If you’re a founder preparing to raise funds, you’ve probably heard investors ask: “Can you share your financial model?”
But here’s the thing — not all models are created equal. A weak, oversimplified spreadsheet can hurt your credibility, while a strong one can actually win investor confidence.
So, what exactly makes a good financial model?
Highly Customizable, Not Static
A good model is not a one-time Excel sheet you email and forget. It should be built in a way that’s:
Dynamic — change one small assumption (say, CAC or churn) and the whole model updates.
Modular — revenue, costs, hiring, and marketing should be clearly separated so you can tweak any driver without breaking the sheet.
Example: If you increase your marketing spend from ₹5 lakh/month to ₹8 lakh/month, your customer acquisition, revenues, and cash flow projections should all adjust automatically.
Based on Realistic Assumptions
Investors don’t expect you to be perfect. They do expect you to be realistic.
Common red flags:
- Assuming CAC will stay flat forever.
- Ignoring salary jumps when hiring senior leadership.
- Projecting “zero churn” for SaaS or D2C businesses.
Instead: Ground assumptions in data. Use benchmarks, early traction, and industry norms to justify your numbers.
Built Monthly, Not Just Annually
In the early stages, startup life changes month-to-month — not year-to-year. An annual model hides the detail investors want to see.
👉 Example: You raise $500k seed funding. Investors will ask: “What does this give you in terms of runway? How many months till you hit X milestone?”
You can only answer that with monthly granularity: revenues, expenses, cash burn, hiring, and runway month by month.
Annual numbers = good for long-term vision.
Monthly numbers = essential for near-term survival.
Focused on Drivers, Not Just Outcomes
A weak model just shows “Revenue = $10M in Year 3.”
A good model shows:
- Website traffic → conversion rate → paying customers
- Sales reps → average deals closed → ARR
- Marketing spend → CAC → new customer acquisition
This way, investors can see how you’ll get there, not just where you think you’ll end up.
Final Thoughts
A good financial model isn’t just about numbers. It’s about showing investors that you understand your business drivers, your risks, and your growth path.
It’s customizable
It’s based on realistic assumptions
It’s built monthly, not just annually
And it’s driven by actual levers of your business
Get this right, and your financial model stops being “just a spreadsheet” — it becomes a storytelling tool that builds investor confidence.
Need an investor-ready financial model? I help founders build clear, dynamic, and credible models for fundraising. Let’s connect.