Common Mistakes in Financial Modeling

Most startup financial models are beautiful lies. I’ve reviewed hundreds of early-stage models. And the pattern is clear: → CAC magically drops over time → Churn is “estimated” but never tracked → LTV isn’t calculated or worse, inflated → Headcount costs are wildly optimistic → There’s a “Misc” tab with $1.2M in it Why does this happen? Because founders treat models like investor theatre. Built to impress. Not to operate. The cost? → You raise capital with zero visibility on runway → You overhire and miss your margin targets → You make roadmap bets you can't actually afford → And worst of all? You realize too late that the business model doesn’t work Your model isn’t a pitch prop. It’s your decision engine. A good one should answer: → What happens if CAC jumps 25% next quarter? → Can we delay the next hire and still hit targets? → What’s real runway after expansion churn? If you can’t get those answers, you don’t have a model. You have a spreadsheet in a blazer. Here’s how to build one that actually works: 1/ Start with a clear purpose → What decisions should this model help you make? Hiring plan, pricing strategy, runway clarity? Be specific from day one. 2/ Ground it in real systems → Pull actuals from your CRM, accounting, and payroll. Your model is only as useful as the data it’s built on. 3/ Link your core financials → P&L, Balance Sheet, and Cash Flow should speak to each other. If they don’t, your forecast can’t be trusted. 4/ Segment revenue realistically → Break revenue down by product, customer type, or geography. Model retention, expansion, and churn by cohort — not hope. 5/ Reflect costs with accuracy → Include real team ramp times, founder comp, tech debt, and overlooked ops costs. This is where most risk hides. 6/ Run scenarios, add sensitivity → Best case, worst case, base case. Play with CAC, churn, and pricing levers. Your model should answer “what if?” 7/ Use and update it regularly → If your model isn’t revisited monthly, it’s already outdated. It should evolve with your business — not collect dust post-fundraise. Bottom line? If your model looks polished but doesn’t drive decisions.. Rebuild it. Your business depends on it. PS: Curious, what’s the one metric you check first when you open your model? ——— Need help making the numbers make sense? I’m Mariya. Fractional CFO for SaaS startups. I help founders get clear on what the numbers are really saying. 📩 DM me if your model doesn’t match your reality.

Financial Modeling Best Practices 📊 I’ve built over 100 financial models in my career… And the difference between a good model and a great one comes down to following proven practices. Let's break down what works in the real world 👇 ➡️ DESIGN PRINCIPLES Start with design... because it makes or breaks your model! Your model needs to flow smoothly from start to finish. No confusion, no scattered tabs, no messy formulas. Start by mapping out: - Source Files → Inputs → Outputs → Dashboards Want to know what I do with inputs? I consolidate everything into just a few tabs: - "Drivers/Model/Assumption" tab - Headcount Tab - Revenue Tab Color coding isn't just pretty... it's crucial! I use: - Blue for assumption cells - Purple/green for cell references - Black for calculations - Red for error checks ➡️ FORECASTING FUNDAMENTALS Forecasting demands collaboration across your entire organization. Strong models incorporate input from your CEO's vision, management's execution plans, department head expectations, and accounting team validation. Working in isolation creates incomplete forecasts. Add your actuals... because stakeholders need the full picture 👀 Show them where you've been and where you're going. Check your assumptions every month. Markets change fast. Business evolves faster. Your model needs to keep up! ➡️ PRESENTATION EXCELLENCE Even perfect models fail without strong presentation… Start with budget comparisons! Your stakeholders want to see: - Dollar variances - Percentage changes - Trend analysis Next comes output optimization... Create summaries that grab attention: - Condensed financial statements - KPI dashboards that pop - Visual breakdowns that make sense Format those dashboards right... because nobody wants to fix formatting 5 minutes before a board meeting! ❌ CRITICAL MISTAKES TO AVOID Design mistakes kill productivity... - Building models only you understand - Creating complex systems - Skipping documentation Forecasting mistakes cost money... - Creating projections alone - Forgetting historical data - Never updating assumptions Presentation mistakes lose attention... - Drowning in raw data - Starting with tiny details - Building slides in your model === These methods come straight from presenting models to boards, investors, and executives. What presentation tricks do you use in your models? Share your tips in the comments below 👇 PS: On Tuesday I’m hosting the first of a 4 part workshop series on how to build the ultimate financial model, open only to community members. Join us and save your spot here: 👉https://lnkd.in/eU4b8ARA

