As the co-founder of a SaaS startup I end up spending quite a bit of time in Excel staring at tab after tab of numbers. Many of these numbers start at the top of the sheet and then after running through a zillion formulas end up populating massive tables full of predictions. Given where we are now, a model based on formulas that take-into account what happened in the past is critical to taking a truly data-driven approach.
But what do you do if you’re just getting started in the SaaS world and there is no past. Plugging in formulas that you know are going to be completely wrong is just going to create a spreadsheet that gets frozen in time and becomes next-to-impossible to update.
We made the mistake early on of trying to built a super complex financial model only to realize that we never updated it and it became more of a snapshot in time rather than a living document. Back then I wish I had read this blog post by Baremetrics with one of the best primers I’ve read on building a financial model that you’ll actually update.
There are plenty of elaborate financial model templates out there, but the ones I’ve seen come with a key problem — it’s a significant undertaking to update them.
In fact, inaccurate financial modeling and the hassle to update that model is what nearly put Baremetrics out of business last year before we worked with them to get a sustainable model in place. (Source – Baremetrics Blog)
Along with walking founders through the process of creating the initial model, the article also shares the Excel template that you can use to get started. So if you’re getting your SaaS company off the ground and trying to put together a realistic financial model, I’d recommend reading this article before you spend a bunch of time and money building a model you’ll never update.
I learned the lesson the hard way, hopefully this blog post saves you some pain 🙂
