Do you have a financial model?

Around the world, it’s fair to say that right now is probably the most critical time for planning and optimisation that your business has ever had the bad luck to sail into. And it’s also true that in challenging times there are opportunities.

Planning is crucial — this we know. If you’re running an enterprise of some sort and haven’t already crashed out or folded, you’re probably pretty good at planning, or at employing people with those talents. Just getting off the ground is an exercise in planning, and so you probably deserve a pat on the back for all that you’ve done so far.

Image of part of an Excel spreadsheet containing a business financial model
Part of an Innokas financial model written in Microsoft Excel. Simple to use, with powerful potential.

However, conditions are, right now, not what we expected they’d be. It’s unlikely that you saw this coming, but it’s here now, and what we could really do with is a well-lit path through the downturn, leading us out the other side intact. This is where modelling comes in: they use the past to help us figure out the future. Good predictions make you adaptable, and that’s what we need to be right now.

Financial models are a vital planning tool: in short, they let you manipulate aspects of your cash flow or business conditions, and predict the effects on the bottom line. The predictions are simple, easy to trace, and are based on what we already know from the past performance of your business.

Depending on your business, your financial model could let you predict the effects on cash flow and the bottom line of changes in…

  • customer numbers
  • average spend per customer
  • purchases of individual items or categories of products
  • cost of critical inputs
  • site rents
  • number of staff hours

…and more. The value of a robust business modelling approach is that it stops you listening to convenient word salads based on nervous gut instinct. You might WANT to say “Sure, we could absorb a 15 percent hit in monthly subscriptions…” But could you? The numbers don’t lie. Maybe the number is 13 percent. Maybe it’s 21. Having a genuine answer is clearly of great value. The results of your financial model can also, with some analysis, reveal which parts of your cash flow are the most sensitive–where small changes create outsized differences in the bottom line.

Our mission here is to arm you with information, and a financial model is a fine weapon for tricky times. Contact us today to organise a simple-to-use, powerful Excel model custom-tailored for your business.