Don't give yourself a circular reference nightmare 🔁 How to avoid the 𝗺𝗶𝘀𝘁𝗮𝗸𝗲 made by 99% of modelers 👇 ❌ 𝗧𝗵𝗲 𝗠𝗶𝘀𝘁𝗮𝗸𝗲 Using the Statement of Cash Flows to 𝗿𝗲𝘃𝗲𝗿𝘀𝗲 𝗲𝗻𝗴𝗶𝗻𝗲𝗲𝗿 the Balance Sheet. That's a "no no." I see it most often in the Cash from Investing section. For example, if someone knows they're going to spend $10,000 on new equipment: 1. They'll add $10,000 to the Cash Flow Statement first, and 𝘵𝘩𝘦𝘯; 2. Add that amount to the Fixed Assets account in the Balance Sheet 👎 𝗧𝗵𝗲 𝗗𝗼𝘄𝗻𝘀𝗶𝗱𝗲 Now, it's not wrong from an 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴 perspective. That's all well and good, but... It will likely mess you up from a 𝗺𝗼𝗱𝗲𝗹𝗶𝗻𝗴 perspective. Once you've got stuff from the balance sheet going to the cash flow statement 𝘢𝘯𝘥 vice versa, it's very likely you will create an error or unintended circular reference. ✅ 𝗛𝗲𝗿𝗲'𝘀 𝘁𝗵𝗲 𝗰𝗼𝗿𝗿𝗲𝗰𝘁 𝘄𝗮𝘆 𝘁𝗼 𝗱𝗼 𝗶𝘁: 1. Build the Income Statement 2. Build the Balance Sheet 3. 𝘛𝘩𝘦𝘯 build the Statement of Cash Flows (using the "indirect method") What do I mean by the "indirect method"? It means you refer to items that 𝘢𝘭𝘳𝘦𝘢𝘥𝘺 𝘦𝘹𝘪𝘴𝘵 in your Income Statement and Balance Sheet, and calculate the difference b/t time periods. It works like this: = Net Income (from Income Statement) + D&A (from Income Statement) +/- the 𝘤𝘩𝘢𝘯𝘨𝘦 𝘪𝘯 Assets, Liabilities, & Equity ➕ 𝗔𝘀𝘀𝗲𝘁𝘀 For Assets, it's the previous period minus the current period (i.e., January's ending AR balance minus February's ending AR balance) ➖ 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀 For Liabilities, it's the current period minus the previous period (i.e., February's ending AP balance minus January's ending AP balance) 🟰 𝗘𝗾𝘂𝗶𝘁𝘆 For Equity, it's the current period minus the previous period (same as Liabilities) (i.e., February's ending Contributed Capital balance minus January's ending Contributed Capital balance) ⚠️ 𝗢𝗻𝗲 𝗘𝘅𝗰𝗲𝗽𝘁𝗶𝗼𝗻 The only exception to this rule is Fixed Assets, where you will also pull out the Depreciation because it's 𝘢𝘭𝘳𝘦𝘢𝘥𝘺 captured in the Cash from Operations. (i.e., January's ending Fixed Asset balance minus February's ending Fixed Asset balance 𝘮𝘪𝘯𝘶𝘴 𝘍𝘦𝘣𝘳𝘶𝘢𝘳𝘺'𝘴 𝘋𝘦𝘱𝘳𝘦𝘤𝘪𝘢𝘵𝘪𝘰𝘯) The one-pager below maps out all the steps. 𝗔 𝗳𝗲𝘄 𝗲𝘅𝘁𝗿𝗮 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀 𝗳𝗼𝗿 𝘆𝗼𝘂... 📥 Download some free Excel 𝘁𝗲𝗺𝗽𝗹𝗮𝘁𝗲𝘀 👉 https://lnkd.in/e4PEhWM4 🧠 Three Statement Modeling 𝗾𝘂𝗶𝘇 👉 https://lnkd.in/eccYpT-R 🎓 Modeling 𝗰𝗼𝘂𝗿𝘀𝗲𝘀 👉 https://bit.ly/FMECourses Hope this helps 🙂.

Scared of Investor Questions About Your Financial Model? 😰 Facing a room full of investors can be intimidating, especially when they start grilling you about your financial projections.  But don't worry, you're not alone! Here's what kills your confidence (and how to fix it): 1. Assumption Anxiety • Unclear growth drivers • Unrealistic projections • Unsupported numbers • Guessing game metrics Fix: Back every number with market data and clear logic. 2. Formula Fear • Complex spreadsheets • Hidden calculations • Manual errors • Inconsistent formulas Fix: Use simple, transparent calculations you can explain in seconds. 3. Market Questions • Vague TAM numbers • Weak competitive moats • Unclear unit economics • Poor market validation Fix: Build scenarios based on real market research. 4. Update Uncertainty • Outdated projections • Static models • Slow updates • Historical inconsistencies Fix: Create dynamic models that adapt to market changes. 5. Story Struggle • Numbers without narrative • Missing milestones • Unclear growth path • Weak assumptions Fix: Connect every number to your story. Using this framework, Wasted.earth went from "model anxiety" to confidently raising $5M - investors were impressed by their clear, data-backed story. Want to walk into investor meetings feeling prepared? Let's chat about your model: https://dub.sh/oetMBFT

This is one of the most common mistakes we see FP&A leaders make.   Adding complexity for the wrong reasons.   I get it. If you're an FP&A leader trying to prove your strategic value, there's a real temptation to showcase technical sophistication. So you start adding: → Excessive customer segmentation → Hyper-detailed expense allocations → Bloated scenario planning capabilities   But here's the problem: when you layer in nuances to appear sophisticated, you create models that seem impressive but are difficult to maintain and impossible for leadership to understand or use.   Before you start, ask yourself the following: → What are the 3-4 levers that actually drive growth or efficiency? → What metrics matter most to your CEO and your board? → Where does the business need to make better decisions in the next quarter?   Once you've identified what actually moves the needle, then it's time to start building. As your business scales, your models will naturally become more complicated. But the real mark of a strategic finance leader isn’t complexity, it’s clarity.