पाठशाला Pathshala · हिसाब Hisāb, Unit economics · Lesson 10 · Start
The one spreadsheet model every founder should build
Ten inputs, one row per month, every other number a formula. A driver-based model that predicts revenue and cash twelve months out, tells you whether you are default alive and gets more accurate every month you use it.
Pathshala, The Founder Library · 11 October 2026 · 7 min read
Most early financial models are either a single line of revenue growing at a hopeful percentage or a forty-tab workbook nobody but its author can change. Neither answers the question a founder actually needs answered every month: given what is true today, how much cash will we have in a year, and what would change that? A model with ten inputs, one row per month and nothing hard-coded answers it, and it takes an afternoon to build.
This lesson names the ten inputs, sets out the monthly engine that turns them into revenue and cash, works one company through, shows how to lay the sheet out so that it stays honest, and ends with the monthly re-forecast that makes the model better every time it is used.
Why drivers, and why only ten
A driver-based model forecasts the things a founder can observe and influence, customers won, price, churn, spend, and lets revenue and cash fall out as arithmetic. A top-down model forecasts revenue directly, which is the one number nobody can act on. When a driver model is wrong, it is wrong about something specific, CAC was higher than assumed or collections slower, and the fix is obvious. When a top-down model is wrong, it is just wrong. David Skok’s SaaS Metrics 2.0 builds its whole argument on a driver model of this kind, and uses it to show that the early losses of a recurring-revenue business get deeper the faster bookings grow, a result no single revenue line could ever reveal.
Ten inputs is a discipline, not a rule of nature. Each additional input is another number to defend, and early-stage forecasts are dominated by a handful of drivers anyway. The model below is the minimum that captures acquisition, retention, margin, cost and the gap between earning money and receiving it. Paul Graham’s Default Alive or Default Dead? asks whether a company reaches profitability on the money it has left, assuming expenses stay constant and revenue grows as it has over the last several months. This model is that question with the assumptions written down where everyone can see and change them.
The ten inputs
1. Cash in the bank today, from the bank statement, not the books. 2. Paying customers today. 3. Revenue per customer per month, ex-GST, as actually billed rather than list price. 4. Gross margin, drawn as the [COGS lesson](/library/what-belongs-in-cogs) draws it. 5. Sales and marketing spend per month, salaries of the sales team included. 6. Paid CAC, that spend divided by customers won from it; Andreessen Horowitz’s 16 Startup Metrics notes that investors treat paid CAC as more important than blended CAC in judging viability, so keep the two apart. 7. Organic customers per month, from referral, word of mouth and inbound that no rupee bought. 8. Monthly churn, the share of customers lost each month. 9. Fixed cost per month: salaries outside sales, rent, tools, the accountant. 10. Days to collect, the average time between invoice and money in the bank.
The tenth is the one most founders leave out and the one that most often makes a profitable plan run out of cash. Revenue is recognised when the service is provided; cash arrives when the customer pays. The 16 Startup Metrics essay warns against using bookings and revenue interchangeably for the same reason. An Indian company selling to large enterprises on sixty- or ninety-day terms is lending its customers two or three months of revenue, and the loan grows with every month of growth.
The monthly engine
Each month is one row and six formulas. Customers equal last month’s customers times one minus churn, plus spend divided by CAC, plus organic customers. Revenue equals customers times revenue per customer. Gross profit equals revenue times gross margin. Cash collected equals the revenue of the month that many days ago: with a 45-day collection period, half of last month’s revenue and half of the month before. Cash out equals cost of revenue plus sales and marketing plus fixed cost. Closing cash equals opening cash plus cash collected less cash out.
Two outputs matter most. The first is the month closing cash goes below zero, or more usefully below three months of cash out, which is the point at which a company must already have raised or cut. The second is the month operating profit, gross profit less spend less fixed cost, turns positive. If the second comes before the first, the company is default alive.
One company, twelve months out
An Ahmedabad company sells inventory software to distributors. It has ₹1.2 crore in the bank, 80 customers paying ₹15,000 a month, a 75 per cent gross margin, ₹6 lakh a month of sales and marketing at a paid CAC of ₹60,000, three organic customers a month, 3 per cent monthly churn, ₹14 lakh of fixed cost and a 45-day collection period. Those are the figure’s defaults.
Twelve months out it has 188 customers and ₹28.2 lakh of monthly revenue. Operating profit turns positive in month eleven. Cash falls from ₹1.2 crore to ₹47.7 lakh and is still edging down at month twelve, because collections trail revenue by six weeks. The company is default alive with a modest cushion. Now move one input at a time. At 90 days to collect, month-twelve cash is ₹26.3 lakh: the same business, ₹21 lakh poorer, because its customers are paying later. At 5 per cent churn it ends with 163 customers and ₹35.9 lakh. Raise spend and the model tells you whether the extra customers arrive before the extra cost does.
That sensitivity is the model’s real output. A founder who knows that collection days move cash more than a price rise, or that churn moves it more than CAC, knows which problem to work on this quarter.
A forecast is not a promise. It is a list of assumptions, written down where they can be checked against what happened.
Laying out the sheet so it stays honest
Three tabs. Inputs holds the ten numbers, each in its own labelled cell in one colour, with a note on where it came from and the date it was last updated. Engine holds one row per month and the six formulas, every one of them pointing back to the inputs tab; there is not a single typed number on it. Actuals holds the same six rows, filled from the books and the bank each month. A check row at the bottom of the engine confirms that opening cash plus collections less payments equals closing cash, and turns red when it does not.
Resist three temptations. Do not let revenue per customer or churn vary by month unless you have a reason you can state, because a curve chosen to make the answer look good is a top-down forecast in disguise. Do not add a tab until a real decision needs it; hiring plans, price changes and a second product are reasons, tidiness is not. And keep GST out of revenue and cost entirely, then add a separate line for the GST payable each month if the timing matters to cash, because it does on large invoices.
When the business has more than one way of acquiring customers or more than one product, split inputs five to eight by channel or product rather than adding new kinds of input. Ten inputs per segment is still a model a founder can hold in their head.
The monthly re-forecast
On the fifth working day of each month, once the books are closed, fill last month’s actuals beside the forecast and compute the gap on each of the six rows. Then trace each gap to an input: more customers than forecast means CAC or organic was better than assumed, less cash than forecast with revenue on plan means collections slowed. Change the input, never the output. Roll the model forward a month so that it always looks twelve months ahead, and note in one line what changed and why.
Once a quarter, compare the forecast made three months ago with what happened and write down which input was furthest off. Over a year that log becomes the most useful document in the company, because it shows where the founders’ instincts are reliable and where they are optimistic. Read the [runway lesson](/library/runway-how-many-months-you-really-have) for what to do with the month the cash line crosses zero, and the [payback lesson](/library/payback-period-and-cash-trap-of-fast-growth) for why growing faster can bring that month closer.
Nothing here is legal, tax or investment advice. The Ahmedabad company is illustrative; its figures are the model’s defaults so that a reader can reproduce every number in the text.
Sources
- Paul Graham, Default Alive or Default Dead?, October 2015 — Whether a startup reaches profitability on the money it has left, assuming constant expenses and recent revenue growth.
- Jeff Jordan, Anu Hariharan, Frank Chen and Preethi Kasireddy, 16 Startup Metrics, Andreessen Horowitz, August 2015 — Bookings are not revenue; net burn as the true measure of cash burned; paid CAC more important than blended CAC.
- David Skok, SaaS Metrics 2.0: A Guide to Measuring and Improving What Matters, forEntrepreneurs, January 2013 — Recurring-revenue businesses run early losses that deepen as bookings growth rises.