Your financial model is one of the most scrutinised documents in any funding process. Investors will pull it apart – testing your assumptions, questioning your growth logic, and looking for signs that you really understand how your business works. A polished pitch deck can open doors, but a flawed financial model will close them just as fast.

The good news? Most of the mistakes we see are fixable. The bad news is that they’re also surprisingly common, even among founders who are otherwise well-prepared. Here are the five red flags that come up most often – and what to do about each one.

1. Hockey Stick Growth With No Explanation

You’ve seen the chart. Revenue flatlines for a year, then suddenly shoots upward. Investors have seen it too – thousands of times. The hockey stick isn’t inherently a problem; most startups do go through an inflection point. The problem is when there’s no underlying logic to explain why it happens when it does.

If your model shows revenue tripling in Month 9, investors will ask what changes in Month 9. If the answer is “we’ll have more sales reps” or “marketing will kick in”, that’s not enough. You need to show the specific drivers: how many reps, what quota assumptions, what conversion rate, what deal size. The more precisely you can explain the mechanics behind your growth, the more credible you become.

2. Assumptions That Don’t Survive Scrutiny

Every model is built on assumptions. The question is whether yours are defensible. We regularly see models built on optimistic churn rates with no comparable benchmark to support them, or CAC figures based on best-case scenarios rather than actual data.

Investors will test your assumptions. They’ll ask where your numbers come from and whether they’re grounded in real performance data, industry benchmarks, or comparable companies. If the honest answer is “we just thought it sounded reasonable”, you’ve got a problem. Every material assumption in your model should have a clear, articulable source.

3. Missing or Muddled Unit Economics

Unit economics are the foundation of a scalable business model. If your financial model doesn’t clearly show your CAC, LTV, gross margin per customer and payback period, investors will notice immediately. Worse, if these figures are buried, inconsistently calculated, or contradict each other across different tabs in your spreadsheet, it signals a lack of financial rigour.

We’ve seen models where the unit economics on page 2 of the deck don’t reconcile with the revenue build in the model itself. That kind of inconsistency is difficult to recover from in a room full of experienced investors.

4. Ignoring Your Burn and Runway

A surprisingly common oversight: founders build a revenue model without properly accounting for what it actually costs to achieve it. Headcount is often the biggest one – hiring plans that don’t flow through to the cost base, or salary assumptions that are unrealistically low for the UK market.

Investors want to see that you know exactly how much cash you’ll consume before you hit your next milestone, and that you’ve planned around that responsibly. A model that shows 18 months of runway on paper but doesn’t account for hiring costs, software licences or office space isn’t a financial model – it’s wishful thinking.

5. No Scenario Planning

The best financial models aren’t single-point forecasts. They include a base case, an upside case and – crucially – a downside case. Investors know the world is uncertain. What they want to see is that you’ve thought about what happens if things don’t go to plan.

A downside scenario doesn’t make you look pessimistic. It makes you look like someone who is managing a real business with real risks, which is exactly the kind of founder investors want to back. If your model only shows the bull case, it raises questions about whether you’ve genuinely stress-tested your assumptions.

Disclaimer: This article is general in nature and does not constitute financial advice. Financial modelling requirements vary by business and funding stage – speak to a qualified advisor about your specific situation.