Everybody’s got a start-up idea these days. We’re sure you do too. But is it good enough to sustain in the market? Profitably? You probably think so. But picture this: You have thought up your venture idea, articulated it in a neat business plan and you are on your way to be a billionaire in just a few years. Sounds exciting, fun and cool, doesn’t it? Yes, it does. But in all the hustle-bustle of a great idea and impressive presentation, you missed out on creating a valuation model for your company to meet the expectations of the investors. Wondering how to work on that? Enquire now for an Executive Certificate Program in Financial & Valuation Modeling from Copal Amba – a Moody’s Analytics Company, and find out how it can benefit your business.
An Executive Certificate Program in Financial & Valuation Modeling is just the solution to all your problems. Here are 5 tips to stand out to your investors and knock them over with your flawless financial model.
- Cash is king.
Beginning Cash + Revenue – Expenses = Ending Cash is not enough for the investors because that is not the whole story. Along with a Balance Sheet and Statement of Cash Flows, factor in cash collections, money from various funds, and other working capital considerations. Customers may pay through different platforms. Carrying inventory on your balance sheet is important for companies who are looking for investments.
- Explain assumptions and make sure they tie to reality
A model that shows X% growth over time with no embedded correlation to sales/marketing is a huge red flag. A business with a direct sales model is likely to drive revenue growth based on the productivity of the sales team, with increasing targets over time. If assumptions improve with time, like lower costs for customer acquisition, better retention and higher profits, include a plan on how you will achieve such milestones with your model. A model that projects future revenues based on the actual sales pipeline, is even better.
- Bridge historical and projected data.
We often exclude anything that has happened in the past while reviewing an operational model that starts in “Month 1”. A successful model is one that starts with historical data and flows seamlessly into projected data. It allows a user to understand how your assumptions relate to reality.
- Include a sensitivity analysis.
It is not necessary for every model to have built-in multiple pre-set scenarios. However, it is useful to see how changing key assumptions affect the model outputs in real-time. Seeing this output directly on the assumptions tab discards the need to flip between tabs after tweaking an assumption.
- Output key metrics, not just financial statements.
Include an output of key metrics like acquisition costs, cohort retention, lifetime value, etc. in addition to summary financial statements. Presenting such outputs will make your business model seem financially sound in real-time.
Make sense of this all and much more. Learn about running a profitable business from a leading provider of offshore research and analytics services to global financial and corporate sectors. Enhance your skills in Financial Valuation & Modeling and build an exciting career in Finance.
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