How to Build a Financial Model That Investors Actually Read

By Hugo Bradshaw | TBG Updated: June 2026

Why Do NZ Startup Founders Struggle With Financial Models?

Most founders build financial models that investors skip.

Why?

Because they're too complex, too optimistic, or lack the clear assumptions that investors need to validate your numbers.

From helping startups secure multi-million-dollar funding rounds, I've seen what works: simple, defensible models with transparent assumptions that show you understand your business inside out.

Here's how to build a financial model that investors actually read—and use to make funding decisions.

3 Reasons You Need a Financial Model (Beyond Fundraising)

Before diving into the "how," understand why a financial model matters:

Reason	Why It Matters
Build an economically viable business	Quantifying your business plan reveals whether your idea can actually sustain itself. Scenario planning prepares you for delays or slower growth
Raise funding	Investors require financial plans. A solid model helps you answer tough questions about funding needs, runway, and growth projections
Track performance	Without targets to benchmark against, how do you know if you're performing? Shareholders expect updates against promised outcomes

Even if you're not raising capital yet, you need a model to run a sustainable business.

The 3 Outputs Your Financial Model Must Include

Every investor-ready financial model contains these three outputs:

1. Financial Statements (3-Year Forecast)

What investors expect:

• Profit & Loss (P&L): Shows revenue, costs, gross margin, EBITDA, and net margin

• Balance Sheet: Assets, liabilities, and equity at a point in time

• Cash Flow Statement: Operating, investment, and financing cash flows

Key detail: Early-stage startups typically show yearly forecasts for 3 years, with monthly detail for the first 12 months.

2. Operational Cash Flow Forecast (12 Months Monthly)

This answers questions yearly statements can't:

• When will cash come in vs. go out?

• What's your monthly burn rate and runway?

• Do you need to cut costs before a cash dip?

Pro tip: Add columns for actual vs. forecast so you can track performance over time.

3. KPI Overview (Industry-Specific Metrics)

Include the metrics that matter most to your business:

Business Type	Key KPIs to Include
SaaS	MRR, CAC, LTV, churn rate, LTV:CAC ratio, NRR
E-commerce	Average order value, conversion rate, customer lifetime value, repeat purchase rate
Service-based	Revenue per employee, utilization rate, billable hours

Investors want to see you track the right metrics—not just revenue.

The 6 Inputs That Build Your Financial Model

Your outputs come from these six input sheets:

1. Revenue Forecast

How to forecast revenue:

Use a combination of top-down and bottom-up approaches:

• Bottom-up (1–2 years): Based on internal capacity, sales data, marketing budget. Example: LinkedIn ad cost per click → website visitors → leads → customers

• Top-down (3–5 years): Based on market size (TAM/SAM/SOM) to show the ambition investors want

What to include:

• List all products/services

• Forecast units sold per period

• Add selling prices

For SaaS, forecast based on existing customers, new customers, and churn rate instead of units.

2. Cost of Goods Sold (COGS)

COGS are costs required to deliver your product/service:

Business Type	Typical COGS
Physical products	Raw materials, labor, packaging
SaaS	Hosting costs, customer support, payment processing fees
Consultancy	Personnel costs delivering the service

Forecast COGS by multiplying units sold × cost per unit, or as a percentage of revenue.

3. Operating Expenses (OPEX)

Operating expenses support your business but aren't required to produce goods:

Typical startup OPEX:

• Sales & marketing (online ads, events, travel)

• R&D (engineering salaries, prototyping, patents)

• General & administrative (rent, utilities, legal, accounting, insurance)

Rule of thumb: Align spending with strategy. If growth depends on online marketing, expect significant spend there.

4. Personnel Forecast

Project the number of employees + salaries + benefits + payroll taxes:

Category	Includes	Appears In
Direct labor	Engineers, technicians, customer onboarding	COGS
Sales & marketing	Sales managers, copywriters, social media	OPEX
R&D	R&D managers, software engineers	OPEX
General & admin	CEO, CFO, bookkeepers, secretaries	OPEX

Reality check: Divide projected revenue by FTEs to get revenue per employee. If it's already at top tech company levels in year 2, you're likely too optimistic.

5. Capital Expenditures (CapEx)

Investments in physical assets: computers, software, office equipment, machinery, buildings.

