Of course, no financial model is perfect. In fact, every financial model you build will be wrong.

But creating a financial model is less about being right or wrong, and more about going through the process of detailing how a business “works”. The result, a set of financial statements, key operational metrics, and a set of key drivers and assumptions, creates a map for you to explore how your tactical product, marketing, organizational and strategic decisions impact your company’s profitability. It will help you determine your key milestones, capital needs and types of potential investors.

Here’s the key: your model will be wrong. Instead of focusing on the bottom-line income statement and the hockey-stick growth you’re projecting in year 3 of your venture, focus on your process, assumptions and key drivers and build a detailed month-by-month model that you can modify and update over time.