The Numbers That Actually Matter: Financial Planning for Startups

When it comes to financial projections, I’ve noticed something interesting.

It’s often the part founders struggle with most — and ironically, it’s also the part they sometimes skip or rush through because it feels intimidating.

Here’s the thing: you don’t need to be a CFO to build solid financial projections. You just need to understand a few key concepts and be willing to make thoughtful assumptions.

Start With Assumptions (And Document Them)

Every financial projection is built on assumptions. How much will you charge? How many units will you sell? What will your growth rate be?

The numbers themselves matter less than your ability to explain the logic behind them.

I always tell founders: investors aren’t expecting you to predict the future perfectly.
They’re looking to see that you’ve your business. That you understand your cost structure.

That you’ve considered different scenarios.

So write down your assumptions. Things like:

.Unit price: $99/month
.Expected conversion rate: 5% of free users upgrade to paid
.Customer acquisition cost: $50 per customer
.Monthly churn rate: 3%

When these assumptions are clear, you can easily adjust them.
What if you charge $79 instead of $99? What if churn is 5% instead of 3% ?
Having a model with clear assumptions lets you explore these scenarios — and lets investors test your thinking with their own “what if” questions.

Revenue Streams: Where Does Money Come From?

Start by mapping out all the ways money will enter your business. These are your revenue streams.

Maybe you have a single revenue stream (subscription fees), or maybe you have multiple (subscriptions + licensing + professional services). Either way, get clear on each source of revenue and how you’ll price it.

For each revenue stream, ask yourself:

.What’s the unit of sale? (per user? per transaction? per month?)
.What’s the price per unit?
.How many units do you expect to sell, and when?

This gives you the top line of your financial projections — your revenue forecast.

COGS: What Does It Cost to Deliver Each Sale?

Here’s where founders in tech sometimes get tripped up. “I’m building software,” they say.
“I don’t have cost of goods sold.”
Actually, you do.
Every row in your database has a cost. Server hosting.
Data security. Compliance. Customer support for each additional user.
Even if you’re selling services, there’s a cost to deliver each hour of consulting.
Your time, preparation, follow-up, overhead.
COGS (Cost of Goods Sold) represents the direct costs associated with delivering what you sell.
Subtract COGS from your revenue to get your gross profit.

Operating Expenses: What Does It Cost to Run the Business?

Beyond the direct costs of delivery, you have operating expenses — the costs of running your business regardless of how much you sell.
These typically include:
- Research & Development (R&D): Building new features, improving your product
- Sales & Marketing: Advertising, content, sales salaries, events
- General & Administrative (G&A): Office space, legal, accounting, HR
In early-stage startups, R&D and marketing often dominate. You’re investing heavily in building the product and getting customers before revenue really kicks in.

The P&L: Putting It All Together

When you combine revenue, COGS, and operating expenses, you get your Profit & Loss statement (P&L).
It tells a story:
- Revenue — Here’s how much money came in
- COGS — Here’s what it cost to deliver
- Gross Profit — Here’s what’s left after direct costs
- Operating Expenses — Here’s what it costs to run the business
- Net Profit (or Loss) — Here’s the bottom line
For early-stage startups, that bottom line is usually negative. You’re investing more than you’re earning because you’re building for the future. That’s expected and OK — as long as you can show a path to profitability.

Runway: How Long Can You Survive?

This brings us to perhaps the most critical number: your runway.
Runway is how many months you can operate before you run out of cash.
If you raise $500,000 and you’re burning $50,000/month, you have about 10 months of runway. That’s 10 months to hit your milestones, show progress, and (probably) raise your next round.
Understanding your burn rate (how much you spend each month) and your runway is essential for:
- Planning your milestones realistically
- Knowing when to start your next fundraise (hint: not in month 9)
- Making smart decisions about spending

How Much Should You Raise?

Here’s something that always surprises founders when I ask them: “How much are you looking to raise?”

The answer I often get is something like, “I heard you can raise around $500K at this stage.”

That’s not a good answer.

The right amount to raise is the amount you need to reach your next meaningful milestone — plus some buffer. It should come from your financial projections, not from what you heard is typical.

Work backwards:
1. What’s the milestone you need to hit before your next funding round?
2. What will it take (hiring, marketing, development) to reach that milestone?
3. How long will that take?
4. What’s your monthly burn during that period?
5. Add a buffer (usually 3-6 months) for things that take longer than expected
Now you have a defensible answer to “how much are you raising?” — one that’s grounded in your actual plan.

Financial projections feeling overwhelming? The Startup Playbook includes step-by-step guidance and an Excel P&L template to help you build projections you can actually defend in investor meetings. Get your copy [here] and take the guesswork out of your numbers.