Nathan Beckford walks through financial modeling for startups, covering realistic sales cycles, hiring ramps, cash flow timing, and churn. He explains how to build a 5-year forecast, create an assumptions dashboard, and present your model to VCs without overselling the numbers.
Chapters
This first bit here is focusing on adoption sales cycle and how people actually buy. And what that means in practice is, for example, I showed you an example of using— of hiring salespeople and making assumptions of their sales quotas and things like that for building up a model. Well, in reality, what does that look like? Does it mean it takes us— 2 months to hire a salesperson and then it takes them 2 months to get up to speed in terms of training and then maybe it's by month 4 that they actually make their first sale. You know, that would be an example of like what does reality really look like. It's too easy to just plug in salesperson in month 1 makes 10 sales. We want to kind of stretch it out to match reality. Did that example make sense? I don't know if that was clear. But yeah, the point is we're trying to capture realistic customer behavior. So that usually means putting in more expenses, stretching things out, because nothing ever goes quite as fast as you think it's going to go. And again, paying attention to cash flow. Expenses, your bills arrive on time every month, but revenue can take its own sweet time to come in the door. So, And then think about things like sometimes people don't pay. You have to factor that in. You have churn, people drop off your business. And then here's a quick example of what like a 5-year forecast would look like. We have some key data up top. I don't know if everyone can see this, but basically this is a typical 5-year model. And then this is, A per-unit basis. End of the day, your model should be logical, reasonable. We're taking your vision, putting it in numbers. It should be simple. It should be easy to navigate. I usually say build a dashboard of assumptions and then spread those over the rest of the model so you can go into the dashboard and fiddle around. I can show you an example of that. And then when you're pitching it, we usually just put a really good summary slide into your pitch deck. Have the model also— I'm talking about like going into a VC meeting. We'll have like one slide in the actual pitch deck that might have your financial forecast, but then you also would probably have your model open in case the investor starts asking questions. Did you have a question? Nope. Nope. And then again, the ultimate point of this, especially in the context of raising money, is showing that you understand your business and that you can take $1 million of investment and turn that into many millions of dollars in the form of a profitable business. That's what you're doing here.
