Financial Planning for Startups

5 Free Financial Planning Tools

Entrepreneurs often struggle with developing their own templates when going through a financial planning exercise. Without a financial background, it is easy to spend hours for research, piecing together a model that fits your needs.

But there actually are tools out there. A number of free financial planning tools offer solid frameworks. We wanted to introduce five of them to you and talk about their pros and cons.

The criteria for evaluating financial planning templates

We considered the following criteria for evaluating the financial planning templates:

  • Simplicity and Ease of Use (Scale 1-5 with 5 being the best): How easy is it to use the template with only rudimentary financial skills?
  • Notes and Comments (Scale 1-5 with 5 being the best): Is the template well documented and are there instructions for using the financial planning template?
  • Profit and Loss Statement: Does the template include a profit and loss statement?
  • Capital Expenditures: Does the template include capital expenditures?
  • Cash Flow: Does the template allow you to make cash flow forecasts?
  • Balance Sheet: Does the template have a balance sheet section?
  • Graphics and Summaries: Does the template have summary and graphics tabs to visualise data?

As you can see, the criteria are quite straightforward. We only used a simple scale for the first two categories. For features, we scored each template with ‘–’ if a feature in that category did not exist. If the feature did exist, a score between ‘+’ and ‘+++’ shows how advanced its functionality is.

The candidates

We researched five different financial planning templates. For sure, there are more out there and there are certainly more premium models out there. Let us know if you find any other financial planning template that we should check out, too.

  • Businessmodelforecast.com: This excel-based model comes with a lot of thunder and its own website. It is a basic model for any industry. It allows you to quickly set up a forecast for your business in the broadest categories. It also has a neat dashboard around key figures.
  • Christoph Janz’ 2.0: A financial template for Software as a Service (SaaS) startups that started as a one-sheet forecast and now has developed into a more advanced model. The author, Christoph Janz, is an investor himself (e.g. ZenDesk) and Managing Partner at Point Nine Capital in Germany.
  • Christoph Janz’ 1.0: This SaaS financial is Christoph Janz’ first version of a financial planning template. It is a one-page Google Sheet that beautifully combines simplicity with the most relevant categories.
  • Futurpreneur.ca: This model is published as a template for applications to Futurpreneur in Canada. It comes as an excel file with loads of explanations, a great glossary and detailed forecasting abilities.
  • Danielnowack.com: This GoogleSheet also provides all inputs on one single sheet. It was developed in an attempt to create a template that is as simple has Christoph Janz’ templates but includes the feature to plan capital expenditures (=big investments). It also provides basic diagrams and summary views. Disclaimer: It has been developed by the Executive Director of YSB Balkans.
  • Business Model Forecast – financial planning for advanced planners
    The BusinessModelForecast template – A whole website built around a financial planning template. Nicely presented and very clean!

Results Overview

Business Model Forecast Christoph Janz 1.0 Christoph Janz 2.0 Futurpreneur Daniel Nowack
Simplicity Score: 3
Super simple to understand but with protected sheets. Planning only on a quarterly basis.
Score: 5
Everything for Saas and tech startups on one sheet. Beautiful!
Score: 4
Not quite as simple as version 1.0 and doesn’t have everything in one template anymore. But still strikingly simple.
Score: 3
Even though it is pretty complex, it does guide you through each step in a visual and rather straight forward way.
 Score: 4
Not quite as simple as Christoph Janz’ 1.0 masterpiece but still all inputs on one page
Notes & Comments Score: 4
Only very basic notes and explanations but an extensive website
Score: 5
Notes are right next to the cells and the blog answers any remaining questions
Score: 5
Straight forward descriptions and an extensive blog post about the template
Score: 5
Futurpreneur really outdid themselves on that – plenty of notes, instructions and even a glossary. Awesome!
Score: 2
No documentation at the moment but a blog post is promised to come soon.
P&L + ++ ++ ++ ++
CAPEX ++ +
Cash Flow + + ++ +
Balance Sheet +
Graphics + +++ ++

Results details

Simplicity: Christoph Janz’ first version of the SaaS financial planning template is the clear winner in this category. The template has everything on one sheet. Instructions are straightforward. Formulas are easy to understand. It just does not get any simpler.

