Additionally, if done rightly, financial modeling result in better financial decision making. Top executives in a business or a startup use financial models to make decisions about:

• Budgeting and forecasting
• Priority-based capital allocation
• Management accounting
• Fundraising, etc.

Note: Financial Modeling is a very complex process, and choosing the best types of financial models is important. Also, decision makers should always consult financial modeling professional like The StartupLab.

Benefits of Financial Modeling For Startups

• It helps in finding out whether you can turn your ideas into a sustainably operating business.
• During fundraising, financial models come in handy as they provide quantifiable data, which is important for an investor and a startup.
• Financial Modeling presents the exact financial situation of the startup. By knowing the financial situation, you can use or allocate your money where it matters the most.

5 Types of Financial Models

Below are the Top 5 Most Common Models used in Corporate Finance and are Relevant to Startups:

1. Three Statement Model

It is the most basic setup for financial modeling, and links the three statements-income statement, balance sheet, and cash flow statement into one dynamically connected financial model.

2. Forecasting Model

It is used to predict outcomes regarding sales, supply and demand, consumer behaviour and more.

3. Budget Model

It focuses heavily on the income statement and is used to prepare the budget together for the coming year(s).

4. Discounted Cash Flow Model (DCF)

DCF model is used for analyzing the present value of an investment/company/cash flow by adjusting future cash flows to the time value of money. Upon analysis, DCF gives the present fair value of assets/investments.

5. Merger Model (M&A)

It is used to ascertain whether or not there exist benefits to an amalgamation

Choose The StartupLab for Financial Modeling

As a front runner in the Indian startup ecosystem, The StartupLab provides entrepreneurs and startups with assistance in Financial Modeling. The StartupLab team follows the best practices for building practical financial models and forecasts for your startup business.

We believe that what gets measured, gets managed. So, if you need Financial Modeling for your startup, contact us.

We, with our team of financial modeling experts, will help you prepare financial models, which you can leverage to Forecast customer growth by channel, budgeting and forecasting, raising capital, management accounting, priority-based capital allocation, etc.