When it comes to building a financial model for your company, it can seem intimidating, but it really doesn’t have to be. In this video, we take a look at 3 different methods of building a financial model by focusing firstly on how to model out revenue projections, namely:
1. Easy – Growth Rate – This is as simple as it sounds (and most small businesses probably use this method). You can build your revenue projections by just applying a growth rate to each year to the historical financials or actuals that you have.
2. Medium – Units x Price – This is a little bit more complicated because you need a little more information from the historical period. This method multiplies the number of units sold multiplied by the average price per unit. Even if you have multiple units, you can use this financial modeling method by just using total revenue and total units.
3. Hardest (but still pretty simple) – Each Product units by price. While this is the most complicated because it requires the most information on a historical basis and makes the most assumptions about the projected financials.
Once you have built revenue for your financial model using one of these three easy techniques you can turn your attention to the other elements of the income statement which we will cover in other future videos.
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