Building a Financial Model an Investor Will Actually Read

Structure over sophistication

A working early-stage model needs four connected sheets: assumptions, revenue build-up, cost build-up and a monthly cash statement. Everything else is optional.

Rules that make a model credible

1. No hard-coded numbers inside formulas — every driver lives on the assumptions sheet.
2. Revenue built from volume × price, never typed as a growth percentage.
3. Costs separated into fixed, variable and one-time capital expenditure.
4. Collections modelled separately from revenue recognition.
5. Three scenarios: conservative, base and stretch, driven by the same assumptions.

The two-minute test

Ask a reviewer to change one assumption — price, volume or churn — and watch whether the model responds sensibly. If it does not, the model is a presentation, not an analysis.