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Investor-Ready Financial Models Chris Dishman Denali Financial Consulting

Investor-Ready Financial Models Chris Dishman Denali Financial Consulting. Why are Financial Models Critical? Finance is the “ language of business ” Models show investors how you think The model validates your business model Investors will want to see your model, and stress test it

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Investor-Ready Financial Models Chris Dishman Denali Financial Consulting

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  1. Denali Financial Consulting LLC Investor-Ready Financial Models Chris Dishman Denali Financial Consulting

  2. Denali Financial Consulting LLC Why are Financial Models Critical? • Finance is the “language of business” • Models show investors how you think • The model validates your business model • Investors will want to see your model, and stress test it • Models serve multiple purposes, like budgeting and forecasting

  3. Denali Financial Consulting LLC The Model Reflects Your Plan? • Problem (“Pain Point”) • Your solution • Business model (e.g. SaaS) • Underlying technology (advantage) • Marketing and sales • Competition • Team that will make it happen • Projections and milestones • Status and timeline • Funding need

  4. Denali Financial Consulting LLC What Makes a Good Model? • Simple, clear and concise assumptions • AE – “If you can’t explain it simply, you don’t understand it well enough” • Key drivers clearly identified • Familiar format: • P&L and cash flow • Detailed assumptions…but simple • Organized operating expenses • Fixed versus variable costs • Direct costs of revenue identified • Capital expenditures (e.g. hdct-driven)

  5. Denali Financial Consulting LLC What Important Questions are Answered? • What are the key metrics of the business? • How do metrics compare to benchmarks? • What are the major risks to the plan? • How fast does revenue ramp up? • When does the company reach profitability? • What is cash flow breakeven point? • How much investor funding is needed? • How many employees are needed? • Revenue per employee • Cost per employee

  6. Denali Financial Consulting LLC Common Modeling Mistakes? • Complex and confusing assumptions • Confusing and/or sloppy model design • Not knowing your market metrics • Overly aggressive revenue ramp • Underestimating expenses & cash needs • Ambiguous key milestones • Not connecting the model to the story!!!

  7. Denali Financial Consulting LLC In Summary Good Financial Models….. • Keep it simple and easy to follow • Make the model map to the pitch deck story • Clearly articulate metrics and milestones • Estimate headcount and other costs • Calculate cash flow breakeven • Calculate the timing of the cash needs

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