If you need a bit more complexity, Christoph’s 2.0 version and Daniel Nowack’s template are similarly simple. Both add a few more layers of functionality. Christoph’s 2.0 and Daniel’s template are straight forward to use and don’t really need further explanation. But if you do need more guidance, Christoph has an amazing blog that goes into every single detail.

The Business Model Forecast is also quite simple – almost too simple in some instances. But it has protected sheets that make it harder to change parts of the template. And futurpreneur’s template is the most complex though well documented (see next category).

Notes & Comments: Three out of five financial planning templates do an amazing job in documenting their setup. Probably the best explanation comes from Futurpreneur. Not only do they provide a blog post about their template. They also offer detailed instructions and a glossary in the financial planning template itself. The glossary alone is a gold nugget for any startup.

Similarly, Christoph Janz’ templates provide a lot of context in the sheets themselves. They also come with dedicated blog posts. The BusinessModelForecast template has an entire website dedicated to it – though is not necessarily easy to use. The template itself relies on your ability to make sense of the financial vocabulary.

Similarly, Daniel Nowack’s template has some explanations. But it mostly relies on the user making sense of it. However, there is a blog post coming that further describes the template. So stay tuned.

Features: There is a huge variation of features across the templates. You can get the gist of it through the results overview. It is striking that all templates offer P&L planning (which is obvious). But almost none offer balance sheet or cash flow planning. So if you have significant working capital, high CAPEX or simply a more complex balance sheet, you may want to look elsewhere. In terms of visualisation, Christoph Janz’ 2.0 template is again far ahead of other templates. It provides beautiful diagrams with insightful analysis.

Picking your financial planning template

Different financial planning models may be more helpful to you. It all depends on your business model and industry. If you do have a startup in tech or even SaaS, there is no way around Christoph Janz’ templates. They are just too good to be true.

If you need more detailed CAPEX planning but don’t want to sacrifice simplicity, go for Daniel Nowack’s template. Finance savvy founders who just want a quick scrabble of their finances should go for the BusinessModelForecast. And if you want more sophisticated financial planning but need a step-by-step walkthrough, Futurepreneur definitely is a good choice.

You know other models?

Let us know if you know any other models that we should take a look at! We know, for example, that there are great premium models out there. And we are certain we missed a number of free models. Happy to hear more!

About the author

Ermira Repaj is responsible for new investments and our portfolio at Yunus Social Business Balkans. She leads new investment candidates through our due diligence. She works with our portfolio companies to implement best practices for financial management, operations and planning.

Prior to YSB, Ermira was responsible for managing the Treasury Single Account in the Treasury Department, in the Ministry of Finance of Albania, with strong expertise in accounting and finance. She is an adjunct professor at the Faculty of Economics of University of Tirana. Ermira’s early professional experiences include working as finance specialist in the National Albanian Agency for Homeless People and teaching as an adjunct professor in the Faculty of Economics of University of Shkodra: “Luigj Gurakuqi”. Ermira has a BA in Business Administration from University of Shkodra and a Msc. in Financial Management from University of Tirana and University of Modena & Reggio Emilia.

Financial Planning for Startups

5 Steps to Financial Planning for Startups

For most people, financial planning is certainly not a fun activity. You have probably never met a single person that said “oh we just got together with a bunch of friends for beers and a relaxed financial planning exercise”.

So why even bother about financial planning?

“Life is what happens while we are busy making plans” – John Lennon

For startups and small businesses, financial planning is crucial to survival – even if you are not looking for money from investors or donors. It helps you understand the nuts and bolts of your business. And in many cases, it even tells you whether it is worth pursuing your idea or not.

In the past years, we have worked with over 400 entrepreneurs across the world at Yunus Social Business. And I personally had my own share of startup mania as a CFO and Product Manager for startups and as a mentor at Google Launchpad.

