Why Startup Founders Need To Take Financial Modelling Course?

By Author: Skillfin Learning
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You surely need a great product idea to finally launch your startup. You will also need a terrific team to bring the business together and disrupt the market. However, just the right product and the right team will not get you, investors. And they will not protect you from going bankrupt. For this, you will need financial models. To predict your monetary future and guard against the inevitable storms. When you are just starting with limited resources in your pocket, you are your company’s go-to financial analyst. Hence, a financial modelling course should be one of your primary investments.

Why focus on financial modelling?

Amidst all the business-related questions that you have addressed before taking the final leap, consider 3 more.

1. How much money is currently flowing into your market and how much will flow in the future?
2. How will you ensure your investors that they are going to get their returns? How much stake shall you distribute among them?
...
... 3. How will you ensure a daily profitable operation? Where will you allocate your financial resources and what will be your budget be like?

If you already have answers to the above without financial models, the chances are that they are your best guesses. And it is definitely not news to anyone that businesses do not run on guesses. Learning what is financial modelling and how to build one around these issues will help you find definite answers. You will have a clear picture going ahead and a proper financial plan for your startup.

Financial models and the required answers

First, to estimate how much money your customers will pay for your product, you will have to build a Market Model. In this top-down approach, you gather all the financial data from your sector and look into the market share of your competitors. You will fit in somewhere in this crowd. You will not be creating a new market. Depending on historical data, you will have to build a financial model to estimate your cash flow 5 years down the line.

Second, a good financial modelling course will teach you something called Investor Modelling. Here, you build spreadsheets to balance your cash outflow with the inflow and show your investors that their shareholding equity will be inflating with time. On another side with another model, you can estimate how much stake you will need to hand out over time and when to do the same to collect funds without giving up your ownership of the firm.

Lastly, through DCP modelling, you can track your daily operations. You may also evaluate your competitors, their growth prospects and seasonal variations of your product’s demand. A financial modelling course also includes budgeting techniques that help in the said resource allocation and predict the future of investments based on the current and estimated market movements.

There is no other way

As evident, without the knowledge of what is financial modelling and its business applications, you will just be swimming in an ocean without any sense of direction. Startups prosper through financial planning. Investors believe models more than your words of assurance. Financial modelling is a vital skill for all founders and there is no debate about it.

Rajiv G. is a Strategy and Corporate Finance Consultant with 15+ years of experience. Previously, he has worked with the Strategy and Corporate Finance practice at McKinsey & Company. He has advised clients globally in multiple industries on various Strategy and Finance engagements. Prior to this, he has worked as an Equity Research Analyst with CRISIL. He is a CFA and Chartered Accountant.