I am currently looking for funding for my startup - $1.5 million worth. As part of this process we put together a detailed financial model of the business including: financial assumptions we were making (as to sales prices and costs etc), schedules, financial statements for three years, startup costs and cap table.
It was a lot of work but worth it for several reasons:
- We now have a very good understanding of how the numbers work, what the pricing structure is and what the critical milestones are for the business to hit. We understand our margins and how changes in those will affect our profitability.
- We have made the business model leaner and less capital intensive
- We were able to use scenario analysis to work out what our key vulnerabilities are and what the impact would be to the business if some of our key assumptions changed. Most importantly we have found ways to mitigate these risks.
- We have justified every number in the model so have confidence that the business will become profitable
- When investors ask us questions about any of these we have intelligent answers that we can justify with data.
- We can make a decision about our valuation which is reasonable and can be justified (to some extent).
And several times I have had investors sit down and want to go through the financial model and assumptions in detail (at the first meeting) to check that I know my stuff.
So in your case, if you are asking for 'a lot', I don't think a budget will cut it. If you were applying to an incubator and asking for up to $50,000, you could probably get away with that with some of them as they don't necessarily expect you to have a lot of financial skills.
However if you are applying to a VC or angel, I wouldn't go in with doing a full financial model - otherwise I think you would just come out of interviews with egg on your face.