Why build a financial model?
The financial model doesn't matter; the thought process does.

Why?

To start, financial models are always wrong. But it’s important to create one anyway. I have created, modified, and delivered hundreds of custom financial models in Excel for a range of clients over the past decade, and learned a lot about how to create and use financial models in decision-making.

Creating a financial model forces an entrepreneur to outline very specifically how a business “works”: how a company creates their products, how users and customers find and use their products and how those processes create revenues and costs. The result, a set of operational metrics, financial statements and the “equation of the business”, is one view of a potential reality of the business. While any one view is inevitably wrong, by digging deeper and analyzing the key drivers and testing a range of assumptions an entrepreneur can create multiple views to help make crucial product design, marketing, organizational and strategy decisions.

Instead of focusing on the bottom line profit and net income, focus on the assumptions and key drivers of the business. Developing a financial model creates the type of thought and data that helps entrepreneurs figure out what they are betting on and how likely their bets will pay off.

Sounds hard? Financial models are easier than you think.

Resources for Business and Financial Modeling

Financial Model Excel Templates

Best Practices and Guidelines

User Acquisition, Lifetime Value, Cohort Analysis, Analytics

Revenue Models and Forecasts

Fundrasing

Pitch Decks

Background Information

Learn how to build a financial model.

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