From Projections to Profits: Financial Modeling Essentials with Chuxin Liang and Eric Nelson
Notes and takeaways from our session.
Thank you for joining us for a great session with Eric Nelson and Chuxin Liang on financial modeling essentials.
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Below are clips and the full video recording of the session, along with a list of takeaways for those who couldn’t make it.
We hope you can attend the next session Looking to the Exit? It’s Never Too Early to Know the Options this Thursday, November 7.
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— Avalanche & ECMC EIF
Takeaways
A good financial model helps guide management decision-making and articulate your thesis using numbers to external stakeholders.
“The point of financial projections is to tell a story with numbers – a story about opportunity, resource requirements, market forces, growth, milestone achievements, and profits.” – Guy Kawasaki
Track spending and revenue - understand your budget and where your money goes.
Avoid running out of money and help raise funds when needed - know how much investment you need and when.
Identify key business drivers - determine the metrics crucial for survival and growth.
Build your model bottoms-up, on a monthly basis. Projections should be based on key business drivers specific to your business (how you bring customers in, how you activate your customers, how you monetize your customers, what it costs to keep your business running, how your cash is managed, and what investment capital is necessary). Use metrics, benchmarks, and comparables as a guide and to sanity check your assumptions.
Know your cost structure inside and out. Understand your COGS and unit economics, build out your hiring plan (who, how much, when), and layer in your operating budget and capital expenditures. In the early days, talent is often the biggest cost and the greatest accelerator to growth (investors are betting on founders building an A team).
Your model should be dynamic as your assumptions and business change. It should be built to scale and be logical, reasonable, and actionable.
A thoughtful financial model will give you instant credibility to investors. It should show that you understand your business and can craft a plan to achieve scale and profitability. A poorly articulated financial model will weaken your credibility as an operator and reduce your negotiation leverage.
It is crucial to regularly compare your model to actual monthly results. This helps refine your assumptions, understand your business’s long-term health, and update projections with the latest information.
Stay in touch and material referenced in the webinar:
Notion webpage with all resources
Lessons and experience shared by other VCs:
Startup financial modeling by Math Venture Partners
Making a financial model for your early-stage startup? by Bloomberg Beta
Managing Startup Finances, common mistakes and how to prevent them by YC
CFO Playbook: Mastering metrics and managing boards for SaaS finance success by Bessemer
KPI analysis benchmarks by sizes/stages of the company:
Clips from the Session
When to Raise Money to Stay Afloat?
Why Investors Fixate on Costs
Mastering Your Business Roadmap to Attract Investors
Upcoming sessions: Please sign up!
November 7, 2024 | Looking to the Exit? It’s Never Too Early to Know the Options
Expert: James Marciano, CEO and Founder of Tuck Advisors
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November 21, 2024 | GTM Tools: Find and Respond to Public Sector RFPs and Education Institutions
Expert: Justin Wenig, co-founder of Coursedog
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December 5, 2024 | Metrics That Matter: Proving efficacy and implementing the right KPIs
Expert: Susan Cates, Managing Partner of Leeds Illuminate
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