures
TwoHourFinancialModel.com

6. To develop a clear
understanding and thought
process
TwoHourFinancialModel.com

7. To evaluate and make major
decisions about your
business
TwoHourFinancialModel.com

8. TwoHourFinancialModel.com
It’s not that* hard

9. Your model will be wrong
TwoHourFinancialModel.com

10. TwoHourFinancialModel.com
But you will learn
something valuable

11. TwoHourFinancialModel.com
Focus on:
Process (esp. revenue)
Major assumptions
Key drivers
Cash (near-term budget,
balance, etc.)

12. Budget vs. Model
TwoHourFinancialModel.com
(or both)

13. TwoHourFinancialModel.com
Budget
 Next 6-24 months
 What you plan to spend with your funds
 Syncs to meaningful achievements
(product, customers, revenue)
 “The Plan”

14. TwoHourFinancialModel.com
Model
 Longer term
 Much less certainty
 Shows the realm of possibilities
 Helps you identify impactful key metrics
and drivers

15. How good is
“good enough”?
TwoHourFinancialModel.com

16. TwoHourFinancialModel.com
The checklist:
 Easy to follow - by somebody else
 Bottom-up revenue forecast
 Unit economics
 Positive cash balance at all times
 All major assumptions verified with data
 Simple, understandable charts & graphs
 Pass a sniff test

17. TwoHourFinancialModel.com
Unit economics
What is the key unit of revenue?
Ex: Revenue per User (web model)
– Revenue sources:
• Subscription upgrades (product tiers)
• Ads, Data, Other non-paying sources
– Costs
• Acquisition
• Service & retention
• COGS

18. Revenue forecasts
TwoHourFinancialModel.com
Bottom-up
Sales per customer or
channel (B2B)
Funnels, customer
acquisition costs
Viral growth (with math)
DO THIS
Top-down
X% of market size
Good for sniff testing, not
for forecasts
Use to check your
bottom-up forecasts, not
to project

19. TwoHourFinancialModel.com
Verify key inputs
Ideal = sync key metrics to what you have
achieved, and scale over time
Next best = benchmark to other people’s key
metrics
Focus mostly on the metrics you think will be the
drivers of your business

20. Link to more benchmarking resources: http://www.springexcel.com/benchmarking-model-inputs.html
TwoHourFinancialModel.com

21. Scenarios (advanced)
What are the high, med. and low outcomes
based on a range of expectations?
Which levers have a large impact on growth
and profits (e.g. viral growth coefficient,
churn, customer acquisition costs)
Use to help develop targets and stretch
goals for your key metrics
TwoHourFinancialModel.com

22. Formatting matters
TwoHourFinancialModel.com

23. Your presentation materials:
TwoHourFinancialModel.com
 Know your audience
 KISS
 Show the basics of your budget & milestones. This
is what you are expected to be able to control.
 Maybe show your long-term projections (have in
backup slides for sure)
 Be able to explain each the details and key
assumptions, when asked
 Many VC investors rarely want audit your model.
But they might, so be ready. Corporate investors
usually will.

24. TwoHourFinancialModel.com
Sniff test
Does everything
seem reasonable?
– If no, why?
– Double-check,
make changes
– Discuss with
advisers before
presenting to
investors
– Listen to feedback

25. Additional Reading
SpringExcel.com/Resources.html
TwoHourFinancialModel.com

26. TwoHourFinancialModel.com
2-hour
Financial Model