Build Financial Projections in Google Sheets
Create investor-ready 3-5 year financial forecasts. Model revenue growth, expenses, and cash flow for fundraising and planning.
Every investor will ask for your financial projections—and most founders get them wrong. Overly optimistic revenue, underestimated costs, and missing key assumptions destroy credibility. If your projections do not make sense, investors walk away. Financial projections are not just for fundraising. They guide hiring decisions, set sales targets, and help you spot cash crunches before they happen. A good model shows you when to raise money, how much runway you need, and whether your unit economics actually work. In this comprehensive guide, you will build a complete 3-5 year financial model from scratch. Learn to forecast revenue with realistic growth assumptions, model operating expenses, project cash flow, and create sensitivity scenarios. By the end, you will have an investor-ready model that demonstrates you understand your business.
What You'll Need
- Intermediate knowledge of Google Sheets
- Understanding of your business model and revenue streams
- Historical financial data (if available)
Step-by-Step Guide
Set Up Model Structure and Assumptions
Create a clean framework for your 3-5 year forecast.
- Create separate sheets: Assumptions, Revenue Model, Expense Model, Cash Flow, Summary Dashboard
- Assumptions sheet: List all key assumptions in one place (growth rates, pricing, churn, headcount)
- Time periods: Use monthly columns for Year 1, quarterly for Years 2-3, annually for Years 4-5
- Use cell references: All formulas should reference Assumptions sheet, not hardcoded numbers
- Add version control: Date and version number at top (V1.0 - 2024-01-15)
Pro Tip
Centralizing assumptions makes scenario planning easy. Change one cell to see impact across entire model.
Build Revenue Projections
Forecast revenue based on customer growth and pricing.
- Start with current state: Month 0 = actual numbers (current customers, MRR)
- Customer growth model: New_Customers = Previous_Customers × (1 + Growth_Rate) - Churned_Customers
- Revenue per customer: =Customers × Average_Revenue_Per_Customer
- For SaaS: MRR = Active_Subscriptions × Price_Per_Plan
- For products: Revenue = Units_Sold × Average_Selling_Price
- Add revenue streams separately: Subscriptions, Professional Services, Ads, etc.
- Year 1 monthly detail, then summarize to quarterly/annually
Pro Tip
Investors hate "hockey stick" projections. Show realistic, achievable growth based on historical data or comparables.
Model Operating Expenses
Project all costs: salaries, marketing, infrastructure, overhead.
- Salaries: Create headcount plan by role (Engineers: 5 → 8 → 12), multiply by average salary + benefits (1.3x multiplier)
- Marketing/Sales: Often % of revenue (20-40% for early startups) or fixed monthly spend
- Infrastructure: Cloud costs (AWS/GCP), SaaS tools, office rent
- Professional services: Legal, accounting, consultants
- R&D: Product development costs not in salaries
- General & Admin: Insurance, travel, office supplies
- Use escalation: Costs typically grow 3-5% annually (inflation)
Pro Tip
Build headcount plan separately, then link to salary expense. This shows investors you have hiring roadmap.
Calculate EBITDA and Net Income
Determine profitability and path to break-even.
- Gross Profit = Revenue - Cost of Goods Sold (COGS)
- Gross Margin % = Gross Profit / Revenue (aim for 70%+ for SaaS)
- EBITDA = Revenue - All Operating Expenses
- Net Income = EBITDA - Interest - Taxes - Depreciation - Amortization
- Break-even month: First month where Net Income > 0
- Cumulative cash burn: Sum of negative cash flow months
Pro Tip
Most startups are not profitable for 3-5 years. Show path to profitability and when you will break even.
Project Cash Flow
Track cash in and out to ensure you do not run out of money.
- Starting cash: Beginning cash balance + new investment
- Cash from operations: Net Income + non-cash expenses (depreciation)
- Cash from investing: CapEx, acquisitions
- Cash from financing: Equity raised, debt borrowed/repaid
- Ending cash: Starting Cash + Cash In - Cash Out
- Minimum cash balance: Flag if cash drops below $100k (or 3 months expenses)
Pro Tip
Cash flow is not profit. Profitable companies can run out of cash. Always model monthly cash balances.
