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I’m Taylor Davidson from Foresight, and here’s how to get started with the Standard Financial Model, SaaS Financial Model, and Ecommerce Financial Model. If you have any questions in how to setup the models for your business, feel free to email or call/text/WhatsApp me at +1 646.770.0052

Who should be using this guide?

If you are using v4.5 or above of the Standard Financial Model, Standard Financial Model for SaaS, Standard Financial Model for Ecommerce, or any other “Standard Financial Model for (specific revenue model type)” (coming soon), this guide is for you.

The Standard Model is the base for all the business model-specific variants. There are no other structural differences between them, they are targeted to different business types by the default setup of the model. This is done because a) the Standard Model itself is built to handle a wide variety of business types, and natively handles SaaS, Ecommerce, and any subscription or transaction-oriented business, but with additional sheets that can be used to dive deeper into different business models depending on the modeling approach desired by the user, and b) this creates consistency across all models. So anything that references the “Standard Model” also applied to any of the “Standard Model for …” variants.

The v3.x Standard Models and below, v2.x SaaS Module, v2.x SaaS Financial Model, v2.x Ecommerce Module, v2.x Ecommerce Financial Model, v2.x Services Module, and v2.x Services and Consulting Financial Model do not follow this approach. The variants have different structures that integrate with the Standard as modules. The v2.x modules do not prelink with the v4x Standard Model, but can be linked in through Hooks and Forecast the same as any custom revenue model, with no issues.

For all other models, visit Learn for the appropriate get started guide for your model, and if there’s any gaps or questions, don’t hesitate to contact me

Familiarize yourself with the structure

Start by breifly reviewing the overall structure of the model and get acquainted with where the inputs are located and where the important data comes out.

All of my models work in Microsoft Excel or Google Sheets without issues; you can upload the Excel file you downloaded from purchase into Google Sheets and use as an Excel file or convert to Google Sheets without issues (no formulas break, although some charts will appear different). Open or upload the file, and prepare to start editing. (More on recommended software ›)

Streamline the model

Then, I generally clean up the model a bit so I can focus on the sheets that matter. Once you’ve taken a look at the overall structure, I usually advise hiding a few sheets to streamline the model presentation

That leaves you with a much slimmer model that’s easier to navigate and use, but still has more detail behind the scenes if needed, or once you’re ready to use it.

Write down your goals

I advise taking a step back before diving into the model setup, to write down in text form the main things you want to accomplish with the model, and write down the key numbers and inputs you think you want to reflect in the model. This helps provide a guide to true back to as you dive into the details.

Once you start, I generally advise that it should take 2 hours to build a base model for your business using the template.

Setup the growth and conversion funnel

Then, I setup the conversion funnel on Get Started to fit one’s business. There’s a lot of power, optionality, and extensibility prebuilt into the structure. Despite the defaults, this is not focused on subscription or digital business, and simply by changing the labels, it can fit a wide variety of business types. Here’s a couple examples that are easy to setup in the model:

The Presets sheet has a number of common setups already laid out, and you can select which one you want to use to start off your structure. Details on Presets ›

All of those, and many more, are easy to setup. Specific documentation coming soon, for now start with the revenue model overview ›

Use the inputs to create the revenue forecast

The model follows a general ethos to consolidate inputs, but to provide a couple levels of detail to how they are presented. The model level assumptions are all on Get Started, and the detailed inputs are on Forecast and the optional Pricing and Pipeline sheets, if required for your business model.

For the big picture on how I approach modeling revenues, read how to model revenues. For the detail on how I implement that in the Foresight models, read on.

On Get Started, the initial inputs are structured for model level assumptions:

The next inputs on Get Started are built for the four basic building blocks in creating a growth and revenue forecast:

The inputs and flow for this is covered in detail at the default revenue model. The Standard works for many different types of businesses, featuring the two-channel or two-step conversion funnel that models 1 “average” product, order, customer, subscription, SaaS plan, at each conversion step, and allows you to model transaction or subscription-based businesses easily just by using a dropdown selection that changes the labels and formulas accordingly.

By default, the model feeds bookings, billings, and revenues into the Revenues section on Forecast. By using the revenue categories appropriately, this does not double count revenues and no editing is required.

