Financial Model — Building financial projections...

Builds monthly revenue projections, expense forecasts, unit economics (CAC, LTV, payback), break-even analysis, cash flow tracking, and scenario modeling (best/base/worst).

Activation

When this skill activates, output:

Financial Model — Building financial projections...

Then execute the protocol below.

Context Guard

Context	Status
User says "financial model", "projections", "revenue forecast"	ACTIVE
User mentions MRR, churn, CAC, LTV, runway, or break-even	ACTIVE
User wants to forecast revenue, expenses, or cash flow	ACTIVE
User wants to set pricing tiers	DORMANT — use Pricing Strategy
User wants to generate an invoice	DORMANT — use Invoice Generator

Common Mistakes

Mistake	Why It's Wrong
"Hockey stick revenue"	Realistic projections beat optimistic fantasies. Start conservative, model scenarios.
"Forget to model churn"	SaaS without churn modeling is fiction. Even 3% monthly churn compounds fast.
"Revenue only, no expenses"	Revenue without expenses is a dream. Model all costs to see actual profitability.
"One scenario only"	A single forecast is a guess. Model best/base/worst to understand the range.
"Skip unit economics"	If CAC > LTV, growth loses money. Unit economics tell you if the business model works.

Protocol

Step 1: Gather Business Data

If the user hasn't provided details, ask:

1. Business model — SaaS, e-commerce, service, marketplace, or other?
2. Revenue streams — subscriptions, one-time sales, services, ads?
3. Current numbers — existing revenue, customers, growth rate?
4. Pricing — price points, tiers, average revenue per user?
5. Costs — known fixed and variable costs?
6. Funding — bootstrapped or funded? Current cash balance?

Step 2: Revenue Model

SaaS / Subscription revenue:

Month N Revenue = (Previous customers - Churned + New) × ARPU

Where:
- Previous customers: end of prior month
- Churned: Previous × monthly churn rate
- New: Acquired through marketing/sales
- ARPU: Average Revenue Per User (monthly)

Month	Starting	New	Churned	Ending	MRR	ARR
1	0	[X]	0	[X]	$[X]	—
2	[X]	[X]	[X]	[X]	$[X]	—
3	[X]	[X]	[X]	[X]	$[X]	—
...
12	[X]	[X]	[X]	[X]	$[X]	$[X]

E-commerce / Transaction revenue:

Monthly Revenue = Visitors × Conversion Rate × Average Order Value

Where:
- Visitors: Monthly unique visitors (organic + paid)
- Conversion Rate: % of visitors who purchase (target: 1-3%)
- AOV: Average Order Value

Service revenue:

Monthly Revenue = Active Clients × Average Monthly Retainer
  + Project Revenue (one-time)

Step 3: Unit Economics

Key SaaS metrics:

CAC (Customer Acquisition Cost):
  = Total Sales & Marketing Spend ÷ New Customers Acquired
  Target: recover within 12 months

LTV (Customer Lifetime Value):
  = ARPU × Gross Margin% × (1 ÷ Monthly Churn Rate)
  Example: $50 × 80% × (1 ÷ 0.05) = $800

LTV:CAC Ratio:
  = LTV ÷ CAC
  Target: > 3:1 (every $1 spent acquires $3+ in lifetime value)

Payback Period:
  = CAC ÷ (ARPU × Gross Margin%)
  Example: $200 ÷ ($50 × 80%) = 5 months
  Target: < 12 months

Unit economics table:

Metric	Value	Target	Status
ARPU (monthly)	$[X]	—	—
Monthly churn rate	[X]%	<5%	[OK / At Risk]
CAC	$[X]	—	—
LTV	$[X]	>3× CAC	[OK / At Risk]
LTV:CAC ratio	[X]:1	>3:1	[OK / At Risk]
Payback period	[X] months	<12 months	[OK / At Risk]
Gross margin	[X]%	>70% (SaaS)	[OK / At Risk]

Step 4: Expense Forecast

Fixed costs (monthly):

Category	Monthly Cost	Annual Cost	Notes
Salaries & wages	$[X]	$[X]	[Headcount × avg salary ÷ 12]
Office / co-working	$[X]	$[X]
Software & tools	$[X]	$[X]	[List: hosting, SaaS tools, etc.]
Insurance	$[X]	$[X]
Legal & accounting	$[X]	$[X]
Total fixed	$[X]	$[X]

Variable costs (scales with revenue):

