If you’ve ever pitched to investors or prepared for a board meeting, you’ve probably heard the term “3-statement model.” But what exactly is it, and why does everyone seem to want one?
The Three Statements
A 3-statement financial model connects three core financial statements:
- Income Statement (Profit & Loss) — Shows your revenue, expenses, and whether you’re making money
- Balance Sheet — Shows what you own (assets), what you owe (liabilities), and your equity
- Cash Flow Statement — Shows how cash moves in and out of your business
The magic happens when these three statements are linked together. Change your revenue assumptions, and it ripples through to your cash position. Hire more people, and you see the impact on both your P&L and your runway.
Why Investors Want One
Investors ask for 3-statement models because they reveal the full picture:
- Revenue projections alone don’t tell you if the business will run out of cash
- Profit doesn’t equal cash — you can be profitable on paper and still go bankrupt
- The balance sheet shows how you’re financing growth — debt, equity, or cash flow?
A well-built model shows you’ve thought through the mechanics of your business, not just the top-line growth story.
The Traditional Problem
Building a proper 3-statement model typically requires:
- Deep Excel expertise
- Understanding of accounting principles
- 20-40 hours of work (or $5,000-$15,000 for a consultant)
- Ongoing maintenance as assumptions change
Most founders don’t have this time or expertise. So they either skip it, build something incomplete, or pay too much for something they can’t maintain.
A Better Approach
What if you could build a 3-statement model by describing your business in plain terms?
Instead of wrestling with formulas, you define:
- Your revenue streams and how they grow
- Your cost structure and what drives it
- Your team and hiring plans
The model builds itself from these building blocks. All three statements stay connected automatically.
That’s what we built Profitual to do.
Getting Started
Whether you use Profitual or build your own model, the key is to start with the business logic, not the spreadsheet formulas. Understand your drivers first:
- What drives revenue? (Customers × Price? Units × ASP?)
- What costs scale with revenue? What’s fixed?
- When do you collect cash vs. when do you pay bills?
Once you understand these dynamics, the model becomes a tool for thinking, not just a document to hand over.
Ready to build your first 3-statement model? Start a free trial and see how Profitual makes it simple.