Important: CapEx appears on the balance sheet (not P&L) and is depreciated over time.

6. Financing

Include equity, loans, or subsidies to test their impact on funding needs.

If including loans: Account for repayment and interest payments in cash flow.

Common Financial Model Mistakes NZ Founders Make

From working with startups through funding rounds, here are some of the common pitfalls I’ve found:

Mistake	Why It's a Problem	How to Fix It
Too optimistic revenue growth	Investors see through it immediately	Use bottom-up forecasting for years 1–2 with defendable assumptions
No supporting assumptions	Investors can't validate your numbers	Create a "data room" with market research, conversion rates, pricing validation
No scenario planning	Unprepared for delays or slower growth	Build base, downside, and upside scenarios
Ignoring working capital	Cash flow surprises even with profitable sales	Model payment terms (e.g., 90-day client terms vs. 30-day supplier bills)
Overly complex model	Investors skip it	Keep it simple; the earlier the stage, the simpler it should be

What Investors Actually Look For in Your Financial Model

When I review models with investors or lead due diligence, here's what matters:

1. Defensible Assumptions

Investors care less about the exact numbers and more about the reasoning behind them. Can you show the proof?

Build a data room with:

• Market research and keyword search volumes

• Historic sales data (if available)

• Conversion rates from marketing campaigns

• Contracts with suppliers or customers

• Pricing validation from customer interviews

2. Clear Funding Needs

Can you clearly articulate:

• How much you're raising

• What it's for (hiring, marketing, development)

• How long it extends runway (minimum 12–18 months to next milestone)

3. Path to Profitability

When do you reach positive EBITDA? Investors want to see that costs and expenses won't exceed revenue forever.

4. Realistic Personnel Planning

Does your hiring plan match your revenue targets? If you're hiring 10 people in year 1 but only forecasting $500K revenue, that's a red flag.

Step-by-Step: Build Your Model in 5 Hours

Hour 1: Set up your model structure

• Create tabs: Settings, Revenue, COGS, OPEX, Personnel, CapEx, Financing, P&L, Balance Sheet, Cash Flow, KPIs

• Set forecasting period (3 years), currency (NZD), tax rate (NZ corporate tax: 28%)

Hour 2: Build revenue forecast

• Bottom-up for years 1–2 (units × price or customer-based for SaaS)

• Top-down for year 3 (market share ambition)

Hour 3: Add costs and expenses

• COGS based on revenue targets

• OPEX aligned with strategy

• Personnel by category

Hour 4: Link to financial statements

• Ensure P&L, balance sheet, and cash flow interconnect properly

• Add working capital, depreciation, and tax calculations

Hour 5: Add KPIs and scenario planning

• Include industry-specific metrics

• Build downside scenario (50% slower growth, 20% higher costs)

Ready to Build an Investor-Ready Model?

At TBG, we help NZ founders:

• Design and implement financial frameworks including forecasting models tailored to your business model

• Build investor-ready financial projections with clear, defensible assumptions

• Provide human oversight to check and interpret AI-assisted financial reports (because AI can calculate, but can't yet provide strategic judgment)

• Guide capital raise preparation including financial due diligence support

If you want a financial model that investors actually read and trust, let's connect.

FAQ: Financial Models for NZ Startup Funding

How many years should my financial forecast cover?

3 years is standard for early-stage startups. Investors want to see long-term growth potential, but beyond 3 years becomes too speculative. Include monthly detail for the first 12 months.

Should I use Excel or Google Sheets?

Both work. Google Sheets is better for collaboration with co-founders and investors. Excel has more advanced features for complex models. Pick what you're comfortable with.

What's the biggest mistake founders make with financial models?

Overly optimistic revenue projections without defendable assumptions. Investors have seen hundreds of models—they'll spot unrealistic growth immediately. Use bottom-up forecasting for near-term and support all numbers with data.

Do I need a financial model if I'm bootstraping?

Yes. You need it to build an economically viable business, track performance against targets, and prepare for future funding if you decide to raise later.

How much funding should I ask for?

Your model should show 12–18 months of runway to the next major milestone (e.g., $1M ARR, product-market fit, profitability). Calculate: Amount needed = Monthly burn × desired runway months.