Assumptions

Most startup financial models treat hiring plans and budgets as separate things. You plan to raise $4M, and separately you plan to hire 8 engineers. But those two numbers are connected: the engineers are funded by the round. If the round comes in at $2M instead of $4M, the hiring plan should change. In a spreadsheet, you update both manually, then check the statements tab to make sure nothing broke downstream. Change one cell, verify ten others. This is exactly the kind of fragile linking that makes spreadsheet models a liability. ...

Your financial model is only as good as the assumptions behind it. Get them right and you have a tool for making decisions. Get them wrong and you have a spreadsheet full of fiction. After watching hundreds of startup models, the same five assumptions trip up founders over and over. Here’s what they are, why they matter, and how to get them closer to reality. 1. Fully-loaded cost per employee Most founders model headcount using base salary alone. That’s a problem. Salary is typically only 60-70% of what an employee actually costs you. ...