What is this Financial Model for Anyway?

This is a Thingamabob—the main character in a children’s book that feels like it explains a lot about how startups think about their financials.

“…In an instant, the thing exploded into gobs and gobs of thingamabobs.

One by one, the thingamabobs became all of the things we know today ...big things, little things and even very complicated things.

Everything was in its place. Well, everything except for one small, shapeless thingamabob.

No one knew what it was.

And no one was clear what it was for.”

Feels like how some founders holding on for dear life think about their financial model.

Ask them about whether they’ve even built one and you either get "not yet", because it feels too early, too premature or "yes" because someone told them that they needed one.

Box checked.

Very few founders have a clear sense of what a model should be doing for them at an early stage and what kind of professional input can help them get more out of it. That gap is expensive. Not just financially when it comes to hiring the wrong person— it costs founders the clarity they need to make better decisions, move faster, and walk into investor conversations with something real behind the number they're asking for.

Before you've committed to anything, the first model isn't really a model. It's a sanity check — back-of-the-napkin math on how big this thing needs to get, and how fast, for it to be worth doing at all. What does full-time success look like? What kind of cash flow supports what size team? Is the ceiling high enough to be venture-backable, or is this a lifestyle business, or neither?

Can you even describe what a scaled version of this looks like?

Most founders skip this entirely. They go straight to building, or straight to raising, and never sit with the question of whether the math of the business works in principle. If you're only using this stage to make sure you have enough runway to get started, you're leaving the most important question on the table: is the ceiling on this thing high enough to be worth the effort? Once you can describe what scale looks like, you can start backing into which assumptions have to be true to get there. That's when the model becomes a tool for building, not just a check on your own sanity.

This is where my book, Founder Unfriendly, starts out—helping founders figure out whether their thing is actually a thing, and then quickly getting right into “You've got something — now how fast should you go?”

Once the sanity check passes, the model's next job is to answer a question most founders never actually ask:

“If money weren't the constraint, how fast would you want to grow?”

Not how fast you could grow — how fast you could grow while still making good decisions.

Here's the exercise, taken straight out of the book: Take your current plan and ask: could I go twice as fast without things blowing up? Run the numbers. If yes, do it again — twice as fast as that. Keep going until you hit something uncomfortable. At some point, the model will tell you that you need to hire six salespeople next month, or spend half your budget on paid ads. You'll look at that number and know, viscerally, that you cannot do that well.

That's the constraint.

That's the ceiling on smart growth for this version of the company. Now you know something useful: the number you actually want to raise is the one that gets you to that ceiling — not beyond it.

It also tells you something about the thing you need to figure out—how to raise the ceiling.

This exercise also tells you what your marketing needs are. If the model says you could handle 200 new customers a month operationally, then the question becomes how you generate 200 new customers a month. That dictates where your time goes, where you spend money, what content you produce, who you hire.

The model isn't just financial planning — it's telling you what kind of company you have to become to grow at the rate you want to grow.

Most founders skip this and go straight to the investor conversation, where someone asks "how much do you want to raise?" with no real answer behind it. The doubling exercise is how you get an answer that isn't just a number you pulled from comparable rounds.

Too many founders set their raise it based on some notion of how much they think they can raise, rather than what ask actually makes for the best version of the company at this stage—and the best version of the company is the one that makes for the best pitch. Every company has an optimal amount of fuel — the number that launches the business into orbit with the right trajectory.

It's not always the case that asking for more is harder. Pitching with a worse pitch, because you’re describing a worse version of the company, is harder. Sometimes, the $2M ask makes for a far weaker pitch than the $4M ask, because $4M is the number that funds the hires and the experiments that actually prove the thesis. The exercise of treating money as if it weren't a constraint isn't abstract — it's how you find that number.

Build the plan that makes the most sense, figure out what it costs, and then make the case for it. That's a fundable pitch. Asking for whatever you think you can get is just negotiating against yourself before you've even walked in the room. If you’re not sure how to do that, or you need a gut check, I can help you.

Once you have some signal, maybe some revenue, and potentially a runway deadline coming, the model's job evolves. You're not modeling the business anymore, you're modeling the decisions. When do I need to raise? What do I need to show to raise it? What does burn need to look like to get there? If you're only using the model to avoid running out of money, you'll update it when an investor asks and ignore it the rest of the time.

The more useful version — running it regularly, watching where actuals diverge from plan — turns it into a feedback loop. That variance is data. It's telling you which assumptions were wrong, which bets are paying off, and where to put more resources. The model shouldn't just be tracking what happened. It should be informing what you do next.

When you’ve gotten product-market fit, this is where things get genuinely complicated, and where most finance hiring misfires happen. You've raised money. You're spending it. You think you need someone to help you “track” it. You conflate someone who can close your books accurately with someone who is doing variance analysis, informing hiring decisions, and giving you a window into improving unit economics. If you're only using it to track what already happened — to make sure the books close and the burn rate looks right — you're leaving the actual decision-making value on the table. The question isn't just "are we within budget." It's "which of our bets from last quarter paid off, and what does that tell us about where to put resources next quarter."

As you grow, now you have financial coordination around department heads. You might have multiple revenue streams and cohorts. The model has to translate across the organization — finance talking to the head of growth, talking to the head of sales, talking to you. This is when you need someone who can own the model as a communication tool, not just a math tool. Most founders get here and realize their model doesn't actually reflect how the business works. It reflects how they thought about the business two years ago.

The version of the finance function you need to support this model is directly upstream of the decisions you're trying to make, while founders often treat it as a lagging function. They hire when the mess is already bad—when it’s too much for them to keep track of on their own.

Next week I'm sitting down with Anthony Rosen of Propeller Industries about how to match these needs to humans, titles and org structure. He’s been CFO for 60+ startups across the full arc from pre-launch to $250M+.

If you're a founder who's starting to feel that pull, that sense that your spreadsheets are no longer making sense and something needs to change — come to the conversation before you make the hire. Register here.