Financial Modeling – Top Down or Bottom Up?

Ryan Nash
Ryan Nash , COO , Gust INC
11 Apr 2024

Welcome to a fresh perspective on your startup’s journey from Mission Control–a new entrepreneur support network from Gust. Periodically, we’ll share insights from the program to help you navigate your own startup journey.

Today, we’re talking financial models and projections; specifically, the perspectives you need to be  considering to build something accurate for operations and compelling for fundraising.

Key Takeaway

There are two common ways to build financial models and projections: top-down and bottom-up. Top-down risks setting unrealistic expectations while bottom-up can fail to showcase the big opportunity. You’ll need to balance both to build an optimal model for operations and fundraising: top-down to sketch the big picture, bottoms up to detail how you get there.

The Details

Top-down involves starting from a top-line target like market size estimations or revenue benchmarks and driving downward toward specifics. For example if we acquire 10% of a $1B market we’ll have $100MM revenue; if we charge customers $10k / year, that implies 10k customers.

Bottom-up involves starting with specifics you know or hypothesize and using assumptions on growth to build up from there. For example, we’re driving 10 customers per month through channel partnerships, if we increase our channel partner count by 3x we’ll have 20 more customers and thus X more revenue.

Which is better? Well…both! Use top-down to align your model with the expectations of potential growth for your business. Can it grow big enough to justify the funding you intend to pursue? Use bottom-up to make sure each business line and go-to-market strategy can feasibly work toward the audacious top-down goal. If your top-down and bottom-up analysis are an order of magnitude apart, you’ve got work to do!

Navigating with Mission Control

A few weeks ago 27 Mission Control startups joined the team from Gust and our partners at Forecastr for a live, virtual review of 2 financial models from real startups in the program—one top-down, one bottom-up—and gave tactical advice on how to apply the opposite perspective to improve the model for operational and aspirational use. Check out how in this short video:


Check out Gust's Mission Control- a support network for serious founders.

This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.