Models Models Models
As a business owner, when talking about models, you are talking about a Financial Model. The type of financial model that shows you where your business is going to be in five years time. The type of financial model that helps you raise capital (also read, Funding Your Dreams).
Enabling Decision Making
A Dynamic Tool
A Financial Model isn’t static either. It changes with the business, with moving markets and with new products and customers. It should be continuously updated. This also helps the entrepreneur to assess whether their forecast became reality (and if it was vastly different, to understand where the error in the modelling process is).
Cash is King
Most importantly for an entrepreneur, a Financial Model shows actual CASH FLOW. Cash is King, and a business can only survive on actual cash flow (not cash which may or may not materialize in a few months time). An entrepreneur needs to ensure that their cash is always sufficient to pay suppliers, staff and their expenses (plus a salary), and of course any debt. Many a business has failed by not ensuring there is sufficient cash in the business. Don’t fall into this trap!
Learn to Model… in Excel
Good luck and happy financial modelling!
Now read all about forecasting in financial models.