Financial modelling – why it’s important
Listen to Octopus Ventures investor, Edward Keelan, talk about financial modelling as a tool for planning and building your business. You’ll pick up some tips on making sure that your financial model is as useful as possible – even if it turns out to be wrong…
Tips for building your financial model:
- For early stage founders, the instinct is often to get creative first with a pitch deck, then think about the numbers later. But getting a good financial model together early will help you find clarity and understand what you’re going to do with the money you make.
- Think of your financial model in three layers: assumptions, then calculations, then outputs. Centralise your assumptions, such as price of product and staff costs. Then build a calculations page and be as granular as possible. Next, build your output tabs, which can be lifted out and into your pitch deck.
- There are tons of resources online that offer good starting points for financial models, but be sure to personalise yours: nothing beats a bespoke approach.
- Ultimately, the financial model will be the lodestar for your business. It should be something you live and breathe so own it – and make sure you understand how it all works.