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Anyone can look like a hero in good times — but it's the bad times that truly forge Founders.

The good times mask bad behavior. When things are good, we can make tons of mistakes that simply get glossed over. It's not until the shit starts hitting the fan that we're really tested as Founders, and as leaders.

Easy to be Right With Fresh Capital

Have you ever noticed how every startup that just raised capital seems like they are doing everything right? They just hired a ton of staff, signed a huge new office lease, and paid for a big media splash to show off their stuff.

It's hard to feel like we're "wrong" when our coffers are overflowing with fresh capital. Any dumb hire we make or bad use of capital doesn't have a consequence — yet.

But wa...

Startup Founders are not entitled to success, yet we sure act like it.

When we're sitting in a room full of Founders or pouring through social media, we're inclined to think everyone is "killing it" but us. We hear of these meteoric rises, huge funding rounds, and big exits and invariably wonder when all that goodness will happen to us.

What we form is an "entitlement to success." We believe that because we see so much of it happening elsewhere, by virtue of that, it's only a matter of time until it happens to us.

What we miss when creating that entitlement is just how flawed the foundation of that premise is and what a house of cards we create with our own expectations.

"I Deserve to be Funded"

In the early days of our formation, when we'r...

"Nearly every startup that goes IPO raises capital — doesn't that say it all?" — Every VC

Whenever I get into a debate with a Founder or Investor over whether startups need to raise capital, the discussion inevitability leads to that "trump card" of finality. The thinking goes that if every single super-successful startup has raised capital (by IPO standards) then it's impossible to overlook that data — or disagree.

While there's nothing wrong with raising capital (we run Fundable.com, a fundraising platform!) I think the default reasoning requires a bit more examination. This isn't so much a case for not raising capital — it's a challenge to some broken assumptions that matter.

"All the Best Companies Raise Capital"

By definition, the comp...

The business startup costs that are the least complicated for startups tend to be our "fixed costs" like office space, utility bills, or software expenses incurred. While these start-up costs grow with any new business, they don't scale the way our variable cost projections do when starting a business.

Fixed Costs vs. Variable Costs

The reason we separate our fixed costs versus our variable costs is that we want to isolate our startup cost categories to focus on what will truly drive our business plan. Things like scaling our advertising costs will have an exponential effect on our revenue, for example.

But our fixed costs don't have nearly this impact.

Our fixed expenses do "grow" over time, but not exponentially. Therefore we tend to separate...

All startup financial projections are based on a few key assumptions about how we feel the business will perform.

In this section, we're going to explain what key assumptions drive our financial forecasts and how to adjust them to create a financial model that works.

Download our Income Statement Template here to get started and follow along.

What’s the Goal Here?

The Assumptions tab in our income statement template gives us a worksheet to help determine what the right values will be to populate in our projected income statement. The tab itself is just a worksheet that drives things like our revenue projections, cost assumptions, and ultimately net income.

We’ll walk through each of the assumptions in this worksheet one by one to give a little m...

The beauty of the startup game is that you only have to be right once.

The frustrating part is you never know when that one time might be! While we all love to hear Founders regale us with origin stories of their massive successes, what we miss most often is the part where they had many misses along the way.

We write those misses off as incidental — they aren't. Every one of those misses started with that very same Founder thinking that was going to be the time they got it right.

How Many Shots Do We Have?

What we tend to misunderstand, most often early in our careers, is that there's rarely one single moment where it's all “make or break.” It's kinda like when we were in High School and we thought what happened at that moment was going ...

Startups create financial projections in the form of a "Pro Forma Income Statement" — which simply means a financial forecast. Early-stage startups are still building their financial models with assumptions, forecasting everything from sales revenue to marketing costs to a basic cash flow projection.

We're going to explain exactly how to build financial projections for your startup even if you have no idea where to start!

Financial Projections are just Assumptions

Most businesses that have been around a while have historical financial statements that detail how operating expenses, direct costs, fixed costs, and their sales forecast have worked all along — startups have none of this.

Therefore instead of working from real-world data to build our...

Startups live and die by financial projections — yet we tend to suck at creating them!

That's because we're so busy trying to create the "perfect" financial statements, when in fact what we should be working on is identifying what key assumptions will drive our projections at all!

Assumptions are the raw materials that make up our financial statements and tell us whether we're headed toward gross profit or total disaster! Here we'll be taking a beginning inventory of the 3 most important financial assumptions that tend to drive most startup company projections.

Assumption #1: "How Many Customers Will We Acquire?"

Our first step is to construct a series of assumptions that tell us how many paying customers we will get through the door. All of th...

Every kid should become a startup Founder, even if they never want to start a business.

Years ago, I started teaching entrepreneurship at my kid's Middle and High schools. What I thought might be an exercise in futility wound up being an incredibly eye-opening experience. As it turns out, kids are freakishly good at being Startup Founders!

When I was a kid, no one told me I could forge my own path. We sort of were handed a dozen careers, and you got to pick one. It was basically our guidance counselor telling us "Oh, you're good at math? You'll be an accountant." Never mind that we never really wanted to be accountants.

Kids Have Unlimited Curiosity

Instead of shoe-horning kids into some prescribed path, entrepreneurship leverages their gre...

While we may not know all there is to know about our business yet, there’s still going to be some good old-fashioned accounting to do. So let’s break out those green visors and add machines — it’s time to learn WTF accounting is!

At its core, in order to be an accountant we need to be able to collect all the sources of income and expenses and translate those into a spreadsheet. When the numbers are small, this is so easy to do we’ll wonder why people get paid to do it. When they get large, we’ll wonder why anyone is willing to do this for any amount of money ever!

Can any Founder do Accounting for Startups?

Yes! Because accounting for startups in the early days just isn't that complicated yet. Even if we've never seen any financial statements ...