Part 2: Understanding financial models
What a financial model is, the five business types, and the difference between Planning and Investment models.
What is a financial model?
A financial model is a quantitative representation of your business: a mathematical story about its future. It takes your assumptions (pricing, growth, churn, costs) and projects them forward to show how much revenue you'll generate, what your expenses will be, when you'll become profitable, how much cash you'll need, and what your business could be worth.
Why it matters:
- Fundraising — investors expect projections, and a well-built model proves you understand your business economics. Your model is your second pitch deck: the deck tells the story; the model proves you can deliver it.
- Planning — set targets, understand your cash runway, and make hiring and spending decisions with confidence.
- Communication — a common language for co-founders, boards, advisors, and acquirers.
A complete model contains an income statement (P&L), a balance sheet, a cash flow statement, and supporting schedules (revenue build-up, headcount, customer acquisition, capital spending). Radley generates all of these for you. You focus on the assumptions, and the app handles the accounting mechanics and the maths.
Five business types, five purpose-built models
When you create a new model, Radley asks "What kind of business are you modelling?" Five types are available today:
| Type | Built around | Fits if you… |
|---|---|---|
| SaaS | ARR: customers, churn, expansion | Charge recurring subscription fees |
| Services | Capacity and utilisation | Sell time, projects, or retainers |
| Ecommerce | Orders, AOV, inventory | Sell products online direct to customers |
| Hardware | Units, BOM cost, inventory, software attach | Ship physical devices with real unit costs |
| Marketplace | GMV, take rate, supply and demand | Connect buyers and sellers and take a cut |
Your choice matters because each type gets a genuinely different model: different questions, different revenue engine, different key metrics, and different worksheets in your Excel export. All five share the same accounting chassis underneath (P&L, Balance Sheet, Cash Flow, Cap Table, Exit Valuation), so whichever you choose, the statements are built the same rigorous way.
Every business type is available in both tiers: a Planning model and an Investment model.
Tip: Hybrid business? Choose based on your primary revenue driver. Mostly subscriptions → SaaS. Mostly billable time → Services. Mostly product orders → Ecommerce. Mostly device sales → Hardware (software attach is supported). Mostly transaction fees → Marketplace. You can also start with "Describe your business" and use the extracted assumptions as a sense-check.
Planning Model vs Investment Model
Radley offers two model tiers, and the difference isn't just depth. It's direction:
- Planning Model: "Plan out your numbers and validate your direction." A fast, guided model for setting targets and aligning your team.
- Investment Model: "Create an investment model for your startup." Monthly and annual statements, plus Q&A Prep, Investor Memo, Rehearsal, and version History.
Most founders start with a Planning Model and upgrade later. Your answers carry forward.
| Planning Model | Investment Model | |
|---|---|---|
| Approach | Validate direction, plan your numbers | Fundraising and due diligence |
| Statements | Annual | Monthly + annual |
| Wizard | Vertical-specific guided steps | Deeper (SaaS has a focused six-step investment wizard; other verticals reuse their planning wizard with deeper outputs) |
| Outputs | Excel + Review / Health Score | Full Excel + Q&A Prep + Investor Memo + Rehearsal + History |
| Best for | Planning, alignment, quick validation | Fundraising, boards, due diligence |
A good rule of thumb: the Planning Model is for numbers you need to trust; the Investment Model is for numbers investors need to trust.
The outputs you'll get
- Excel financial model (download, all models) — formula-linked workbook. Planning: 11–12 sheets. SaaS Investment: 25 sheets with live scenario switching. Other Investment verticals: monthly statements plus the vertical driver model.
- Sanity Report & Health Score (in-app, Review tab) — benchmark, stage, and consistency checks with a 0–100 score.
- Q&A Prep (in-app, Investment Models) — likely investor questions with answers grounded in your model's numbers.
- Investor Memo (in-app, Investment Models) — Thesis, Assumptions, Unit Economics, Use of Funds, Milestones, and Downside.
- Rehearsal (in-app, Investment Models) — practise defending your numbers; graded against your real model with a fluency score.
Every Investment model also has a History tab tracking each version of your inputs over time. Parts 5 and 6 cover these in detail.