Feed Your Model

Any finance vet will tell you, the key driver to bad analysis is “trash in, trash out”. In other words, you can have the best financial model in the world, but if you only have bad inputs you’re only going to get useless outputs.



Any finance vet will tell you, the key driver to bad analysis is “trash in, trash out”. In other words, you can have the best financial model in the world, but if you only have bad inputs you’re only going to get useless outputs. For your company’s financial model to be a useful tool, you’ve got to regularly ensure your latest prospective deal pipeline, financial transactions, expenses, etc are worked in. When you have reliable inputs in your model, you’ll have a dependable financial forecast that you can use. Not only that, but you’ll have created the necessary accountability every business needs. A model that reflects an uptodate sales pipeline will show you what every deal is going to do to your bottom line, and better yet will let you work in probabilities so you can make better estimates of your financial results. This perspective is so powerful because it lets you make sure you’re devoting resources to likely deals, and/or potential points of low capital. 

Culturally, the benefit of having your sales pipeline built into your model is invaluable. It contextualizes the importance of deals to each individual sales employee, thereby getting your whole sales department to buy into the overall growth of the company. For someone to not hit their commission cap is a good motivator but seeing what that does to the company’s financial health as a whole will be a much more powerful motivator and enhances the overall culture.