Map your Business Math
Let's face it:
Financial models can get confusing
There are a lot of inputs and a lot of outputs
They can involve multiple sheets, rows, columns, and complex formulas
That's why, during every financial modeling course I teach,
I make an unconventional recommendation:
Don't start in Excel;
Start with a pen and paper.
And before you come after me with, "Wooohhkay Boomer",
Hear my out:
Most financial models generally calculate the same foundational equation.
It's this:
Revenues - Costs = Profit
So, to begin creating your model, all you need to do is ask yourself
How do I calculate Revenues for my business?
How do I calculate Costs for my business?
You might find that Revenues =
Average cart size x * Customers
or
Dealflow on my marketplace * % Take rate
or
Average monthly subscription price * # subscribers - churn
Once you figure that out, circle any of the factors in your equation that won't be easy to estimate
And figure out how you'll calculate those too.
For example:
Average cart size x * Customers
Customers = # Leads * Conversion rate
# Leads = $ spent on google ads / cost per click
Whatever your unique math is, it'll be easier to figure out breaking things down on paper
Than it will be if you ALSO have to worry about
A complicated Excel workbook.
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