Draw Your Business

The first step to building a good financial model has nothing to do with spreadsheets.

Want to build a model?

Good.

Now, close Excel, and open up Word.

(Or GoogleDocs, or Notepad, or Notion, or a literal pen and paper, or whatever you use to take notes).

Set aside a half-hour or so and answer these questions:

• What is your company's value proposition to customers?

• How do/will you make money (revenue)? How will this change over time?

• What are/will be your variable and fixed costs? How will these change over time?

• Will you need to separately consider vastly different types of:

  • Customers?

  • Products?

  • Channels?

  • Suppliers?

  • Locations?

• What 3 metrics are most important to track in your business? (best guess if you don’t already know)

When complete, you’ll have in front of you the first step to creating a great model:

The building blocks of your business.

A list of all the factors at play,

In terms and units that make sense to YOU.

And now that you know all the variables,

All we have to do

Is figure out how to connect them

With math.

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