In this article, we are examining a financial model for a new business, aimed at forecasting potential revenues and expenses for the company, determining the breakeven point, and calculating the required investments. To achieve this, we utilize a “Three-Statement Model,” which forecasts movements in three standard financial reports: the “Profit and Loss” (P&L) statement, the “Cash Flow” statement, and the “Balance Sheet.”
At this stage, we put aside the assessment of the business’s value, investor ROI, and other interesting calculations, which, however, are of little use if the company lacks an understanding of its path to commercial success.
The objective of our model is to link the project’s roadmap, the necessary expenses for its implementation, and the dynamics of customer growth and revenues. We are creating a financial model in Google Sheets (the same algorithm works for Excel) that will be a flexible tool for planning a new business. Therefore, we separate all the input data into individual tabs, and the main forecasts are calculated automatically based on formulas.
Let’s begin with the structure of our financial model file in Google Sheets:“Setting” Tab
Here, we set the general parameters for the business.“Roadmap” Tab
We list the events on the business roadmap that will influence the dynamics of the company’s revenues and expenses.“Payroll” Tab
We input information about salaried employees.“Projections” Tab
We input the initial data to generate all income and expense streams. The onset of various income and expense items is linked to events on the roadmap, and revenue generation depends on direct expenses leading to sales. The “Monthly forecast” tab is based on the values entered here.“Monthly Forecast” Tab
Here, we create a detailed financial forecast for the business on a monthly basis.“P&L | Cash Flow | Balance” Tab
We compile financial statements: the Profit and Loss (P&L) statement, Cash Flow statement, and Balance Sheet on a monthly basis.“Data for Charts” Tab
This is an auxiliary tab to facilitate the creation of charts for the “Charts” tab.“Charts” Tab
This tab is for visualizing key business metrics. Charts are generated based on the data from the “Data for Charts” tab.Here
you can buy the template of the financial model described in this article.