Glenn Kelman’s Financial Model


After posting “Financial Models for Underachievers: Two Years of the Real Numbers of a Startup” about the two years of actual costs of Redfin, many people asked for a generic version of the financial model that Redfin used to project costs. Here it is! Redfin used this model over the past two years, but beyond the costs already disclosed, the numbers are all fictitious. Also, unlike last week, the values aren’t actual data-points but formulas and formats that calculate them.

Glenn’s point isn’t to make a statement one way or the other about Redfin’s business or to even give you a crystal ball for seeing whether you’ll succeed. A model, after all, doesn’t drive demand or serve customers; it only helps you count up the beans if you do. We’re posting this model because its basic structure might help other entrepreneurs who don’t know where to start.

Here’s what you’ll find in the model:

  • Earnings, capital expenses and cash balance summarized on a single page.

  • Ratios of revenue and profits to employees and program expenses.

  • Assumptions called out so investors can easily evaluate dependencies.

  • Assumption-driven formulas, so changes to the assumptions propagate through financial statements.

  • Unit economics isolated on a separate page: for Redfin, this is how much profit each real estate market can generate.

  • Charts of headcount growth, cash balance, earnings segmentation, revenue segmentation.

  • Hiring detail with headcount and salary sums for each department.

The model also contains a few Redfin-built, custom Excel functions:

  • Counting the number of employees in a department, by counting the number of times a department value like “Engineering” appears in a column.

  • Summing the salaries of employees in a department, by adding up salaries for each employee where the department value for that employee equals a value like “Engineering.”

  • Calculating how a Redfin market grows in revenue-capacity to reach maturity, and then grows more slowly thereafter.

  • Calculating the number of support personnel needed to accommodate demand, and when those support personnel start. This allows us to update the staffing projection automatically when we change demand assumptions.

To get the custom functions to accommodate changes in the assumptions, you will have to set Excel’s macro security to “Low” (Tools | Macro | Security | Low). The file does not contain any malicious macros.

By | 2016-10-24T14:18:14+00:00 October 14th, 2007|Categories: Entrepreneurship|16 Comments

About the Author:

Guy Kawasaki is the chief evangelist of Canva, an online graphic design tool. Formerly, he was an advisor to the Motorola business unit of Google and chief evangelist of Apple. He is also the author of The Art of Social Media, The Art of the Start, APE: Author, Publisher, Entrepreneur, Enchantment, and nine other books. Kawasaki has a BA from Stanford University and an MBA from UCLA as well as an honorary doctorate from Babson College.


  1. Doug October 15, 2007 at 3:56 am - Reply

    This is really great. While the document is still some specific for what Redfin wants to do – it is still very useful. Excellent post!

  2. Tom Haines October 15, 2007 at 7:42 am - Reply

    Thanks Glenn and Guy!

  3. Markus Zondler October 15, 2007 at 7:49 am - Reply

    Great Post. Thank you.

  4. Eric D October 15, 2007 at 8:06 am - Reply

    Thank you for sharing Glenn and Guy!

  5. jb October 15, 2007 at 8:38 am - Reply

    Thanks for the great info. This kind of openness really helps out the community!
    Just one request, though. It would be great if the “user input” fields were highlighted to distinguish them from the calculated and hard-coded fields.

  6. Aditya Kothadiya October 15, 2007 at 8:52 am - Reply

    This is awesome. It’s very helpful for first time entrepreneurs. Even though the document is not specific to one’s individual needs, it is the ultimate reference guide for new players to plan their business. Thanks Glen and Guy!

  7. Yury October 15, 2007 at 12:15 pm - Reply

    Awesome! Should go well with Powerset’s data center model:

  8. Bruce Badeau October 15, 2007 at 2:33 pm - Reply

    While it is nice to give away a model, I wonder where the Balance Sheet and Cash Flow Statements are… I have been modeling for nearly 20 years and these two components with beginning balances seperate the men from the boys… especially when the model always balances without a line of plugs… I invite readers to look at the features of a professional model – which unfortunately requires a professional driver… something not appreciated… but necessary… I think a well prepared model that does IPO pricing can easily be worth its weight in gold when the VC’s are negotiating and slicing equity away from you… mine does the liquidity event…
    Regards, Bruce Badeau and … for details

  9. Glenn Kelman October 15, 2007 at 5:22 pm - Reply

    Balance sheets and cash flow statements are important for monthly reporting but for the purposes of modeling how an early-stage company could grow it seemed sufficient to us to track only the cash balance and to amortize capital investments in the way we proposed here. The point of a model isn’t to prove your financial savvy or to speculate on the price of a public offering five years in the future. It’s to figure out, together with your investors, whether you have a real business. The best way to do that, at least for me, is to get the most important numbers all on one piece of paper, even if it means smooshing together numbers from the B/S onto what otherwise looks like a P&L.

  10. cjagers October 15, 2007 at 9:04 pm - Reply

    This is great. However, the hard part for me is using this info to make “the promise” to investors. Should the offer include compounded deferred dividends, how much? How do you use EBITDA to calculate future value, and gage how much ownership should be offered for investment.
    I have found these technical aspects calculating “value” much harder in raising money than developing a model. I would love to see a post on this.
    Love the blog Guy, thanks!

  11. Bipin October 16, 2007 at 1:59 am - Reply

    This is awesome.
    Are there any US specific formulae here which may not be applicable to other geographies? I am from India.
    Thanks Guy and Glen.

  12. Dan October 16, 2007 at 9:37 am - Reply

    Terrific post. Thanks Glenn. We are going to use this spreadsheet as well as tell everyone about RedFin. Keep disrupting the market. The consumers deserve more.

  13. alex October 17, 2007 at 11:36 am - Reply

    It’s great to have a real case to study and the lessons given by Glenn on the imperative to be extra-conservative in the assumptions is one I would echo. A few years back I was in a software business, where we saw quite a few of the points highlighted by Glenn in the 2-part post on this blog.
    I will however also go along with Bruce Badeau’s point about features one needs in a financial model. Obviously the balance to be found is between the intrinsic / theoretical value of a model and the requirement to have a sound basis for an intelligent business discussion with investors, partners, employees and sometimes also key customers.

  14. Aries October 21, 2007 at 9:16 am - Reply

    The xls is not working with 2.2

  15. Tercume October 21, 2007 at 3:44 pm - Reply

    nice article..

  16. Ian October 23, 2007 at 1:31 am - Reply

    It’s very interesting, but the problem with this type of thing is that people are prone to simply plugging numbers into a model without understanding what they mean and how they’re derived. My feeling is that it’s much more productive for someone to develop their own model that they can understand at a deep level.

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