I found that many startups only have a vague idea about how much money they have to make to become financially sustainable (i.e. break even). So I tend to do a quick financial planning exercise with them (not more than 20 minutes) which more often than not is a real eye-opener. They suddenly realise the challenges, identify the things they have to validate and how they can scale their business.

Financial Planning as a Blueprint

Financial Planning is like finding the Levers to a Steam Engine

Financial Planning helps you to understand which levers you need to push in order to go to full steam with your startup!

So think of planning as a blueprint to a steam locomotive that has numerous handles and levers that you can pull. Your job as an entrepreneur is to understand which levers to pull in order to move as quickly as possible. And financial plans help you do just that.

You will identify what drives success for your business. Is it really how many new customers you can generate each month? Or is it how often a customer orders? Or is it the costs of raw materials? Can you pay your own salaries with 100 customers, 1,000 or 1 million?

And don’t worry too much about accuracy: The whole exercise is about taking an educated guess and understanding how the pieces of the puzzle fit together. You will later take this guess and validate it in the market through iteration, customer development and experimentation.

Getting started

But where to start? Let us walk you through a step-by-step exercise on how to develop your financial plans. Don’t worry, we will support everything with examples to make it transparent. In the coming months, we will further deep-dive into topics like sales planning, costing or investment planning. So stay tuned.

Whatever you do, keep in mind that the whole exercise is not about predicting the future. It is about taking an educated guess and understanding how everything fits together.

1. Planning your Sales

Start with your ambitions for the future and talk about how quickly you will find new customers/users and make money. This includes asking yourself the following questions:

  • How many customers can I attract each month?
  • How much does each customer buy?
  • How many customers come back to order again? How often and frequently do they come back?
  • How many do not come back?
  • What are your total sales?

People love complex language because it serves as a code. If you can speak the code, you belong to the group of cool guys. Don’t worry, we decode some of the most used words for you here as well. We call that “Bullshit Bingo”.

Don’t forget VAT!

When planning sales, many entrepreneurs forget the value-added tax (VAT). In many countries, VAT is a substantial amount of your sales. As an example: Your customer is paying you 100 EUR per sale. But from those 100 EUR, you will need to pay VAT – either now or later as you grow depending on the laws in your country. Let’s assume your country charges 20% VAT. That means that out of the 100 EUR, 17 EUR are VAT (100 EUR divided by 1.2). Those 17 EUR do not go to your business but will have to be paid to the state. It leaves you with 83 EUR to play with.

2. Variable Costs

Variable costs are costs that increase with the number of products and customers you have. There are many types of variable costs but we will talk about the two most common costs below: Costs of Goods Sold and Customer Acquisition Costs.

Cost of goods sold (COGS)

Producing a product or service has a cost. It may be raw materials that you have to buy, worker wages or fees you have to pay for each product you produce and sell. These variable costs are called “Costs of Goods Sold”. They are critical for the success of your company because of COGS per unit are higher then your net sales per unit, you are effectively making a loss on each product you sell.

So for example, if you are selling vegetables from farmers on a fresh market, you will need to buy the vegetables from the farmers in the first place. The price you pay those farmers is part of your COGS. The logistics costs such as gas for the pickup truck are also part of COGS because they increase as your sales volume increases. Obviously, it is important that you sell the products at a higher price than what you had to pay.

Customer Acquisition Costs (CAC)

This cost type is quite unique mostly to e-commerce and online startups. But the concept can be equally applied to other businesses – especially if you are attracting your customers through online activities. CAC measures what it costs you to acquire one paying customer.

Why is that important? If you cannot make enough money from each customer that you attract to cover the costs that it takes to acquire that customer, you are back in the loss-making business.

