I can’t tell you how often I got excited about projecting financials for my startup. Let’s be honest; if you’re an entrepreneur, your revenue in five years is a number that you should care about. Over the years, in my entrepreneurial journey, I’ve discovered many ways to create my startup financial projections. This article showcases a startup financial projections template in Google Sheets or Excel that would be very helpful.
Let’s do this!
Before I begin, if you’re only interested in the template, click on the table of contents option below to jump to the end of the article (It’s okay, I forgive you.)
However, if you want to be guided by a ten-year investment consultant, read this small 5-minute article. It aims to support your projections.
Stages of your startup
Startups have various stages. There’s ideation, which is the phase that all startups start in. Then they evolve to an MVP (minimum viable product.) After that, money starts coming in (it doesn’t have to be money in particular, it could be data as well.)
Once that happens, a startup becomes post-traction. As a business consultant in Zurich, Switzerland, I always advise my clients to consider raising funds post-traction.
It’s much easier to value and project financials at that stage. If you made $5 from selling a service, then it stands within reason that you won’t be making $30,000 from selling this simple service. So your projections could convey an increase over the years that is a reasonable increase.
Hence, you need to be aware of your startup’s stage:
There are more detailed stages, but this is for simplification. The thing you should be aware of is that your financial projections vary by a wide margin during each phase. This makes sense when you really think about it. When you’re in ideation, the money you think you’ll be making is absolutely not accurate compared to when you make your first sale, even if you have the strongest market research to support your claim.
But do financial projections have to be accurate? Yes, and no. Let me explain.
Startup Financial Projections Accuracy
When you’re sending off your financial projections to an investor, for example, that investor is aware that there is inaccuracy involved. Yet, you’re accountable for that. So when you are projecting $100 million of revenue in the first year, and you convinced your investors to invest accordingly, then it’s a shocker to everyone if you made $1 million in the first year.
However, if you made $90 million instead of $100 million, it’s a margin that your investor will not be bothered with. It’s actually saying that you were 10% close to your real values, which is quite impressive.
Hence, don’t expect your financial projections to be controlling your business. It’s the other way around. You create a plan, and the business will sort itself out. You might change those projections multiple times; that’s absolutely normal.
Finally, many of my clients demand three scenarios for a financial model: a worse-case, best-case, and average-case scenario. This is not a bad idea. It’s like projecting a 500-pixel image using three pixels instead of one. It’s still far-fetched, but it’s slightly more accurate.
Hiring a Financial Modeler vs. Doing it Yourself
Many clients ask me this question. The truth is it depends on your fundraising stage. If you’ve made $250 million of annual revenue, it stands to reason that you hire a financial modeler to help you out. However, this question is more viable when you have $0 revenue.
In that case, it depends on your experience with numbers. You don’t have to be an accountant or a financial wizard. However, it will take time for you to create a theory of projections. But the good news is if you’re doing it is that there is no better person who knows your business.
Hence, you will be defending those projections with your heart. The con is that the accuracy could be affected because of the same reason: “You will be defending those projections with your heart.”
A financial modeler wouldn’t have the same bias. They would just be looking at your business as a business, which is beneficial in a lot of cases.
My ultimate advice is to try to do it yourself. There’s a startup financial projections template at the bottom of this article. Do your best to project your own financials and have some expert review it.
The Startup Financial Projections Template
Finally, I used this financial projections template with multiple pre-revenue startups. It could also work with post-revenue startups, but not companies who have raised over $10 million, as it doesn’t account for the complexity.
Many people would tell you that you need a 3-statement model with a projected balance sheet, cash flow analysis, and an income statement. The ultimate truth is that this is nonsense. Projecting a balance sheet is a catastrophically useless idea for pre-revenue or early-stage startups. This is the definition of over-planning that’s toxic.
You need to know how much you’ll be making, hence, your income statement. But you do not need to know how much cash flow you will have on a monthly basis in the upcoming ten years if you still didn’t sell a single product.
This template revolves around a simple income statement projected over 3 years while having the first year broken down into twelve months.
If you’re looking for a Google Sheets version of the Startup Financial Projections Template, which is the original, click the button below, choose “File”, and “Make a copy”. Then you’ll have everything you need.
For the excel template, just click the button, and it will download.
Project away, my friend!
Meet The Author Of This Article
I’m Al Anany, the founder and CEO of Albusi. I constantly make financial projections. I’m even projecting how many of you will be reading and seeing this article. Is it going to be accurate? Not necessarily, but it will be flexible to accompany changes over the years.
Wishing you the best,