Answer to Question #223636 in Other for Atif

Question

Please provide the importance of cash flows and financial assessment in a writing business plan?

Answer 1

A financial model is a system of indicators that can be used to assess the state of a business. It helps to forecast revenue, cash flow, profit and calculate how changes in the market or within the company will affect its financial position. We have explained in this text which metrics to track regularly.

The development of a financial business model is one of the priority processes at the stage of starting a company, which is prescribed in the business plan. There are two main reasons for errors in model development:

the entrepreneur does not understand how the company works and how it needs to be developed;

the entrepreneur cannot assess the profitability and value of the business, as well as its potential market share.

The financial model will help you (as a business owner) to control the development of the company, and to lenders - to make a decision on granting a loan. You do not just talk about your plans, but demonstrate how the business will grow and how you will repay the debt.

Finmodel is studied by both lenders and investors. For the latter, not only the idea is important, but also the real results with growth forecasts.