4 Helpful Tips When Using Financial Modeling to Create Financial Projections for your Business Plan

1. 4 Helpful Tips When Using Financial Modeling to Create Financial Projections for your Business Plan Financial modeling is almost always used to create the financial projections of your business plan. Financial models are typically created in Excel or Google Sheets. These programs give them the flexibility to incorporate necessary formulas and continuously augment the inputs. Financial Modeling can feel overwhelming if you are not a finance person or familiar with spreadsheet software. These tips can help you create models that are easy to establish, use, and will be easy to explain to others. · · Detailed Labels When you begin creating financial models, especially if you are the only using them, there is a tendency not to waste time on labels. After all, you understand it, right? However, your financial modeling will quickly expand and it’s easy to lose track of what various cells, columns, and formulas were meant for or calculating. Label everything in as much detail as necessary to eliminate issues

2. down the road. Later on, once the Financial Projections of your Business Plan are presented, it may raise questions about your financial modeling techniques. It will be much easier to address if the financial models are clearly labeled. This will create an easier foundation for explanation and understanding. · · Separate Inputs Your financial modeling should not only be clearly labeled, it should also be well-organized. One of the primary ways to do that is by having your inputs, formulas and outputs separate and clearly defined. If you have a lot of inputs and the model may be used by others, you might want to consider having a single sheet for all inputs. If you want to keep your inputs in the same sheet in which they apply, you may want to color code them. At a minimum, you should label them as inputs with text. · · Structure in a Natural Way When you are working on financial modeling, you want to make sure they are readable. In addition to the tips above, this includes organizing the way the information is laid out in a predictable manner that is readable and relatable. This means laying out your information from top to bottom or left to right. Start with the input, then calculations, then output. Structuring your sheet(s) this way makes it more intuitive not only for yourself but, anyone else that may view or use them. · · Link Sheets As your financial modeling efforts to create your Financial Projections in your business plan evolve, you may end up with quite complicated spreadsheets. Don’t be afraid to break down the information on various sheets within the same Excel or Google Sheets document. Using various sheets makes it easier to organize your information. Then, you can simply link pertinent information from one sheet

3. to another so the information throughout your entire document flows. If you are unsure how to do this, review the help feature in Excel or Sheets, search Google or YouTube or consult an Excel/Google Sheets expert. Financial Modeling can seem like a monumental task at times. The tips above will help ensure your financial modeling doesn’t become overwhelming while you are actively creating and utilizing it. The models will also make it easier to demonstrate and explain to outside parties how you arrived at the financial projections in your business plan.