Whilst some think of financial projections as an inaccurate collection of numbers that have no weighting in reality, having a strong financial model could be the difference between obtaining investment or not. A solid financial model should act as your roadmap. If you’re able to confidently put your model in front of an investor, and for it be able to answer their questions about the scalability of your business (without you necessarily being in the room!), it could have a big impact.
One of the key pieces of advice we give regarding financial modelling is not to reinvent the wheel; we can provide a bespoke, clear, concise model, that seeks to simplify things for you.
A financial model can be utilised to devise an effective financial statement that reflects the finances and operations of a company. The most widely used form of a financial model is known as the ‘3-Statement Model’. It provides you with an income statement, a balance sheet, and a cash flow statement as well as an accurate set of assumptions. At Raising Partners our bespoke financial modelling service delivers just that.
So why is having a financial model so important?
It can give you clarity on your thinking about your business
As part of building a model, it is necessary to write down all of your assumptions about the business that might have otherwise been floating around in your mind. As an example, what you’ll realistically be able to charge for your product / service in order to cover your overheads. What that number ends up being will have a huge impact on your company’s growth.
It can be brought into high level meetings
Financial models should play a key role in all of the major discussions you have to make about your business with your key stakeholders. A comprehensive financial model should have within it a number of different pieces that are relevant to different conversations within your company.
It can inform smaller day-to-day decisions too
In some cases – whether internally with your team or externally with investors – conversations will need to be high level and in other instances you will need to be more granular. If you have taken the time to thoughtfully prepare your assumptions around the future of your business, your day-to-day conversations will be more productive and you give yourself an advantage in the ongoing negotiations related to talent and capital.
It can (and should) help inform your hiring decisions
The interplay between your revenue growth, your current burn rate, and the amount of money you have in the bank are an important guide when putting together a hiring plan.
A financial model will identify when you need to raise capital
Finally once you have a completed financial model, you can clearly see the capital required to realise your business strategy and how long it will take to start getting a return from your investment. You can then decide whether to fund growth out of operations or raising investment.
Whether you’re raising equity investment, applying for a loan or simply planning your business’s future growth, you’ll need a professional financial model that not only adds up, but is also easy for you to understand and explain.
We know numbers aren’t everyone’s bag, but thankfully we’ve for you covered. Our bespoke financial modelling service will provide you with a 5 year financial forecast including income statements, cashflow and balance sheet. We’ll work with you every step of the way from integrating with your accountancy software to forecasting your numbers and training.