If you need more detail or more advanced methods for forecasting growth and revenues for specific business types, then it is easy to customize and add in more growth channels, conversion steps, or revenue streams. The Standard model by default supports any transaction or subscription business, and can support modeling up to hundreds of different subscription plans, products, SKUs, enterprise clients, projects, or more, using the Pricing and Pipeline sheets, covered at Pricing and Pipeline.

One of the biggest questions people face is how to model multiple subscription plans or multiple products. Generally, I advise modeling at an “average order” or “average subscription” level until you have the data or decision-making process with an operational business to utilize the additional level of detail behind modeling each product, SKU, subscription plan, or customer type. The Standard Model and its variants support both of these types through the “average” or “multiple” selection on Get Started; if you find yourself bogged down in detail, start simpler and build out more detail when you can take advantage of it.

If you need to add in custom revenue streams, here’s an overview on how the prebuilt revenue streams feed into the model and how you can add in additional revenue items or replace the prebuilt ones:

Cost of sales

To model cost of sales, use any of the expense lines on Forecast, select “COGS” from the accounting treatment dropdown for the relevant line you create, and use one of the forecasting methods tied to revenues or an operational metric, and cost of sales will be included. You can break the cost of sales into any level of detail you want, from an overall % of revenue to a detailed buildup of each component of cost of sales on a per unit basis, the model handles all structures by default. An example default is in the model as a % of revenue.

For ecommerce or multi-channel commerce, many people will separate the components of cost of sales into various product costs, fulfillment, shipping, etc. For any costs associated with inventory purchases, select “Purchase, Product and Inventory” in the cost category, and then the model will automatically create a forecast of inventory purchases and inventory levels based on your inputs regarding inventory on Get Started.

Use the inputs to create the expense forecast

After that, I start inputting costs. If you’re an early-stage company or idea (pre-seed or seed), costs are probably the only thing you’ll be able to create with any degree of control or understanding. Start with your employee costs, because your hiring plan is often the most important decision you have to make, and for most early-stage companies it’s the biggest component of your costs.Then move on to estimating your primary cost areas, using the same simple methodology of one row per cost, and type in the costs per month in the relevant months. Here’s the big picture ›

The model is built to be easy to use to enter expenses. All expenses are entered in the Expenses section on the Forecast sheet. There’s two big buckets of expenses that people usually want to model:

Enter a hiring plan

The expenses section allows to easily calculate salaries for roles, and the Payroll section is prebuilt to allow you to forecast roles and hires in a couple ways.

There’s essentially two ways:

A common forecasting method to choose for forecasting salary for 1 person on 1 row is a variant of “reoccur every month, increase 10% every 12 months”, which reflects a monthly salary that stays the same, and goes up 10% every year as a salary increase. Note, that % and # months are variables set in the forecasting method section on Forecast.

Column D allows you to set the team that the person works in. This allows you to look at summary views of how the salary expenses balances by teams. The categories for teams are also inputs, set under the expenses section on Forecast. The category selection will also determine the accounting treatment, typically SG&A, COGS, or CAPEX. For most people, the salary expense will be SG&A for accounting purposes. For some roles, perhaps Customer Support, that could be COGS. The reason it is done this way is to allow you to account for the cash expenses easily, and then the model will determine the correct accounting treatment for financial statement purposes.

This is an example of a structural framework I creates so that no structural changes are required to change the accounting treatment of any expense.

In column E you can also break out the hires into Employees and Contractors, so that 1) employee benefits and bonuses are only calculated based on employee salaries, and 2) so that you can account for some contractors in COGS (developers, support, etc., many contracted service providers can be accounted for as COGS). If a person switches from contractor to employee, or vice versa, I usually use two rows for that person, one for when they are an employee, another for when they are a contractor, and simply start and stop the monthly salaries when they switch.

