Financial Services - Commercialization Support for Business Program

Province of Manitoba Operating Model Template


As you might imagine when investors, or government departments, meet with entrepreneurs and founding teams, funding needs are a common topic. When raising money, entrepreneurs should always be prepared to answer the question “How much money do you need, and how far will that get you?”  Very often, the answer is “We need $X dollars in funding to accomplish these goals: X, Y & Z.”  As an investor, either from the private or public sector, in your business, that is the answer we want to hear. Unfortunately, quite often when staff begins to dig into the “why” behind that answer, it becomes less clear and a lot of time is spent between staff and the management team getting to the right answer. Too often, the number is much higher or lower than the original “$X million” answer.

Our staff and private sector investors understand that as entrepreneurs, you have a lot going on – building your product, hiring an “A” team, signing up new customers, raising money, etc.  Many times, building a financial model to forecast operating expenses and cash needs gets pushed further down the list, especially if you do not have a financial background. This creates a problem when investors begin to look into the detail behind the numbers and expenses during diligence.  Not having a solid operating model in place delays diligence time as investors attempt to get a handle on the cash needs.  This can be crucial time for a cash strapped company. 

The Province of Manitoba’s “Operating Model Template”, based on the original produced by venture firm S3 Ventures of Austin, Texas, is a free resource we hope will help entrepreneurs accomplish two goals:

  1. Better understand their business and the expenses involved to get cash flow positive
  2. Streamline the diligence process during fundraising, saving valuable time

The Province hopes entrepreneurs will be able to utilize this tool to get an accurate, granular view of their business expenses, revenue model, and overall cash needs of the business.  We attempted to make it simple, although it is more applicable to companies engaged in: Enterprise License Software, Software as a Service (SaaS), and Medical Device companies (selectable in a drop-down menu in the ‘Income Statement’ tab).  The model generates Balance Sheet and Cash Flow statements with very few inputs.   It does not include capital expenses (or the depreciation associated with them) or inventory management.

Download the blank Operating Model Template (Excel spreadsheet).

Below are some notes to help you as you use this model:

  • All inputs (business drivers) are in blue and shaded; everything else will auto-populate.
  • Start with the staffing tab and then work through the departments.  As most of the cost of software and medical device businesses is people, the timing and level of hires will be the largest cost drivers in the business.
  • In each department, the model attempts to capture the typical cost buckets for most startups.  If you have other cost categories or line items, you can add rows or drop them into the blank rows.
  •  The revenue and cost of goods in the incomes statement comes from only one of the following tabs: ‘SaaS Revenue’ or ’Enterprise License’ and ‘Medical Device’. Please pick the revenue model that best matches your business from the drop down menu in the ‘Income Statement’ tab.
  • While we attempted to provide a template for some basic revenue models (ELA & SaaS & Medical Device), the revenue drivers in your business will likely be different than the simplified view we have used in this model.  Please add tabs as you see fit and link them either to the existing revenue tabs or directly into the ‘Income Statement’ tab. It is important to understand the real business drivers of revenue for your company and incorporate those into this model.
  • Equity investments are an input in the Cash Flow statement
  • Most investors look at a handful of metrics that are remarkably consistent across the companies they invest in. If you are out of these ranges, you may want to revisit your estimates.
    • For enterprise software and SaaS companies:
      • Total operational expense divided by headcount usually lands at around $15k/head/month +/- $2k.  This variability comes from the type of workforce you have (local vs. offshore, very experienced vs. entry level, etc.).
      • Salaries and Wages are 60%-75% of total operational expense.
      • Gross margins are 90%+.
    • For medical device companies:
      • There are more variances in operational expenses than for software companies, especially depending on necessity of trials, FDA/HPB path, manufacturing process, R&D requirements, etc.
      • If the business is a “razor and razor blade model,” consumable gross margins are 80%+ while the durable device gross margins are usually somewhat lower.
      • Gross margins on medical devices without a consumable component vary from 50%-90%+.

The Province of Manitoba hopes this model helps you with your business, but we know it is not perfect.  If you have suggestions on improving the model or other feedback, please email us at adam.munia@gov.mb.ca

For support under the Commercialization Support for Business Program, please submit your application through our website.

A special thanks to S3 Ventures for creating the original version of these spreadsheets.

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