finance

name	finance
description	Startup financial management and analysis. Use when the user mentions financial modeling, SaaS metrics, unit economics, burn rate, runway, fundraising financials, investor reporting, cap table, dilution, cash management, budgeting, pricing analysis, revenue forecasting, or any startup finance topic. Also triggers on: CFO, MRR, ARR, CAC, LTV, churn rate, NRR, gross margin, burn multiple, Rule of 40, Magic Number, term sheet, valuation, FP&A, P&L, cash flow.
user-invocable	false

Finance

Strategic financial frameworks for startup CFOs and founders. Numbers-driven, decisions-focused. Not financial analysis for its own sake — models that drive decisions, fundraises that don't kill the company, board packages that earn trust.

Keywords

CFO, finance, financial model, burn rate, runway, unit economics, LTV, CAC, fundraising, Series A, Series B, term sheet, cap table, dilution, cash flow, board financials, FP&A, SaaS metrics, ARR, MRR, net dollar retention, gross margin, scenario planning, cash management, burn multiple, Rule of 40, Magic Number, ARPU, payback period, churn, revenue, P&L

Key Questions (Ask These First)

• What's your burn multiple? (Net burn ÷ Net new ARR. >2x is a problem.)
• If fundraising takes 6 months instead of 3, do you survive?
• Show me unit economics per cohort, not blended. (Blended hides deterioration.)
• What's your NDR? (>100% means you grow without signing a single new customer.)
• What are your decision triggers? (At what runway do you start cutting?)

Core Domains

1. Financial Modeling

Build bottoms-up models, not top-down fantasies.

Three-statement model: P&L → Balance Sheet → Cash Flow Headcount cost model: Loaded cost per role × hiring plan × timeline Revenue model: Customers × ARPU × retention × expansion

Projection principles:

• Bottom-up: # customers × ARPU, not "if we get 1% of TAM"
• Three scenarios: Bear / Base / Bull (with clear assumptions for each)
• Monthly granularity for first 18 months, quarterly after
• Every assumption must be labeled and justifiable

2. SaaS Metrics & Unit Economics

Revenue Metrics:

Metric	Formula	Healthy Benchmark
MRR	Sum of monthly recurring revenue	Growing MoM
ARR	MRR × 12	>2x YoY at Series A/B
ARPU	MRR / # customers	Stable or growing
MoM Growth	(This month - Last month) / Last month	>15% early stage
Net New MRR	New + Expansion - Contraction - Churn	Positive
Quick Ratio	(New + Expansion) / (Contraction + Churn)	>4 excellent, >2 good

Unit Economics:

Metric	Formula	Healthy Benchmark
CAC	Total S&M spend / New customers	Declining over time
LTV	ARPU × Gross Margin / Monthly Churn Rate	>3x CAC
LTV:CAC	LTV / CAC	>3:1
Payback Period	CAC / (ARPU × Gross Margin)	<12 months SaaS
Gross Margin	(Revenue - COGS) / Revenue	>70% SaaS

Retention Metrics:

Metric	Formula	Healthy Benchmark
Logo Churn	Customers lost / Starting customers	<5% monthly
Revenue Churn	MRR lost / Starting MRR	<3% monthly
Net Revenue Retention	(Start MRR + Expansion - Contraction - Churn) / Start MRR	>100% good, >120% great

Capital Efficiency:

Metric	Formula	Healthy Benchmark
Burn Rate	Monthly cash outflow	Track trend
Runway	Cash / Monthly Burn	>12 months
Burn Multiple	Net Burn / Net New ARR	<1.5x excellent, <2x good
Rule of 40	Revenue Growth % + Profit Margin %	>40%
Magic Number	(QoQ Revenue Change × 4) / Last Q S&M Spend	>1.0 efficient
Revenue per FTE	ARR / # employees	Track trend

3. Fundraising Finance

Valuation models:

• DCF (Discounted Cash Flow) — for later stage
• Revenue multiples — most common for SaaS
• Precedent transactions — comparable deals
• Venture method — target return backward calculation

Term sheet essentials:

• Valuation (pre-money vs post-money)
• Liquidation preference (1x non-participating is standard)
• Board composition and protective provisions
• Pro-rata rights and anti-dilution
• Option pool (negotiate pre-money inclusion)

Data room contents: See references/investor-reporting.md

4. Cash Management

Runway extension tactics (non-dilutive):

• Negotiate longer payment terms with vendors
• Collect revenue upfront (annual billing discounts)
• Cut discretionary spending (conferences, perks, unused tools)
• Defer non-essential hires
• Revenue-based financing or venture debt

Decision triggers:

• 12+ months runway: Business as usual
• 9-12 months: Start fundraising prep
• 6-9 months: Active fundraising, hiring freeze
• <6 months: Emergency mode — cut to extend

5. Business Health Diagnostic

Four dimensions to evaluate:

Growth & Retention: MRR growth, NRR, churn trends Unit Economics: CAC, LTV, payback, margins Capital Efficiency: Burn multiple, Rule of 40, Magic Number Strategic Position: Market share, competitive dynamics, PMF signals

Rate each: 🟢 Healthy | 🟡 Watch | 🔴 Action Required

Red Flags

• Burn multiple rising while growth slows
• Gross margin declining MoM
• NDR < 100% (revenue shrinks without new churn)
• Cash runway < 9 months with no fundraise in process
• LTV:CAC declining across successive cohorts
• Single customer > 20% of ARR (concentration risk)
• Blended metrics hiding per-cohort deterioration

Reference Files

• references/financial-modeling.md — Three-statement models, projections, budgeting
• references/saas-metrics.md — Complete SaaS metrics guide with calculations
• references/investor-reporting.md — Board financial packages, investor updates, data room

Scripts

• scripts/saas_metrics_calculator.py — Calculate all SaaS metrics from input data
• scripts/financial_model.py — Generate financial projections with scenarios