So you started a successful business. And now you’re looking towards what the future holds for your company. You might have come across this small thing called Financial Modelling Services.
Hear me out, just take a built in tool to forecast your business’ financial performance for the future, make an abstract picture of your real world financial situation based on how your company’s performed before and how you assume the future is going to work out.
Sounds so simple doesn’t it? I’ll be honest, just writing that almost gave me a headache. But I’m going to give you a simple guide to the real reason we all came here for:
A Simple Guide to Financial Modelling
What is a financial model? Financial Modelling is a way to combine accounting, finance, and business metrics to create a realistic representation of your company in the future, and it’s usually done in Excel. Now:
5 Reasons Why Your Business Requires Financial Modelling
- It’s simple: If you use projections and models to make business decisions at an operating level in your company, you need financial modelling.
- If you need to make any decisions about making business acquisitions or assets, or even selling or divesting assets and business units, you would most probably (read: definitely) need a financial model.
- If your company is raising capital, issuing more shares or issuing debt, you need a financial model to accurately price those securities.
- Another use for a financial model is if your business is planning or forecasting for a merger, acquisition or divestiture (selling any subsidiary investments).
- Even to organically grow your business, and prioritising projects or markets to invest in, you need a forecast of your business’ future financial performance.
Now that you’ve come to the quick realisation that your business most definitely needs financial modelling, how do you go about incorporating it in your company?
That’s exactly what I’m coming to next. There’s 1) the simple, time-saving, cost effective way of using financial modelling services, and then there’s the 2) do it yourself method:
Here’s How to Build a Financial Model
The first thing you require is your company’s historical data, which is at least 3 years of input of financial statements into Excel. Next, you can reverse engineer the assumptions for that historical period through calculation of things like revenue, growth rate, gross margins, variable costs, turnover rates, fixed costs, AP days, inventory days, and so on.
RATIOS AND METRICS
Studying the past is key for what the future holds. Now, you can make assumptions for the future and build assumptions for ratios and metrics such as growth rate, gross margins, turnover rates, and, you know.
FORECAST THE FUTURE
These assumptions help make a financial model which forecasts the company’s future financial statements, typically for the next 3 to 5 years.
Now you can use this financial model to set a valuation for the company, most commonly done using the discounted cash flow analysis method, and conduct a host of additional analysis using the financial model through scenarios, charts, and thus plan for the future and make important financial decisions.
Now, how do you know your financial model is good?
What makes a good financial model is that it is simple enough for a layman to understand, and detailed enough to process intricate variables and forecast complex situations and scenarios.
And here is exactly where Financial Modelling Services come in. Using financial modelling services, you can save on time, and opportunity costs, and outsource the entire process to only focus on the forecast of your business outcomes so you can finalise your financial and investment strategies.
Here’s Who Provides Financial Modelling Services:
1) One of the main jobs of Investment Banking analysts and associates is to build financial models as investment banking is closely linked to mergers and acquisitions and thus requires financial modelling services.
But should we really trust financial models made by investment banks? Investment banking is notorious for cutting corners and crossing the line when it comes to financial models so they can decide on a “fair value” and deal price that’s favourable for them.
2) Equity Research analysts and associates use financial models and forecasts to figure out and recommend companies to invest in. However, equity research analysis is a declining industry, and new European market rules have caused some unintended consequences and instability.
3) Private Equity firms also use financial models to finalise the companies they want to acquire and the price they should pay for them. Similar to investment banks, these firms, these firms work more to ensure that a company’s valuation comes out closer to their negotiated deal price.
4) Credit Analysts require financial models to figure out how much capital they can lend to a company. And an unfavourable growth forecast might just cause them to charge more interest for their capital.
5) Outsourcing Companies such as, *ahem* GrowYourStaff provide leading financial modelling services and solutions to firms and companies worldwide so they can accurately forecast financial conclusions for their businesses.
Just Recently, GrowYourStaff provided a New York based growth capital firm with an exclusive remote financial analyst who helped create financial models solely for the firm, and in the interest of the firm.
The firm saved on recruiting, payroll, compliance, office space, you name it.
So You Want The Best Financial Modelling Services Tailored to your Needs
This is where we come in. It’s hard to find a company that provides comprehensive financial modelling services custom-made for the needs and requirements of your business, including offshore financial analysis consulting. Our firm provides:
FINANCIAL MODELLING: Hire our remote financial analyst who’ll help you create an abstract representation of your company’s growth, assess more business opportunities, raise capital, manage accounting, make acquisitions, and analyse other aspects of your business.
VIABILITY ANALYSIS: With every business opportunity, there comes a responsibility to undertake an in-depth financial feasibility study. Our remote team will help you find exactly all the data you need to analyse your opportunities and make an informed business decision.
VALUATION: Find out an accurate value of your investments using discounted cash flow modelling, something our analysts have years of experience in.
MERGERS AND ACQUISITIONS: Our analysts will provide accurate financial models and you’ll know how your company’s financial position is affected by corporate transactions such as mergers and acquisitions.
CAPITAL FORMATION: We can help with capital formation strategies and to find the best ways to gather money, the appropriate sources of capital, as well as the capital needed.
But hey, I can make my own Financial Models too.
And yes, yes you can. But it takes years of practice to learn financial analysis and to gain expertise at it, and you can only get better by making more and more financial models.
Sure, reading equity research reports and a company’s historical financial statements would probably help. Probably. Maybe make a flat line model for the future, but would it be better than the services provided by a leading financial modelling consulting firm? I don’t think so.
This is where we can help.
Our approach involves understanding your particular business model, looking at the key unique factors of the industry, assessing the strengths, weaknesses, operational and capital costs of the business, and creating a tailor-made financial model for your company. Using which you can forecast your company’s growth and make key business decisions.
Truth be told, it can be very beneficial to outsource financial modelling to a financial modelling service. You gain access to qualified professionals with years of financial analysis experience. You can hire them only when you need them, save on costs, and greatly enhance your financial and business decisions.