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3 Steps to a Powerful Financial Model

There aren't many people that enjoy sitting down to go through the process of developing a long-term economic model. Trying to get a three dimensional perspective of finances, while making sure that calculations are credible and compelling for prospective investors, is taxing to go through in depth.

It's the perceived complexity of these models that cause some companies to procrastinate in the face of developing one. But financial modelling is essential for any business seeking to optimise its growth over time.

This complexity, for the prepared, is an assumed one. With a strong understanding of these critical factors, any company can create a robust financial model to chart longer-term expectations and growth.

Knowing past strengths

It's important to remember that banks and investors use these financial models to assess your viability as a company. Past performances can and do equate to future success, especially for understanding your value. Ask yourself, what are your company's strengths within the market? What enabled its accomplishments in the past?

Knowing past expenses and markets

Pure, unadulterated profit may sound good on a Facebook page, but investors and banks need to know about the whole mechanism, not just the result. Planning smart, and taking into consideration the climate of the market, the number of staff in sales, marketing, and so on, is necessary for providing a clear view of your business' direction in the coming years.

Knowing your plotted course

With the steps taken to understand what made your business successful and what potential expenses would be, you'll be able to plan out the future direction of your business. This stage is where you take into account the earlier aspects and create milestones for quarterly profits, including target thresholds for development.

Having a meticulously calculated plan monthly and quarterly allows you to report deviations and change your approach to planning for what works best. If you would like to get in touch with us, please request a callback.

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