Financial Modelling

Financial Modelling is as much an art as it is a science. Creating a strong model requires deep dive analysis to identify critical variables that can be transformed into a growth story. The keys to the future are contained in the data of the past. The model is the mere financial output of an analytically rigorous exercise. A successful financial model frames growth clearly through the prism of sales momentum through new customers, products and markets. All strong financial models are based on historically grounded financial information. The model should objectively tell the growth story of the company in both a bottoms up and a top-down way. The intersectionality of macro and micro assumptions reinforces credibility and builds a strong financial argument for growth. Financial modelling projects can be used in the following situations:

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Building Credibility with Lenders Through Strategic Financial Modelling

Financial modelling is the primary vehicle of financial expression in the lender market. A confidential information memorandum combined with a strong model is needed to be seen as credible by the lender. The mapping of business metrics and units of measurements to the assumptions in the financial model is important. The model should contain a financial metric framework that educates the lender on the compelling aspects of your product and customer economics. Telling the growth story through product lines, customers, volume growth and margin growth shows a coherent operational approach that will catch the attention of the lender.

Frequently Asked Question

1. Is an annual financial model sufficient or should it be done on a monthly basis?

For the first two years, a monthly or quarterly model should be used. For the outer years, an annual model should be used.

2. Should I use the account map format of my general ledger for the financial modelling?

It depends on how detailed it is. It is better to use a more aggregated account map than very detailed one.

3. My CFO is not good at projections so who should I use to create this model?

You should have your investment banker create the model. They know the best format, assumptions and performance cases to use.

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Attract Capital is a highly skilled creator of financial modelling. The thought process behind the modelling provides tremendous insight to our clients as to their condition, growth strategy and resource needs.

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