Although financials are usually at the end of a business model, it is one of the most important parts of the plan. At its most basic, financials help you determine whether your business idea is viable or scalable. It is also the section that investors focus on, and if there are too many gaps or questions, they will quickly end the meeting.
In my opinion, the most important and hardest part of solid financial forecasting is the cash flow projection or forecast model. It is all too easy to inflate numbers based on high hopes and expectations. My job is to bring you down to reality. I believe it is usually better to underestimate income and overestimate expenses.
The following are the high-level steps I take when doing a project like this:
1. Ensure that I understand the business / idea in full. I do this because I want to find expenses and income where they might not be obvious.
2. Collect existing financial data including business and operating expenses, assets, liabilities, equity, etc. If working with a start-up, I move to the budget.
3. Create a budget that will be used for the cash flow/forecast model.
4. Create multiple scenarios to test the model
5. Deliver cash flow/forecast model, income statement, balance sheet, and any other relevant documentation or information needed to complete the project.
The final document will also include any assumptions, decisions, and other relevant details to support the deliverable.
In my Guru portfolio, you will see a pdf of a very complicated modeling spreadsheet. Unfortunately, this site wouldn't let me upload it as a spreadsheet, so you can't see where the magic happens. But trust me, it's there.
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