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!
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.
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.
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!
Yes! Because accounting for startups in the early days just isn't that complicated yet. Even if we've never seen any financial statements ...
All financial projections for startups are based on a handful of financial assumptions. The problem is we tend to make very bad assumptions!
There are no "genius MBAs" out there building financial projections in a business plan that magically come true because they took a class on it. Financial assumptions, particularly for startups, are about making and refining a million tiny guesses until our financial performance gets somewhere close to our financial projections.
Startup financial projections are built around making a series of educated guesses about how things might go. Public companies make sales projections, issue projected income statements, and create revenue forecasts all the time. The diff...
A Startup's financial health isn't just about updating financial statements and balance sheets — it's about understanding basic business financials, and guess what? It's not that hard. This primer is designed for Founders and operators who know little to nothing about startup financials.
The fundamentals of startup finance are this simple – we record every income item (our goods sold) on one side and then record every cost (operating expenses) on the other side of our financial statements. We subtract the income from the costs – and voila! – profit (or a loss... in the early days it’s usually a loss.)
There’s no special black magic to recording income and expenses.
No matter how much we stand to lose, there is always a way to recover.
At the time it sure doesn't feel that way. Nothing keeps us up at night more than playing out every possible scenario of catastrophic outcomes for our startup. We think about the cost of losing our startup, our team, our investor's trust, and ultimately, our personal well-being.
And yes, all of this is super terrifying. But here's the thing, Founders have an amazing ability to recover from catastrophic losses because, in the end, we never consider the fact that the one thing we can't lose is our own tenacity.
It's important to think beyond the "monster in the corner" and play out the entire scenario of what a big loss means, looking all the way past to the other side of ...
Making prototypes in China is a cost-effective way to test your product idea before selling it to consumers, but it is a detailed process that takes a lot of work to initially set up. In order to get a prototype made in China, you need to have an idea of the steps needed to follow before getting your product in mass production.
In this article, we will explore what these steps are and how to go about them with extended insight from members of the Startups.com community.
A prototype is a preliminary model of a product which is used to demonstrate the product's form, fit, and function. Prototypes are made with the intent of testing out different aspects of a design to see how they work.
Prototypes help you make decisions abo...
Nearly every Founder feels woefully behind their friends in life.
As it happens, we picked a particularly shitty profession to ever feel "ahead" of our friends and colleagues. Most of our friends have regular jobs where they actually get paid every week, whereas we spend the entire month wondering if and how we'll get paid at all.
The problem compounds when we start to look at our successful Founder colleagues because the delta in success can be so astronomical so quickly. We start to assume that their successes become a reflection of our failures. But what we're missing in that comparison is how the benchmarks themselves are completely broken.
It all starts when we try to invent where we should be in life as if our pat...
A crypto startup is a business that deals with cryptocurrencies. Crypto startups have been popping up all over the world in recent years. With the rise of Bitcoin, Ethereum, and other cryptocurrencies, many entrepreneurs are looking to create their own cryptocurrency or blockchain-based startup.
1. Identify a problem that needs solving.
2. Create a white paper outlining the idea (i.e. a solution to the problem) and how it will work.
3. Find or create a team of developers to build the platform.
4. Raise money through an ICO (Initial Coin Offering) or VC funding.
5. Develop the company and buy/sell tokens.