Example: You are trying to sell concert tickets online. You are acquiring customers via Facebook ads and your sales funnel looks like this:

  • 0,24 EUR Costs per Click (Facebook ads are usually on a per click basis so each click costs you 0,24 EUR)
  • A user has to click about 4 times until she actually finds a concert that she is interested in
  • 20% of the people that find a concert they are interested in actually purchase from you

That means: Your customer acquisition costs are 4,80 EUR (0,24 EUR x 4 divded by 0,20).  So if you cannot make more than 4,80 EUR from a concert ticket (or can lock in the customer for future purchases), you cannot make a profit from your business.

3. Gross Margin

The gross margin is simply your net sales minus your variable costs (COGS, CAC, etc.). It tells you how much money you are actually making from each sale.

4. General & Administrative Costs (G&A)

General and administrative costs cover the fixed expenses of your business. They cannot be directly linked to a sale or a product. And you have to pay those costs – no matter if you sell 1,000 products or zero. What types of G&A you have can vary across sector and industry but below is a list to think about when doing your financial planning.

  • Salaries
  • Rent, Utilities, Telecom
  • Sales, Marketing, Public Relations
  • Repairs and Maintenance
  • Office expenses (supplies, etc.)
  • 3rd party (legal, accounting, …)
  • IT Expenses (Hosting, Software Licenses, etc.)
  • Other: Freelancers, Travel costs, etc.

EBITDA

EBITDA is short for “Earnings before Interest, Taxes, Depreciation and Ammorization“. Or how I like to call it: Your profit except for the other stuff you have to pay but frequently forget about. EBITDA is simply your Gross Margin minus G&A. Remember, Gross Margin is your Net Sales minus your variable expenses so the full formula looks like this:

  • Gross Sales
  • less VAT
  • = Net Sales
  • less Variable Cost (like COGS, CAC, etc.)
  • = Gross Margin
  • less G&A
  • = EBITDA

To keep it simple: If your EBITDA is positive, you have a good business case. In simplified terms, this is the indicator whether your business is profitable or not. To get to net profit, you have to deduct depreciation and amortisation (a more complex accounting topic that we will go into later), any interest payments and incomes as well as taxes.

5. Plan your cash flow

All of the above items are items of the so-called “profit and loss statement” (or P&L). Plan those items on a month by month basis at least for the first year of your startup. Ideally, you want to have a three year cash forecast – or at least that is what investors will look at.

The P&L gives you an expense-overview but not a cash overview. Confused? Fully understand. Without going into too much accounting details (and horribly simplifying), the P&L tells you when you receive or send invoices and the cash flow tells you when you pay them.

So for example: You send an invoice to a client in January but usually, they only pay one month later. So the P&L will show revenues in January while your cash only comes in February.

Make sure that you think about when you actually need the cash. It is very common for startups to get into financial problems when they don’t monitor their cash enough.

Review and play with your forecast

When you are done with your forecast, take a closer look. What drives your profits? What do you have to do to increase your margin? Is it possible to increase sales as quickly as you think you can?

Change a few assumptions (like price, number of customers, COGS or G&A) and see how this “moves the needle”, i.e. how it changes your profit. That is how you find out what really matters – and quite often it is something startups have not thought about.

Get help

If you don’t feel comfortable with it or if you need more information, get someone to help you. If you don’t have anyone, feel free to reach out to us. Not only do we love to work with startups but we also have access to over 150 mentors that love working with startups, too. So just send us an email and get the discussion started.

Also check out our financial planning template for startups. It’s super easy to use and you can adapt it to your needs. And it’s absoltely free of charge. You can download it here.

About the author

Daniel (@dannowack) has helped start four businesses in image manipulation, mobile payment, online marketing and publishing. He held various roles in startups such as CEO, CFO and Head of Business Development. He also worked in financial planning and reporting for Merck & Co., overseeing $22bn in sales. He has a background in marketing and finance and has been involved in multiple 6- to 7-digit funding rounds in the past. Daniel has been working with Prof. Yunus since 2010 and was in the driver’s seat for key projects such as Social Business Cities or the Global Social Business Summit 2011. He currently heads YSB Balkans as Executive Director.