What Investors Want to See in Your Financial Model
Your financial model is one of the first things investors will test when they look at your business. They are not expecting you to predict the future perfectly. They want to see how you think, how well you understand your numbers, and how your business could scale with the right funding.
A strong financial model helps investors understand the link between your plan, your funding round and your growth targets. It should show where the business is now, where it could get to, and what needs to happen along the way.
Investors and lenders look at forecasts, cash flow and margins to assess the financial health and profitability of a business. British Business Bank also highlights that financial forecasts are a core part of a business plan when seeking investment or finance.
Why your financial model matters to investors
A pitch deck tells the story.
Your financial model tests the story.
Investors use your model to check:
- How your revenue will grow
- What drives your costs
- How much cash you need
- How long the money will last
- What milestones the funding should help you reach
- How realistic your assumptions are
- How scalable the business could become
They are not just looking for big numbers. In fact, over-optimistic forecasts can damage trust.
A good financial model gives investors confidence that you understand the commercial reality of your business.
1. Clear revenue assumptions
Investors want to see how your revenue forecast has been built.
A simple sales number is not enough.
They will want to know what sits behind it, such as:
- Number of customers
- Average order value
- Pricing
- Conversion rates
- Sales cycle length
- Churn or repeat purchase rate
- Contract length
- Revenue by product, service or customer type
For a SaaS business, this could include monthly recurring revenue, annual recurring revenue, churn, expansion revenue and customer acquisition cost.
For a service business, this may include capacity, utilisation, day rates, retainers and delivery costs.
For an ecommerce business, this may include website traffic, conversion rates, average basket value, returns and fulfilment costs.
The key point is this: your financial model should show the drivers of revenue, not just the outcome.
2. Sensible growth, not fantasy growth
Investors expect ambition. They do not expect guesswork.
If your revenue jumps from £100k to £5m in two years, your model needs to explain how that happens.
Ask yourself:
- What marketing channels will drive the leads?
- What sales resource will you need?
- How long does it take to convert a customer?
- What capacity limits exist?
- What evidence supports the growth rate?
- What has already been proven?
Early-stage businesses will not have all the data. That is normal.
But investors still want to see logic. Your assumptions should link back to traction, market knowledge or clear activity.
3. Gross margin and unit economics
Investors want to know whether growth improves the business or makes the losses bigger.
This is where gross margin and unit economics matter.
Your financial model should show:
- Revenue per customer
- Direct cost per customer
- Gross margin
- Customer acquisition cost
- Customer lifetime value
- Payback period
- Contribution margin
The UK Government’s financial model guidance for investment highlights unit economics as a key way for investors to test whether each sale adds value and whether scaling will create profit rather than increase losses.
This matters because revenue alone does not prove a business works.
A company can grow quickly and still burn cash at a rate that makes future funding harder.
4. Cash runway
Cash runway is one of the most important parts of your financial model.
Investors want to know:
- How much cash you have now
- How much you are raising
- How long the money will last
- What monthly burn rate looks like
- When the business may need more funding
- What milestones you expect to hit before the next raise
Your model should make this easy to see.
SeedLegals’ investor-focused finance guidance also highlights runway, bottom line impact and scenario planning as key areas founders should model when preparing for fundraising.
A good financial model should answer a basic investor question:
If we invest this money, what progress will the business make before it runs out?
5. Use of funds
Investors do not just want to know how much you are raising.
They want to know what the money will be used for.
Your financial model should break this down clearly, for example:
| Use of funds | Example |
|---|---|
| Product | Development, testing, technical hires |
| Sales | Sales team, outbound tools, partnerships |
| Marketing | Paid ads, content, events, brand activity |
| Operations | Systems, processes, customer support |
| Finance and legal | Compliance, reporting, investor support |
| Working capital | Stock, VAT timing, debtor gaps |
This should link directly to the growth plan.
If you are raising £750k, investors will want to see why that amount is needed and what it allows you to do.
6. Hiring plan
For many startups and scaleups, people are the largest cost.
Investors will want to see who you plan to hire, when and why.
Your financial model should include:
- Current headcount
- Planned new roles
- Start dates
- Salary costs
- Employer National Insurance
- Pension costs
- Recruitment fees
- Bonus or commission assumptions
- Contractor or outsourced support
The hiring plan should match the wider strategy.
If the model shows aggressive revenue growth but no sales hires, investors will question it.
If the model shows new hires every month without enough cash runway, they will question that too.
7. Cost structure
Investors want to see that you understand your cost base.
