Skill: zhengxinjipai/startup-financial-modeling (version 1.0.0)

--- name: startup-financial-modeling description: This skill should be used when the user asks to "create financial projections", "build a financial model", "forecast revenue", "calculate burn rate", "estimate runway", "model cash flow", or requests 3-5 year financial planning for a startup. version: 1.0.0 --- # Startup Financial Modeling Build comprehensive 3-5 year financial models with revenue projections, cost structures, cash flow analysis, and scenario planning for early-stage startups. ## Overview Financial modeling provides the quantitative foundation for startup strategy, fundraising, and operational planning. Create realistic projections using cohort-based revenue modeling, detailed cost structures, and scenario analysis to support decision-making and investor presentations. ## Core Components ### Revenue Model **Cohort-Based Projections:** Build revenue from customer acquisition and retention by cohort. **Formula:** ``` MRR = Σ (Cohort Size × Retention Rate × ARPU) ARR = MRR × 12 ``` **Key Inputs:** - Monthly new customer acquisitions - Customer retention rates by month - Average revenue per user (ARPU) - Pricing and packaging assumptions - Expansion revenue (upsells, cross-sells) ### Cost Structure **Operating Expenses Categories:** 1. **Cost of Goods Sold (COGS)** - Hosting and infrastructure - Payment processing fees - Customer support (variable portion) - Third-party services per customer 2. **Sales & Marketing (S&M)** - Customer acquisition cost (CAC) - Marketing programs and advertising - Sales team compensation - Marketing tools and software 3. **Research & Development (R&D)** - Engineering team compensation - Product management - Design and UX - Development tools and infrastructure 4. **General & Administrative (G&A)** - Executive team - Finance, legal, HR - Office and facilities - Insurance and compliance ### Cash Flow Analysis **Components:** - Beginning cash balance - Cash inflows (revenue, fundraising) - Cash outflows (operating expenses, CapEx) - Ending cash balance - Monthly burn rate - Runway (months of cash remaining) **Formula:** ``` Runway = Current Cash Balance / Monthly Burn Rate Monthly Burn = Monthly Revenue - Monthly Expenses ``` ### Headcount Planning **Role-Based Hiring Plan:** Track headcount by department and role. **Key Metrics:** - Fully-loaded cost per employee - Revenue per employee - Headcount by department (% of total) **Typical Ratios (Early-Stage SaaS):** - Engineering: 40-50% - Sales & Marketing: 25-35% - G&A: 10-15% - Customer Success: 5-10% ## Financial Model Structure ### Three-Scenario Framework **Conservative Scenario (P10):** - Slower customer acquisition - Lower pricing or conversion - Higher churn rates - Extended sales cycles - Used for cash management **Base Scenario (P50):** - Most likely outcomes - Realistic assumptions - Primary planning scenario - Used for board reporting **Optimistic Scenario (P90):** - Faster growth - Better unit economics - Lower churn - Used for upside planning ### Time Horizon **Detailed Projections: 3 Years** - Monthly detail for Year 1 - Monthly detail for Year 2 - Quarterly detail for Year 3 **High-Level Projections: Years 4-5** - Annual projections - Key metrics only - Support long-term planning ## Step-by-Step Process ### Step 1: Define Business Model Clarify revenue model and pricing. **SaaS Model:** - Subscription pricing tiers - Annual vs. monthly contracts - Free trial or freemium approach - Expansion revenue strategy **Marketplace Model:** - GMV projections - Take rate (% of transactions) - Buyer and seller economics - Transaction frequency **Transactional Model:** - Transaction volume - Revenue per transaction - Frequency and seasonality ### Step 2: Build Revenue Projections Use cohort-based methodology for accuracy. **Monthly Customer Acquisition:** Define new customers acquired each month. **Retention Curve:** Model customer retention over time. **Typical SaaS Retention:** - Month 1: 100% - Month 3: 90% - Month 6: 85% - Month 12: 75% - Month 24: 70% **Revenue Calculation:** For each cohort, calculate retained customers × ARPU for each month. ### Step 3: Model Cost Structure Break down costs by category and behavior. **Fixed vs. Variable:** - Fixed: Salaries, software, rent - Variable: Hosting, payment processing, support **Scaling Assumptions:** - COGS as % of revenue - S&M as % of revenue (CAC payback) - R&D growth rate - G&A as % of total expenses ### Step 4: Create Hiring Plan Model headcount growth by role and department. **Inputs:** - Starting headcount - Hiring velocity by role - Fully-loaded compensation by role - Benefits and taxes (typically 1.3-1.4x salary) **Example:** ``` Engineer: $150K salary × 1.35 = $202K fully-loaded Sales Rep: $100K OTE × 1.30 = $130K fully-loaded ``` ### Step 5: Project Cash Flow Calculate monthly cash position and runway. **Monthly Cash Flow:** ``` Beginning Cash + Revenue Collected (consider payment terms) - Operating Expenses Paid - CapEx = Ending Cash ``` **Runway Calculation:** ``` If Ending Cash < 0: Funding Need = Negative Cash Balance Runway = 0 Else: Runway = Ending Cash / Average Monthly Burn ``` ### Step 6: Calculate Key Metrics Track metrics that matter for stage. **Revenue Metrics:** - MRR / ARR - Growth rate (MoM, YoY) - Revenue by segment or cohort **Unit Economics:** - CAC (Customer Acquisition Cost) - LTV (Lifetime Value) - CAC Payback Period - LTV / CAC Ratio **Efficiency Metrics:** - Burn multiple (Net Burn / Net New ARR) - Magic number (Net New ARR / S&M Spend) - Rule of 40 (Growth % + Profit Margin %) **Cash Metrics:** - Monthly burn rate - Runway (months) - Cash efficiency ### Step 7: Scenario Analysis Create three scenarios with different assumptions. **Variable Assumptions:** - Customer acquisition rate (±30%) - Churn rate (±20%) - Average contract value (±15%) - CAC (±25%) **Fixed Assumptions:** - Pricing structure - Core operating expenses - Hiring plan (adjust timing, not roles) ## Business Model Templates ### SaaS Financial Model **Revenue Drivers:** - New MRR (customers × ARPU) - Expansion MRR (upsells) - Contraction MRR (downgrades) - Churned MRR (lost customers) **Key Ratios:** - Gross margin: 75-85% - S&M as % revenue: 40-60% (early stage) - CAC payback: < 12 months - Net retention: 100-120% **Example Projection:** ``` Year 1: $500K ARR, 50 customers, $100K MRR by Dec Year 2: $2.5M ARR, 200 customers, $208K MRR by Dec Year 3: $8M ARR, 600 customers, $667K MRR by Dec ``` ### Marketplace Financial Model **Revenue Drivers:** - GMV (Gross Merchandise Value) - Take rate (% of GMV) - Net revenue = GMV × Take rate **Key Ratios:** - Take rate: 10-30% depending on category - CAC for buyers vs. sellers - Contribution margin: 60-70% **Example Projection:** ``` Year 1: $5M GMV, 15% take rate = $750K revenue Year 2: $20M GMV, 15% take rate = $3M revenue Year 3: $60M GMV, 15% take rate = $9M revenue ``` ### E-Commerce Financial Model **Revenue Drivers:** - Traffic (visitors) - Conversion rate - Average order value (AOV) - Purchase frequency **Key Ratios:** - Gross margin: 40-60% - Contribution margin: 20-35% - CAC payback: 3-6 months ### Services / Agency Financial Model **Revenue Drivers:** - Billable hours or projects - Hourly rate or project fee - Utilization rate - Team capacity **Key Ratios:** - Gross margin: 50-70% - Utilization: 70-85% - Revenue per employee ## Fundraising Integration ### Funding Scenario Modeling **Pre-Money Valuation:** Based on metrics and comparables. **Dilution:** ``` Post-Money = Pre-Money + Investment Dilution % = Investment / Post-Money ``` **Use of Funds:** Allocate funding to extend runway and achieve milestones. **Example:** ``` Raise: $5M at $20M pre-money Post-Money: $25M Dilution: 20% Use of Funds: - Product Development: $2M (40%) - Sales & Marketing: $2M (40%) - G&A and Operations: $0.5M (10%) - Working Capital: $0.5M (10%) ``` ### Milestone-Based Planning **Identify Key Milestones:** - Product launch - First $1M ARR - Break-even on CAC - Series A fundraise **Funding Amount:** Ensure runway to achieve next milestone + 6 months buffer. ## Common Pitfalls **Pitfall 1: Overly Optimistic Revenue** - New startups rarely hit aggressive projections - Use conservative customer acquisition assumptions - Model realistic churn rates **Pitfall 2: Underestimating Costs** - Add 20% buffer to expense estimates - Include fully-loaded compensation - Account for software and tools **Pitfall 3: Ignoring Cash Flow Timing** - Revenue ≠ cash (payment terms) - Expenses paid before revenue collected - Model cash conversion carefully **Pitfall 4: Static Headcount** - Hiring takes time (3-6 months to fill roles) - Ramp time for productivity (3-6 months) - Account for attrition (10-15% annually) **Pitfall 5: Not Scenario Planning** - Single scenario is never accurate - Always model conservative case - Plan for what you'll do if base case fails ## Model Validation **Sanity Checks:** - [ ] Revenue growth rate is achievable (3x in Year 2, 2x in Year 3) - [ ] Unit economics are realistic (LTV/CAC > 3, payback < 18 months) - [ ] Burn multiple is reasonable (< 2.0 in Year 2-3) - [ ] Headcount scales with revenue (revenue per employee growing) - [ ] Gross margin is appropriate for business model - [ ] S&M spending aligns with CAC and growth targets **Benchmark Against Peers:** Compare key metrics to similar companies at similar stage. **Investor Feedback:** Share model with advisors or investors for feedback on assumptions. ## Additional Resources ### Reference Files For detailed model structures and advanced techniques: - **`references/model-templates.md`** - Complete financial model templates by business model - **`references/unit-economics.md`** - Deep dive on CAC, LTV, payback, and efficiency metrics - **`references/fundraising-scenarios.md`** - Modeling funding rounds and dilution ### Example Files Working financial models with formulas: - **`examples/saas-financial-model.md`** - Complete 3-year SaaS model with cohort analysis - **`examples/marketplace-model.md`** - Marketplace GMV and take rate projections - **`examples/scenario-analysis.md`** - Three-scenario framework with sensitivities ## Quick Start To create a startup financial model: 1. **Define business model** - Revenue drivers and pricing 2. **Project revenue** - Cohort-based with retention 3. **Model costs** - COGS, S&M, R&D, G&A by month 4. **Plan headcount** - Hiring by role and department 5. **Calculate cash flow** - Revenue - expenses = burn/runway 6. **Compute metrics** - CAC, LTV, burn multiple, runway 7. **Create scenarios** - Conservative, base, optimistic 8. **Validate assumptions** - Sanity check and benchmark 9. **Integrate fundraising** - Model funding rounds and milestones For complete templates and formulas, reference the `references/` and `examples/` files.


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