Why you must build a financial model

You cannot hope to run a successful business if you don’t know what needs doing to reach a certain level of sales. What if trading conditions change or prices are forced down? What will be the impact on your business? Build a model in a spreadsheet, even a really basic one, and refer to it often, especially when you need to make a decision.

Make sure your model does not turn into a “nice dream”, but is a tool you can use every week to enter your actuals and track how you’re going. That way you’ll quickly learn whether your forecast is merely a dream or has real legs.

As a matter of housekeeping save a new copy of your model at least every month, so you can track back as your model (and your business) evolves.

A financial model is one of the most important building blocks when starting out, or when your tuning up your business.