Create Scenario Analysis
Model best case, base case, and worst case outcomes.
- Base case: Realistic assumptions you believe will happen
- Best case: 20-30% better growth, lower churn, faster sales cycles
- Worst case: 20-30% slower growth, higher churn, delayed revenue
- Use scenario dropdown: Data validation to switch between scenarios
- Show fundraising needs for each: How much capital required to hit milestones?
- Sensitivity table: Show impact of changing key assumptions (+/- 10%, 20%)
Pro Tip
Investors expect three scenarios. Base case should be achievable with high confidence. Do not make worst case too pessimistic.
Build Key Metrics Dashboard
Summarize critical outputs for investors.
- Year-by-year summary: Revenue, EBITDA, Net Income for next 5 years
- Key metrics table: CAC, LTV, Gross Margin, Burn Rate, Runway
- Growth rates: YoY revenue growth, customer growth, MRR growth
- Fundraising summary: Capital required, use of funds, milestones
- Charts: Revenue and expense waterfall, cash runway chart, profitability timeline
- Use conditional formatting: Color-code positive/negative values
Pro Tip
Dashboard is first page investors see. Make it clean, visual, and focused on the story you want to tell.
Document Assumptions and Validate Model
Ensure model is error-free and assumptions are justified.
- Add assumption notes: Explain WHY you chose each growth rate, pricing, cost assumption
- Check formulas: No hardcoded numbers in projections (all should reference Assumptions sheet)
- Validate math: Revenue - Expenses should match Net Income across all periods
- Cash flow check: Ending Cash each month should match next month Starting Cash
- Benchmark assumptions: Compare to industry standards (SaaS growth rates, gross margins)
- Have someone review: Fresh eyes catch errors you miss
Pro Tip
Circular references break models. If you see #REF or #VALUE errors, check for cells referencing themselves.
Wrapping Up
Frequently Asked Questions
How do I build financial projections for a startup?
Start with revenue: model customer growth and pricing. Add operating expenses: salaries (biggest cost), marketing, infrastructure. Calculate EBITDA and net income. Project monthly cash flow to identify funding needs. Create 3 scenarios (best/base/worst). Use 3-5 year timeframe: monthly for Year 1, quarterly for Years 2-3, annually for Years 4-5. Centralize all assumptions in one sheet for easy scenario planning.
What should I include in a financial model for investors?
Essential components: Revenue projections by stream, detailed expense breakdown (especially headcount plan), EBITDA and net income, monthly cash flow and runway, key metrics (CAC, LTV, gross margin), scenario analysis (best/base/worst cases), use of funds and milestones, assumptions documentation. Create a 1-page dashboard summarizing 5-year outlook. Investors want to see realistic growth, path to profitability, and capital efficiency.
How far out should I project financials?
Standard is 3-5 years. Use monthly detail for Year 1 (most important), quarterly for Years 2-3, and annually for Years 4-5. Early-stage startups focus on Year 1-2 (investors know later years are speculative). Growth-stage companies may project 5+ years. Always include cash flow projections to show funding needs and runway extension from new capital.
What revenue growth rate is realistic for a startup?
It depends on stage and business model. Pre-product: focus on customer acquisition, not revenue. Early traction: 10-20% month-over-month growth is strong. Product-market fit: 15-30% MoM growth for 12-18 months. Mature startups: 50-100% year-over-year. SaaS benchmarks: T2D3 (triple revenue for 2 years, then double for 3 years). Never project >100% YoY without strong justification.
How do I calculate cash runway in my projections?
Cash Runway = Current Cash Balance / Monthly Burn Rate. Monthly Burn = Revenue - Total Expenses. Example: $500k cash with $50k/month burn = 10 months runway. In projections, calculate ending cash each month: =Starting_Cash + Revenue - Expenses. Flag when cash < $100k or < 3 months burn. Model fundraising rounds to extend runway before it runs out.
