BUSI 223: Business Modeling for Entrepreneurs – Unit 5 Project: Startup Financial Modeling & Risk Analysis

Assessment Overview

Course: BUSI 223 – Business Modeling for Entrepreneurs (Entrepreneurship Core)

Assessment Type: Financial Modeling Project & Executive Summary

Weighting: 25% of Final Grade

Length: Excel Financial Model (3-Tabs) + 825-to 1,050-word written analysis

Submission Format: ZIP file containing Excel Workbook and Word Document

Due Date: Friday, 11:59 PM (PST) of Week 5

Context

A brilliant business idea remains a hobby until it is quantified. For entrepreneurs, the ability to build a “bottom-up” financial model is vital for securing venture capital, managing burn rates, and testing the viability of a value proposition. In this unit, we move away from abstract theory and into the mechanics of fiscal projection. You will demonstrate how your business generates revenue, manages cost of goods sold (COGS), and maintains enough liquidity to reach a break-even point. This project mimics the “Financials” section of a professional business plan suitable for presentation to an angel investor or a traditional lending institution.

Task Description

Using the business concept you developed in Unit 2, you must construct a comprehensive 12-month financial projection and a corresponding narrative analysis.

Part 1: The Excel Model

Your Excel workbook must include three clearly labeled tabs:

• Revenue Model: Detail your “unit of sale,” pricing strategy, and monthly sales volume projections based on specific marketing assumptions.
• Operating Budget: List fixed and variable costs, including personnel, rent, marketing, and utilities.
• Cash Flow Statement: A month-by-month projection showing cash-in vs. cash-out, highlighting the “valley of death” (maximum cumulative cash deficit).

Part 2: The Written Analysis (825–1,050 words)

Your written report must interpret the data from your model, focusing on the following:

1. Key Assumptions: Clearly state the logic behind your sales growth and pricing. Why did you choose these numbers?
2. Break-Even Analysis: Identify the exact month or sales volume required to cover all expenses.
3. Risk Mitigation: Conduct a “Sensitivity Analysis.” If your sales are 20% lower than projected, what happens to your cash runway? How will you pivot?
4. Capital Requirements: Based on the model, how much total startup capital do you need, and what specific assets will it fund?

Requirements & Formatting

• Excel: Use formulas for all totals and cross-tab references; do not “hard-code” final numbers.
• Document Style: The written report must follow APA 7th edition formatting for the title page and references.
• Professionalism: Use business-grade language. Avoid “I think” or “I hope”; use “Projected data indicates” or “Assumptions are based on.”

Grading Rubric / Marking Criteria

Constructing a realistic financial model requires a disciplined approach to bottom-up forecasting rather than relying on top-down market percentages. In this specific startup model, the customer acquisition cost serves as the primary driver for all subsequent cash flow projections. If the marketing spend fails to yield the anticipated conversion rate, the burn rate will accelerate and deplete the initial seed capital before the third quarter. Investors typically scrutinize the relationship between variable costs and scaling capacity to ensure the business possesses a viable path to profitability. According to recent research, the majority of early-stage failures stem not from poor product design but from a fundamental misunderstanding of cash runway management (Osterwalder and Pigneur, 2010). Establishing a 20% contingency fund within the operating budget provides a necessary buffer against unforeseen supply chain disruptions. Detailed sensitivity analysis further confirms that the break-even point remains achievable even under a moderate sales slump. Success ultimately depends on maintaining a lean operational structure during the initial twelve months of the launch phase.

 References

• Blank, S. and Dorf, B. (2020) The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. Hoboken, NJ: John Wiley & Sons. Available at: https://www.wiley.com/en-us/The+Startup+Owner%27s+Manual
• Feld, B. and Mendelson, J. (2019) Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. 4th edn. Hoboken, NJ: John Wiley & Sons. doi: 10.1002/9781119593591
• Osterwalder, A. and Pigneur, Y. (2010) Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: John Wiley & Sons. Available at: https://www.strategyzer.com/books/business-model-generation
• Scarborough, N.M. and Cornwall, J.R. (2019) Essentials of Entrepreneurship and Small Business Management. 9th edn. New York, NY: Pearson. Available at: https://www.pearson.com/en-us/essentials-of-entrepreneurship