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It would be challenging to find a successful existing or startup business that did not use some type of spreadsheet to help define and analyze their business. They are powerful tools in transforming your business from ideas & assumptions to data driven insights you can act on. They are also the universal language of finance and if your business is seeking any funds you need numbers to back up your assumptions.
It is not difficult to know you need to have some financial analysis and that spread sheets are an easy way to convey that information. However, it is not so easy to know what numbers you need to show and the best ways to format the layout of your sheet.
Traditional business plans were highlighted in a previous section and one of the biggest "Pros" to a traditional business plan is that most include robust spread sheets. We have listed some of the most common business analysis done via spreadsheets that are common place with any startup business.
- Business Expenses
- Sales Forecast
- Break Even Analysis
- Product Associated Costs
PRO-TIP: When creating your sheets place your assumptions either in a separate tab or as a comment on the row name in column A.
PRO-TIP: In the early days of your startup you do not need to have all the answers or even the analysis. You just need enough to have confidence that it is possible to make money with your solution. Don't waste time early trying to identify every single expense you will have or creating a P&L or Budget. Focus on the numbers that are critical, cost to acquire customers, price point, product cost, and how many units you have to sell each month to break even.
- Forces you to think about the details.
- Can give you a tool you can use to calculate different scenarios.
- They can get messy and convoluted with multiple cells used to calculate data.
- Can lead to paralysis by analysis.