Why financial models can be mathematically correct and still be wrong.

A model can balance perfectly, every formula correct, every tab linked, every number tying out, and still be useless, because the assumptions behind it don't reflect how the business actually works.

This happens most often with growth assumptions. A model that assumes 15% month-over-month growth for three years isn't wrong arithmetically. It's wrong because almost no business sustains that rate for that long, and the model doesn't know that. It just does what it's told.

The same applies to cost assumptions. Models often understate how expensive it gets to scale a team, or assume customer acquisition costs stay flat as you exhaust your cheapest channels first. The math is fine. The story it's telling is not.

A good model isn't judged by whether it balances. It's judged by whether the assumptions inside it would survive someone who knows your market pushing back on them. That means grounding growth rates in what similar businesses have actually achieved, and testing cost assumptions against what you've already seen in your own numbers.

Before you trust a model, yours or anyone else's, ask what has to be true for these numbers to happen. If you can't defend the answer in a conversation, the model isn't ready, no matter how clean the spreadsheet looks.

Who wrote this

Shafneed is the founder of Simplify, a finance clarity and investment readiness practice working with founders across India. He writes about the questions founders bring before a decision, not after it.