Financial Model Assumptions Documenter

A financial model is only as trustworthy as its assumptions, and most models hide them inside formulas where no one can check them. This skill documents the assumptions, drivers, and logic behind a model in plain language, so investors, partners, and future-you can understand it, challenge it, and trust it. Undocumented models get dismissed; documented ones get funded.

1. The model's purpose and what it projects.
2. The key drivers and the assumptions behind them (growth rates, conversion, pricing, costs, timing).
3. The basis for each assumption (historical data, benchmark, judgment).
4. The time horizon and structure.

1. State the purpose and structure

What the model is for and how it is built (the main sections and how they connect), so a reader can navigate it.

2. Document each key assumption with its basis

For every material driver: the assumption, the value, and where it comes from (actuals, market benchmark, or informed judgment). An assumption with a stated basis can be evaluated; one without is just a guess. Label judgment calls honestly.

3. Separate drivers from outputs

Make clear which inputs drive the model and which figures are calculated results, so a reader knows what to change to test scenarios.

4. Flag the sensitive assumptions

Identify the few assumptions the outcome is most sensitive to, since those deserve the most scrutiny and are where a reader should push.

5. Note the limitations

What the model does not account for and where it is most uncertain, stated plainly. Acknowledging limits builds credibility rather than undermining it.

ALWAYS use:

# Model Assumptions: [Model Name]
## Purpose and structure
## Key drivers and assumptions (assumption | value | basis: actual/benchmark/judgment)
## Drivers vs calculated outputs
## Most sensitive assumptions (where the outcome hinges)
## Limitations and areas of uncertainty
## Change log note (for future updates)

• Assumptions with no stated basis.
• Hiding judgment calls as if they were facts.
• Not distinguishing inputs from outputs.
• Claiming precision the model does not have.

This documents the user's model and assumptions; it is not financial advice, a projection endorsement, or assurance the model is correct. Never invent assumptions or their basis. The user owns the accuracy of the model.

An assumptions memo documents a SaaS model's growth, churn, and CAC assumptions with each basis labeled, flags churn and conversion as the most sensitive drivers, and states plainly that the model excludes any downturn scenario.