The nuances of building a financial model | Предприниматель

The nuances of building a financial model

The time when you could go to the investor with a descriptive business plan for fifty pages, has passed. Development Bank, in a moment so tired of these documents, which posted on its website its demands to the business plan and financial model. Now the detailed financial information – an important part of any business plan. But many entrepreneurs doing business for years, the fact that the financial model must be created in the format of Microsoft Excel, still baffled. At the request of Forbes Dmitry Kovalev , senior manager of corporate finance PricewaterhouseCoopers , identified a number of nuances to keep in mind when building financial models and writing a business plan.

  1. Banks prefer to have the financial model presented three predicted forms- the forecast balance sheet, profit and loss forecast, the forecast statement of cash flows. If your business plan, one of the predictions is not likely to have to redo.
  2. forecast should be made at least the entire payback period. Tables in the business plan is better cause a breakdown, which will be retained for all calculations (eg, quarterly).
  3. bankers have more confidence in estimates of revenue, which are supported by qualitative marketing research , as well as letters or preliminary agreements with potential buyerson company letterhead, indicating the purchase amount (copies is given in the Appendix). If no such arrangements and illiquid products, specifically, is your prediction for the proceeds will be a big question. The same is forecast to cost. It is better to attach a letter of preliminary agreements with suppliers.
  4. Monoproizvodstva rare, usually items (drivers) more revenue. Need a good understanding of their product range and expect forecast revenue for each of the products, giving the total amount of output. For example, a business center rents not only offices, but also space for shops, cafes and storage space. Rental rates on all of these categories are different. The same can be said about almost any business, be it a refinery or retail store.
  5. need to understand the nuances of pricingin a market where you are going to work. If it refers to hotels, the business plan can not be provided for 100 percent load, no one would believe it. It is better to split the download in different categories of rooms (suites, it can be 10%, and the usual numbers – 70%). It is also worth considering that the rooms you will sell to corporate discounts, etc.
  6. Most are calculated three scenarios(scenario analysis), business development and prepared the base, optimistic and pessimistic forecasts. Sometimes, to calculate the revenue forecast used sensitivity analysis or probabilistic methods, such as the method of Monte Carlo simulation.
  7. In case of any possible occurrence of any specific project risks banks are welcome, if the business plan covers the topic and listed tools to help the company hedge its risks.
  8. basic requirements for costing – reasonable detail, realism and attention to operating and capital expenditure, which must be calculated for the entire forecast period. If you’re planning a long-term growth in check, as to whether this power. Otherwise, the bankers immediately ask you, where CAPEX to expand production.
  9. calculations cash flowsto reflect the operating cash flow (how much money has come from customers as it took to supplier invoices), investment (what is spent on acquiring new assets or plan to gain from the sale of existing ) and financial (the body of credit, dividends, capital increase).
  10. the calculation of operating cash flow should be taken into account the turnover of goods, delay / difference in getting the money from customers as well as possible delays in its own – an entrepreneur needs to know from previous experience or from an analysis of competitors’ activities. Tax settlements should be done very carefully.
  11. residue, which is obtained at the end of the year in the forecast cash flows must correspond to what is stated in the article in the forecast balance sheet. If they do not converge, it is disturbing. When you check your own financial model on several occasions it is desirable to ensure proper functioning of the model, substituting the various assumptions and verifying it, that assets are liabilities, not having a negative cash balance in line, etc.
  12. No hidden sheets in Excel, the remnants of settlement in the fields should not be. If the three-year CAPEX figure 5 rubles, and in 2013 suddenly from a factor 1.1 is taken, it is necessary to explain that the planned scheduled maintenance. All entered into the model assumptions should be listed on the sheets assumptions , so that bankers can use their own assumptions when testing the financial model, and their numbers and verify the model itself.
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