An article we liked from Thought Leader Nikhil Bhandari:
Financial Models for Software as a Service (SAAS) Start-Ups
Use MyFinModel to determine financial feasibility
Most start-ups in the software space are, naturally, founded by folks whose area of expertise is technical and not financial; they are more likely to be comfortable writing or debugging computer code than to think about income statements or balance sheets. In the early stages of a start-up it is not uncommon to not have a single person on the team who can understand a full set of financial statements let alone create them.
It is, however, important that the start-up ventures undertake some level of financial analysis to determine the financial viability of the venture or determine the need for funding (when and how much). Also, the financial analysis exercise requires a systematic way of organizing one’s thinking about the costs incurred by the venture, the staffing levels, the products and revenues, etc., and the exercise can often help identify key financing elements that one may not have considered.
Most start-ups end up closing shop because they run out of funds. Having a good idea of the venture’s finances can help extend the life of the venture.
The financial analysis is an important component of investor pitches as well, and when it comes to pitching to investors, it is important that the start-up team (the team) present a coherent set of figures that can be used as a basis for valuation of the start-up. The key term here is “coherent set of figures” — by this we mean that the financials that the team presents to investors are internally consistent, i.e., the forecasted revenues are tied to products, customers, price and growth rates, and the costs are tied to actual forecasted expenses like salaries, benefits, office costs, hardware costs, etc.
To develop such figures, the typical approach is to develop an excel based financial model. Now, in most start-ups, there would be one or two members who can easily...
Read the rest of this article at medium.com...
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