Are you into business? Looking ways to grow or expand? Or, are you a start-up aiming to start the business of your choice and dreaming to achieve success at it? well, then you have just clicked on the right page!
Every business needs to have a financial model, no matter what the size and industry is! a financial goal and objective can be realized by having a model in place, that will talk about what amount of business is expected to come, and what should we do to increase and also how much of debt the company faces or is expected! So, all this info is important in realizing the goals.
Financial modeling as the name says, it’s creating a working model, that revolves around finance, but in a way that leads to the betterment of the organization. here is a way to build your mode, if you are planning to get into a start-up; or even planning to expand the existing one.
Past results and assumptions:
You can start your financial modeling by assessing the organization’s previous results if any. Basically, you can start by getting the financial records of the past and comparing the year on year rise, growth, and shortfalls that the company faced. With this, you can calculate what are the fixed costs and commitments needed by the company, and what is the variables.
Balance and income sheet:
With analyzing the income for the company, you can start creating the balance sheet. with the income component being known, you should be able to analyze the expenses, the interest rate for any debt and the annual percentage growth rate. Creating the balance sheet enables you to see the final profits available if any and also the losses incurred if any.
Structure the cash flow:
Cash is essential to run a business, and hence giving it a structure to analyze and regulate is needed. So, build this statement and check the working capital, need for further cash help through debts and equities and arrange accordingly.
Do the business valuation:
Once you are done with cash flow structure, you need to get into the valuation of your business. Know where you stand with a comparison to your peers and in the industry. To get into equity capital, you need to know your valuation first, the reputation of the company is to be gauged. So, perform all these works and get a valuation of everything included.
Make charts and graphs:
The best way to represent something financially is through graphs and charts. So, represent your financial model and results in charts and see where you stand.
Get into auditing the model:
Check if the model works by doing some tests and scenarios given.