As engineers, we're comfortable with complex systems. We model data, simulate outcomes, and manage resources like memory and CPU cycles. But when it comes to business finance—burn rate, runway, projections—many of us treat it like a black box.

After building my own startups and advising many others, I realized that a financial model isn't an accounting exercise. It's a system simulation. It's a script you write to model the future of your company.

This guide will show you how to build a simple, powerful financial model in a spreadsheet. No jargon, no complex formulas. Just a logical system you can build in an afternoon.

Part 1: Your Core Variables—Burn, Runway, and Zero-Cash Date

Before we build anything, let's define our core variables. These are the consts of your business.

monthlyBurn: The net amount of money your company loses each month.
- Formula: monthlyBurn = monthlyExpenses - monthlyRevenue
- Analogy: This is your app's memory leak. You need to know the rate at which you're losing your most critical resource: cash.
runwayInMonths: How many months you can survive before you run out of money.
- Formula: runwayInMonths = currentBankBalance / monthlyBurn
- Analogy: This is your process's Time-to-Live (TTL). It's the countdown clock for your startup.
zeroCashDate: The exact date you run out of money.
- Formula: zeroCashDate = today() + runwayInMonths
- Analogy: This is your hard deadline. It's the date by which you must have achieved a new state (profitability, new funding) or the process terminates.

Knowing these three numbers is the foundation of financial discipline.

Part 2: Build the Spreadsheet—Your Data Model

Create a simple spreadsheet. Google Sheets is perfect. Don't overcomplicate it. Your model should have two main sections: Expenses and Revenue.

Expenses: The Outgoing API Calls

List every predictable monthly cost. Group them into Fixed (the same every month) and Variable (changes with usage).

Category	Item	Month 1	Month 2	Month 3	Notes
Fixed Costs
Salaries	Founder 1 Salary	$5,000	$5,000	$5,000	Be realistic, even if you defer it.
	Founder 2 Salary	$5,000	$5,000	$5,000
Software	Google Workspace, GitHub, etc	$200	$200	$200	Sum of all your SaaS subscriptions.
Variable Costs
Cloud/Infra	AWS / Vercel / GCP	$100	$150	$200	This should scale with users.
Marketing	Ads, etc.	$0	$0	$500	When you decide to start spending.
Total Expenses		$10,300	$10,350	$10,900	`SUM(all expenses)`

Revenue: The Incoming Webhooks

This section is simpler at first. It might have just one line item.

Category	Item	Month 1	Month 2	Month 3	Notes
Revenue	SaaS Subscriptions	$500	$1,500	$3,000	This is where you model your growth.
Total Revenue		$500	$1,500	$3,000	`SUM(all revenue)`

The Grand Finale: Burn and Runway

Now, let's calculate our core variables at the bottom of the sheet.

Category	Month 1	Month 2	Month 3	Notes
Net Burn	($9,800)	($8,850)	($7,900)	`Total Revenue - Total Expenses`
Ending Balance	$490,200	$481,350	$473,450	`Previous Month's Balance + Net Burn`
Runway (Months)	50	54	60	`Ending Balance / ABS(Net Burn)`

Assume a starting balance of $500,000.

Part 3: From Model to Simulation—Projecting the Future

This is where your skills as a developer shine. Your financial model is a simulator. You can model different scenarios by changing a few input variables.

How to model hiring:

Add new rows under Salaries for "Engineer 1" and "Engineer 2," but leave their salaries at $0 for the first few months. In the month you plan to hire them, start inputting their salary. Watch how it immediately impacts your burn and runway.

How to model growth:

Don't just type in random revenue numbers. Create a simple growth model. For example: This Month's Revenue = Last Month's Revenue * (1 + monthlyGrowthRate)

Now you can change the monthlyGrowthRate variable (e.g., 10%, 20%, 30%) and see how it affects your entire financial future.

This turns your spreadsheet from a static report into an interactive tool for decision-making.

Part 4: Connect Your Model to Your Roadmap

This is the secret. A financial model on its own is just numbers. A model connected to your product roadmap is a strategy.

When a VC asks what you'll do with their money, you can give a powerful, specific answer:

"We're raising $1.5M. As you can see in our model, this gives us 18 months of runway. In Month 3, we'll hire two senior engineers for $250k/year total. That will allow us to ship our Enterprise SSO feature by Month 6. We project that feature will help us land 5 enterprise clients by Month 12, adding $125k in ARR and extending our runway by another 4 months."

This answer shows you aren't just spending money; you are investing it in specific milestones that generate a return.

Your Financial Model is a Tool, Not a Prophecy

No one expects your projections to be perfect. They are guaranteed to be wrong. But the act of building the model proves you understand the levers of your business. It shows VCs that you are thinking like a CEO—managing resources, planning for the future, and making data-driven decisions.

Start simple, iterate often, and you'll have a tool that gives you more control and confidence than any pitch deck ever could.

Frequently Asked Questions (FAQ)

Q: How accurate do my projections need to be? A: Not very. The purpose of the model is to demonstrate you understand the levers of your business (e.g., "if we hire an engineer, our burn increases by X, so we need to generate Y more revenue"). The assumptions are more important than the outputs.

Q: What is the biggest financial mistake founders make? A: Running out of money unexpectedly. A simple burn rate model, updated monthly, makes this almost impossible. You will always know your zero-cash date.

Q: Do I need to use complex accounting software like QuickBooks? A: Not at the pre-seed stage. A well-structured spreadsheet is faster, more flexible, and perfectly sufficient for strategic planning and VC conversations.

Decoding the Numbers: A Developer's Guide to Financial Projections