A business plan and a financial model are necessary to solve different problems. The first allows you to describe and analyze the market, assess risks, prepare material and marketing projects, etc. The second allows you to consider different scenarios for the development of events, calculate key indicators for each, and determine at what value the business will be most effective.
Usually, a financial model is enough to understand at the initial stage whether it is worth taking on the business. Once you open a business, you will be able to use this tool to track indicators and choose ways to achieve maximum results.
Why does a company need a financial model?
One of the key criteria exploring amazon: the essentials determining the success of a business is profit. Many entrepreneurs cannot say how much they will earn by the end of the year, because they are sure that it is impossible to plan, because it is unknown what will happen tomorrow.
The financial model allows you to predict the future of the business and determine:
revenue and profit for the year;
break-even point, that is, the number of products the company can sell that can break even;
key indicators that have a multiple impact on profits – these may include website conversion, traffic, average check, etc.
A financial model is necessary in several cases:
It allows you to accurately assess how successful a new enterprise will be. It is used when there are funds, an idea, but no experience in a certain area. Based on the data from the financial model, it is easier to choose a suitable business scheme, adjust prices and indicators to ensure the profitability of doing business.
It allows you to plan profits, identify key growth points, bottlenecks in a business that has already entered the market. Using this model, you can understand what the losses are associated with, and in which case it is wiser to simply close the company.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
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After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
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