Do I really need a financial model? - Scott Geller

Scott Geller – The CFO Perspective

Episode: Do I really need a financial model? 

Date: January 25, 2020

IBGR.Network - PROFIT Radio. Everything a business owner needs to start, grow or exit a business. GROW WITH US.

INTRODUCTION

Show Objectives - The Why
Financial Modeling is the process conducted to create a financial representation of the entity. It is the process of creating a summary of a company’s expenses and earnings in the form of a spreadsheet that can be used to calculate the impact of a future event or decision. A financial model is the tool to create proactive strategies rather than making reactive adjustments. 


What You Need to Know - The What

1. A financial model is simply a tool that’s built in spreadsheet software such as MS Excel to forecast a business’ financial performance into the future.
2. Considerations
   1. Model purpose
   2. Granularity
   3. Flexibility
3. Purposes
   1. Custom Financial Statements outside of standard accounting SW
   2. Cash Flow Tracking and Forecasting
   3. Financial Forecasting
   4. Scenario Planning
   5. Raising Capital
   6. Making acquisitions
   7. Growing a business organically
   8. Valuing a business
   9. Financial statement analysis / ratio analysis
4. Sources
   1. DIY - training courses
   2. Download Free ... sometimes get what you pay for
      1. www.corporatefinanceinstitute.com
      2. Industry specific experts or consultants
   3. Purchase ... sometimes get what you pay for
   4. Leverage or hire someone - experience can go a long ways  

What You Need to Do - The How

1. Planning your needs
   1. Stop, Think, and Plan
   2. Begin with Financials and work back
   3. Historical results
   4. Driving Assumptions
   5. Data Input
   6. Future periods
   7. Sensitivity analysis and scenarios
2. 3 Statement model
   1. Income Statement
   2. Balance Sheet
   3. CF Statement
3. Structure 101
   1. x-axis serving as time
   2. y-axis serving as details
   3. Input - Revenue, assumptions,
   4. Detail Tabs - Expenses, historical actuals,
   5. Financials
   6. Summary or Reporting - Fed from Financials for investor, board, leadership, etc
   7. Metrics and Ratios - trending, inter dependencies, red flags
   8. Graphs and Tables
4. Formulas to accomplish more & Best Practices
   1. SUMIF
   2. VLOOKUP
   3. Error Checks
   4. Group Rows and Columns
   5. Simplicity and Transparency - Regardless of the quality of the calculations, if it looks complex or the model flow isn’t intuitive then expect immediate negative feedback. Transparency drives structure, complicated formulas should be avoided at all cost. A complicated formula can often be broken down into multiple cells and simplified.
   6. Avoid Linking Files
   7. Avoid Pivot Tables
5. Don't follow a model output blindly
   1. Stress test
   2. Gut test
   3. Reconcile to actual financials

(SAMPLE) Shows 

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Resources (optional):
You can connect with Scott via his website or LinkedIn
Connect on LinkedIn
See Scott’s Website

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