Your model should separate:
- Direct costs
- Staff costs
- Marketing costs
- Software costs
- Premises costs
- Professional fees
- Finance costs
- Tax and VAT timing
- One-off costs
- Recurring overheads
This helps investors see how the business behaves as it grows.
Do costs rise in line with revenue?
Can margins improve?
Are there fixed costs that create risk?
Are there costs missing from the forecast?
A common mistake is to forecast revenue growth but understate the cost needed to deliver it.
8. Working capital
Working capital often gets missed in startup financial models.
That can cause problems.
A business can be profitable on paper and still run out of cash.
Your model should consider:
- Debtor days
- Supplier payment terms
- VAT payments
- Stock purchases
- Deposits
- Deferred revenue
- Annual software renewals
- Payroll timing
- Corporation tax
This is especially important for businesses with long payment terms, stock, project-based work or upfront delivery costs.
Investors want to know that your cash flow forecast reflects how money actually moves through the business.
9. Scenario planning
One version of the future is not enough.
Investors often want to see different scenarios, such as:
- Base case
- Upside case
- Downside case
This does not need to overcomplicate the model.
But it should show how the business responds if things change.
For example:
- Sales take longer than expected
- Hiring is delayed
- Churn increases
- Marketing costs rise
- A funding round takes longer
- A major customer pays late
Scenario planning shows investors that you understand risk and can make decisions if the plan changes.
Balderton’s guidance on growth and burn also frames investor discussions around runway, operations, future financing and growth versus burn trade-offs.
10. Milestones linked to funding
Investors want to know what the funding round helps you prove.
Your financial model should link the cash raised to clear milestones.
These may include:
- Revenue targets
- Product launches
- New market entry
- Key hires
- Customer numbers
- Gross margin improvement
- Break-even point
- Next funding round readiness
This helps investors understand the value inflection points.
For example, raising £500k to “grow the business” is too vague.
Raising £500k to reach £1m ARR, hire two salespeople, reduce churn and build investor reporting ahead of a Series A is much stronger
11. Historic performance
If you have trading history, include it.
Investors will compare past performance against the forecast.
They will look at:
- Revenue trends
- Gross margin
- Cost control
- Cash burn
- Customer growth
- Churn
- Budget versus actuals
- Forecast accuracy
Your past numbers help investors judge whether your future numbers are credible.
If your model ignores what has happened to date, it weakens the forecast.
12. Clean structure and easy navigation
A financial model does not need to be over-engineered.
In fact, a messy model can create doubt.
Investors want a model they can follow.
A good financial model usually includes:
- Assumptions tab
- Revenue forecast
- Cost forecast
- Hiring plan
- Profit and loss
- Cash flow
- Balance sheet, where relevant
- Funding requirement
- Scenario summary
- Key metrics
Use clear labels. Avoid hardcoded numbers buried inside formulas. Make the assumptions visible.
The model should be detailed enough to support the raise, but not so complex that nobody can understand it.
Common mistakes founders make in their financial model
Founders often weaken their financial model by:
- Forecasting revenue without clear drivers
- Forgetting VAT, payroll taxes or corporation tax
- Ignoring working capital
- Underestimating hiring costs
- Showing no downside case
- Assuming every marketing pound produces instant sales
- Not linking funding to milestones
- Using inconsistent formulas
- Hiding key assumptions
- Building a model that does not match the pitch deck
These issues are common, but they are fixable.
What investors really want from your financial model
Investors do not expect your forecast to be perfect.
They do expect it to be thought through.
Your financial model should show:
- You understand your business model
- You know what drives revenue
- You understand your costs
- You have a clear plan for the funding
- You know how long the cash will last
- You have tested different outcomes
- You can explain the assumptions behind the numbers
A strong financial model will not secure investment on its own.
But a weak one can stop a good business from getting funded.
Final thought
Your financial model should make the investment case easier to understand.
It should show how your business works, what the funding will achieve and how you plan to manage growth.
For UK startups and scaleups, this is not just about building a spreadsheet. It is about giving investors confidence in your thinking, your numbers and your ability to make good decisions as the business grows.
Need help with your financial model?
At AI Accounts, we help owner-managed UK businesses build investor-ready financial models, cash flow forecasts and funding plans.
We can help you turn your numbers into a clear model that supports your pitch, tests your assumptions and gives investors the financial detail they expect.
Planning a raise or already issued shares?
Talk to AI Accounts Ltd about SEIS and EIS support for UK startups.
Need an investor-ready financial model?
If you’re preparing for investment, we can help you build a clear financial model that shows your revenue assumptions, cash runway, funding need and growth plan.
Book an intro call with AI Accounts to get your financial model investor-ready.
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