Financial Models should be Excel-based and presented on a monthly basis with up-to-date actual / historical figures (ideally from past 2 years, if company has been in operation that long) and at least 2 years of forecasts
Financial Models should include all three, core financial statements:
Income / P&L Statement – demonstrates to investors the nature of the company's revenues & expenses and thus gives insights into profitability and the long-term viability of the business
Cashflow Statement – demonstrates to investors the company's sources and uses of cash and the expected rate of cash burn should they invest
Balance Sheet – demonstrates to investors the current and projected “book value” of the business, which is critical to making an educated investment decision
Financial Models should include the following core KPIs:
Revenue – demonstrates to investors the scale of the business and traction with paying customers over time, which is used to evaluate the company's investment potential
EBITDA – demonstrates to investors the company's short-term operational efficiency, which is a more accurate reflection of operating profitability since EBITDA margin ignores the impacts of non-operating factors such as interest expenses, taxes, or intangible assets
Total Costs – demonstrates to investors the total expenses incurred in business operations
Total Staff Costs – demonstrates to investors the total expenditure incurred for staff time used to deliver goods and services
Cash Receipts From The Sale Of Goods Or Rendering Of Services – demonstrates to investors how much cash the company generates from its core business operations
Cash Payments To Suppliers And Employees – demonstrates to investors how much the company spends on day-to-day operations and allows them to better understand how the company intends to spend their cash should they invest
Net Cashflow – demonstrates to investors the company's financial viability, as a consistent positive net cash flow is an excellent indicator of the business's potential to succeed
Gross Runway – demonstrates to investors how many months the company can keep operating before it runs out of money. Investors generally want to see 12 – 18 months of runway, allowing time for essential projects to finish before additional funding is required
Total Assets – demonstrates to investors the tangible “book value” of the company and the ratio of assets to bank debt (as applicable)
Cash & Cash Equivalents (Closing Balance) – demonstrates to investors the liquidity of the business and addresses whether the company has sufficient cash and cash equivalents to meet urgent liabilities when they fall due
Total Equity (as applicable) – demonstrates to investors the capacity of the company to finance future growth and expansion, as well as give investors a sense of how well the company generates cash
Team Size – demonstrates to investors the scale of the company's human capital resources and needs
Total Users (as applicable)– demonstrates to investors how large the company's client base is and gives a sense of how much of the target market has been captured
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