Startup Funding Model example Redfin

Redfin has opened up their books to give startups an idea of what actual verses planned costs can look like in a startup situation. Normally this kind of information is top secret, something that no company is going to willingly give out without a number of NDA’s being signed. This is probably one of the better chunks of intel for folks who are working in a startup, or thinking of doing a startup. Not only is this good for managers, this is also really good for the employees to read as well.

The reason that it is important for everyone in a company to read is that this sets up a baseline, not just of expectations, but of the realities of working in a startup.

One of the hardest things about any kind of business model is trying to do accurate or realistic projections of what the market should look like. The reality is that what a company projects is probably well over what it really will be. You might end up being the next best thing to sliced bread, but the reality is that the moment your technology looks even remotely promising, someone is going to come along and try to copycat that idea. Your business plan for your startup needs to take that and more into account, which is why the Guy Kawasaki article is so worth reading.

When first putting together our financial model, we looked online to calibrate spending assumptions. So many people have blown venture capital, we thought, there must be a manual somewhere on how to do it, at what rate, avoiding which follies. We couldn’t find anything. So we took some wild guesses and figured we’d see how they turned out. And now two years later to the day that we built our first model, here are the projections and actual results. Hopefully, you can learn from our experiences. Source: Guy Kawasaki

Given the numbers, it is important to notice that there is a difference between what was expected and what was actually paid as a percentage basis. If you take the percentage that they are off in general, and apply it to your own budget, your budget might be more realistic. You actual difference between what you spend and what you expected to spend might be different, that percentage higher or lower can help offset otherwise variable guesses when working within a budget.

We also all know that disasters happen, if you are the kind of person that saves up 2000 dollars, just to have some house repair come in at exactly what you saved up you know what we are talking about. There is always something that is going to come along and wipe out company savings for whatever reason you can think of. Knowing how far off kilter from your normal budget planning is can help you work out a place to keep “disaster money” in one company bucket or another.

In all one of the more valuable articles you can read today.