Why Financial Modeling Matters

In business, the numbers matter. When you are entering M&A negotiations, financial modeling information can give you an edge that can be worth millions of dollars. When you are operating a company, proper analysis of your data can point the way to hundreds of thousands of dollars in cost savings. When you are pitching a deal, explaining the economics in the most favorable terms can be the difference between getting funded or not.

Results Are In The Details

It's so easy to make modeling errors. Back in 1988, a manager at Marakon sat me down and said, "We're consultants. We cannot make mistakes." I've taken that to heart and strive for perfection. Sometimes re-using well-tested components helps to deliver perfection. Sometimes it's innovative technology. Mostly it's just focus and hard work.

What I am ultimately producing is business results: changes for operating efficiency, closing a large deal, etc. To get there, my work has to be a complex enough model of the real world so we can understand the underlying economics, but it also has to be simple enough that we can understand what's going on so it is not a black box. In the end, I'm trying to educate executives about financial realities so they can make the best decisions.

Collaborating for Success

For forecasts, I depend on the client to describe the key moving pieces of the business and to gather research and industry statistics. To create a truly compelling presentation, the client has to focus on the numbers as an investor/board member would and understand what parts of the story are material, and be able to modify the strategy if the financial implications are unfavorable. The final product is never developed in a vacuum, but is rather the result of lots of back-and-forth between us.

Having a clear vision of what the finished product looks like is a key client responsibility in larger system development projects, so that we can then design and build a system to meet it. The projects which fail are those where requirements constantly change.

For many projects a strong technical contact is essential to long term success. This may be an analyst who becomes trained in database maintenance details or a spreadsheet power user who supports other users and extends the work as needs change. This person need not be real "techies," but should be a strong Excel user comfortable learning technical procedures and, importantly, the reasons why the procedures are necessary.

On budgeting systems, we are most successful working with you if you are committed to following budgeting best practices such as using targets, avoiding excessive detail, conducting reviews at an economic (not line-item) level, and only budgeting what can later be tracked. (See the White Paper on Budgeting Best Practices for more information.)

Gaining support from IT gatekeepers is a key to success on many projects.

Next steps

See the Client List who benefitted from our approach.