Starting and operating a business can be a daunting task. Given the knowledge required of branding to website development to legal, tax, and accounting considerations to getting the right operational processes and team in place, a casino starts to seem like a more appealing alternative for making sound financial decisions.
Now if that casino had Microsoft Excel, you’d be right.
By leveraging the financial modeling capabilities and visualizations provided by Microsoft Excel, you can better understand how and when it’s beneficial to implement business decisions. Take for example the following inquiries:
- What’s the most advantageous way to structure my business from a tax and cash flow standpoint?
- How many months until my business starts earning a profit?
- What sort of budget can I expect to have for product research, marketing, hiring, and/or the deployment of new operational processes?
- How will the variability/unpredictability of cash flows affect the liquidity requirements of my business?
- Given cash flow unpredictability, what’s the worst case scenario and will my business be able to withstand it?
- How sensitive is my business to changes in the economic/industry environment, pricing, or costs?
- What’s the optimal pricing and cost structure to ensure my business is optimizing income?
- How much external funding will my business require to get up and running?
- Is it beneficial for my business to pay down outstanding debt or re-invest in growth opportunities?
Setting up a financial model in Microsoft Excel will allow you to answer these questions. With answers to these questions, you’ll be better informed about the viability, risk, and expectations of your business. You’ll also be able to visualize how each component fits together to make the right business decisions efficiently and with conviction.
So How Do I Build A Well-Crafted Financial Model in Excel?
A well-crafted financial model in Excel will have three main components, as follows:
- A Defined Place to Enter Inputs and Business Assumptions
Having a defined place to organize, enter, and modify inputs allows you to locate and make adjustments to relevant variables quickly. The more defined and organized this place is, the less time you’ll spend flipping between tabs and scrolling through cells to make changes and view the results of those changes.
- Calculation Worksheets and Logic
Where it’s determining how a change in price will affect your business net income, understanding the tax implications of a business decision, or projecting cash flows into the future, each financial model needs a place for calculation logic. With worksheets dedicated solely to calculations and formulas linked to the inputs, you’ll require minimal interaction with these calculation worksheets after the initial set up of logic. This separation of calculations from inputs significantly reduces the risk of inadvertent changes to your model.
The more data and calculation intensive a model is, the more difficult it can become to grasp how metrics are affected by changes in inputs and logic. Visualizations not only assist with understanding your data and keeping track of important metrics, but can also be leveraged to present key information to colleagues, investors, or clients.
Contact Us For A Free Consultation
Using financial modeling and visualization capabilities within Microsoft Excel can provide you with the framework and tools you need to optimize your business decisions. No longer do you have to feel like putting cash in a slot machine will give you a better chance at success. To understand how we can help, schedule a free consultation with our team by calling 1-800-682-0882 or visit our website at ExcelHelp.com to submit an inquiry online.