Category	Cost Basis	Monthly Estimate	Notes
Hosting / infrastructure	[X]% of revenue	$[X]	Scales with users
Payment processing	2.9% + $0.30/txn	$[X]	Stripe standard rate
Customer support	$[X] per 100 customers	$[X]
Sales commissions	[X]% of new revenue	$[X]
Marketing spend	$[X] fixed + [X]% of revenue	$[X]
Total variable		$[X]

Total monthly burn:

Burn Rate = Fixed Costs + Variable Costs - Revenue
Runway = Cash Balance ÷ Monthly Burn Rate

Step 5: Break-Even Analysis

Break-Even Point (customers):
  = Fixed Costs ÷ (ARPU - Variable Cost per Customer)

Break-Even Point (revenue):
  = Fixed Costs ÷ Gross Margin%

Example:
  Fixed costs: $10,000/month
  ARPU: $50/month
  Variable cost per customer: $10/month
  Break-even: $10,000 ÷ ($50 - $10) = 250 customers

Monthly P&L projection:

	Mo 1	Mo 3	Mo 6	Mo 12
Revenue	$[X]	$[X]	$[X]	$[X]
COGS / variable costs	($[X])	($[X])	($[X])	($[X])
Gross profit	$[X]	$[X]	$[X]	$[X]
Gross margin %	[X]%	[X]%	[X]%	[X]%
Operating expenses	($[X])	($[X])	($[X])	($[X])
Net income	($[X])	($[X])	$[X]	$[X]
Cumulative cash	$[X]	$[X]	$[X]	$[X]

Step 6: Scenario Modeling

Three scenarios:

Assumption	Worst Case	Base Case	Best Case
Monthly new customers	[X]	[X]	[X]
Monthly churn rate	[X]%	[X]%	[X]%
ARPU	$[X]	$[X]	$[X]
Marketing spend	$[X]	$[X]	$[X]
Hiring timeline	Delayed	On time	Accelerated

12-month outcome by scenario:

Metric	Worst	Base	Best
Customers (Mo 12)	[X]	[X]	[X]
MRR (Mo 12)	$[X]	$[X]	$[X]
ARR (Mo 12)	$[X]	$[X]	$[X]
Monthly burn (avg)	$[X]	$[X]	$[X]
Break-even month	Mo [X]	Mo [X]	Mo [X]
Runway remaining	[X] months	[X] months	[X] months
Cash needed	$[X]	$[X]	$0

Step 7: Cash Flow Summary

Monthly cash flow:

Month	Revenue	Expenses	Net	Cumulative
1	$[X]	$[X]	($[X])	$[X]
2	$[X]	$[X]	($[X])	$[X]
3	$[X]	$[X]	($[X])	$[X]
...
12	$[X]	$[X]	$[X]	$[X]

Key dates:

• Cash-flow positive: Month [X] (when monthly net turns positive)
• Break-even (cumulative): Month [X] (when cumulative losses are recovered)
• Runway exhausted: Month [X] at current burn (worst case)

Output Format

# Financial Model — [Business Name]

## Revenue Model
[From Step 2 — monthly revenue projections]

## Unit Economics
[From Step 3 — CAC, LTV, payback, margins]

## Expense Forecast
[From Step 4 — fixed + variable costs]

## Break-Even Analysis
[From Step 5 — break-even point + P&L]

## Scenario Analysis
[From Step 6 — worst/base/best]

## Cash Flow
[From Step 7 — monthly cash flow + key dates]

## Key Assumptions
[List every assumption with the value used]

Completion

Financial Model — Complete!

Business model: [Type]
12-month ARR (base case): $[X]
Break-even: Month [X]
LTV:CAC ratio: [X]:1
Runway: [X] months
Scenarios modeled: 3 (worst/base/best)

Next steps:
1. Validate assumptions with real data (update monthly)
2. Track actual vs projected monthly
3. If LTV:CAC < 3:1, reduce CAC or increase ARPU before scaling
4. If runway < 6 months, raise capital or cut burn
5. Update the model quarterly with actuals

Level History

• Lv.1 — Base: Revenue models (SaaS, e-commerce, service), unit economics (CAC, LTV, payback, LTV:CAC, gross margin), expense forecast (fixed + variable), break-even analysis with P&L projection, 3-scenario modeling (worst/base/best), cash flow timeline with key dates (cash-positive, break-even, runway). (Origin: MemStack Pro v3.2, Mar 2026)