There’s also an optional method for calculating hires and costs based on the growth of the company prebuilt into each line, commonly used to:

These “hires” can be considered as a number of hires for a team, or a specific role, a geography, etc., just input the proper terminology in column B for what you want to use. For hires tied to operational performance, you can set the number of people hired per N number of the operational metric (in the forecasting method section on Forecast), and the model will automatically calculate the total spend on that role. Then in the Headcount section on Forecast, it will calculate the number of hires that spend for that role represents, and that automatically factors into the employee headcount in all the reporting in the model.

For most forecasting methods that works flawlessly, for hires based on a percentage of revenues, you have to alter the monthly salary in the Headcount section so that the number of employee headcount works appropriately. It’s also a best practice to enter in column B unique names of roles so that the model doesn’t misinterpret the headcount calculations.

Create an expense forecast

The expense section on the Forecast sheet offers a lot of flexibility in creating expense forecasts. Here’s an overview:

More at The Essentials of Finance and Accounting for Financial Modeling ›

Essentially, you can use the prebuilt forecasting drivers, or you can simply enter in the expenses on a month by month basis. Pay attention to which rows are labeled as inputs and which ones are not, and only edit the rows that are labeled as inputs. If you need to add in more lines, simply insert a row, copy the formulas from an adjacent row, and all the summaries and calculations will work.

Take note that this section handles the topic of “expenses” much more loosely than “operating expenses”, which has a specific accounting and management analysis definition and usage. This section also takes other expense, other income, and cash flows that are not “expenses”, but turn into accounting expenses - e.g. inventory purchases as the big one - and the model handles the accounting treatment of them automatically. The category selection determines the accounting treatment, so you can also change accounting treatments at any time without needing to edit the model.

The category-level reporting includes all “expenses”, but the SG&A-specific category-level reporting only includes the expenses of each category categorized as SG&A.

Review top-line growth, margins, cash, and iterate

After we have a basic revenue and expense forecast, I start reviewing cash, financial statements, fundraising needs, and the operational metrics that are coming out, and I refine the inputs to get to what I want to show.

Get Started contains a number of other inputs around inventory, balance sheet accounts, debt, and working capital line, all optional. The sheet also has a section for fundraising and valuation inputs, covered in detail at Fundraising, and Valuation.

If you need a background primer on financial statements, check out Explaining Financial Statements and Essentials of Finance and Accounting for Financial Modeling.

Once we have started iterating on a model and refined the growth, margins, cash needs, then I generally spend time reviewing the implications of the model by reviewing the Summary and Key Reports sheets, understanding the cap table and implications, and perhaps the valuation and exit waterfall to understand the returns to investors. That’s covered deeper in my review process for Foresight models ›

If you are building a business in the impact space, and want to create a forecast of impact metrics to report along your financial metrics, check out Impact ›

Prepare the model to send for review

All of my models are created to be used with one’s team and investors to make business operational and financial decisions, and thus sharing them is a key part of using them. I build the model with the presentation sheets - Summary, Key Reports, Breakdown - all at the beginning, so that they are the first things people look at when they open the model, and they allow someone to get the big picture about the business quickly from the start. Then one can dive into Get Started, Forecast, and Statements to understand the detail.

When sending to external parties for review (e.g. as part of a potential investment due diligence process with an investor or lender), I often advocate for sending summaries by PDF early in the process, and then the full model once the investor has qualified their interest to dig in more. I generally do not advise sending locked models, so that investors and analysts and change inputs to see how the business changes and understand sensitivities. Please make your own judgements on what information should be sent to internal and external parties based on your specific situation.

Need support or customization help?

I’m always happy to take a look at your model and answer questions. I’ve worked with thousands of entrepreneurs as a VC, consultant, or advisor, and can help on technical Excel questions, financial accounting questions, business model questions, to fundraising and pitch questions.

  1. The formulas themselves can be detailed, and I don’t generally advise attempting to try to break down each formula to understand the model. If you work to break down and audit each formula, there will likely be things that aren’t immediately obvious to you why I do it that way, but are the result of having spent thousands of hours building financial models and hundreds of hours iterating on this model specifically, and are tied to looking to create a generalized solution to a wide variety of specific needs. 

  2. The bookings, billings and revenues from Pipeline are prelinked into the model, but may need to be relinked into the Revenues section on Forecast depending on your specific setup, channels, and desired level of detail in reporting. 

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