Why Your Financial Model is Lying to You

Most startup financial models are built on hope, not data. Founders often project hockey-stick growth without accounting for the operational drag that comes with scale. Here's how to fix your assumptions before you pitch to investors.

The "Linear Growth" Fallacy

The biggest mistake we see is assuming that revenue growth will be linear while costs remain static. In reality, as you scale, your Customer Acquisition Cost (CAC) often increases, and your operational complexity explodes. Your model needs to reflect step-function cost increases, not just smooth curves.

Ignoring Cash Flow for Revenue

Revenue is vanity; cash flow is sanity. Many SaaS founders focus entirely on ARR (Annual Recurring Revenue) while ignoring burn rate and runway. A robust financial model must include a detailed cash flow statement that accounts for payment delays, churn, and unexpected expenses.

Actionable Steps

• Audit your CAC assumptions against industry benchmarks.
• Build "step costs" into your hiring plan.
• Stress-test your model with a "worst-case" scenario (e.g., 50% lower growth).