Financial Modeling and Forecasting

Understand the Key Levers for Profitability

Some companies treat financial models and forecasting as a game: What assumptions must we "adjust" to meet the demands of potential investors - and our own dreams of growth?
Abacus approaches modeling with a different philosophy. We let the business model drive the structure of the financial model and then let the assumptions dictate the financial forecast. Not the other way around.

Our Process

There are five steps to our financial modeling process. During the entire process, we work closely with you and your financial executives so that you have a visceral grasp of its inner workings.

1. Understand the Business and Market Strategy

The first step in developing your financial model is to understand your business and market strategy. The best source for this information is usually a well-written business plan. A good business plan will discuss key distribution channels, customer segment behavior, operations expectations and the other important elements of a financial model.

2. Develop Basic Model Structure

A good grasp of the business model allows us to develop the basic mechanics of the financial model. This not only includes a pro forma income statement, balance sheet and cash flow, but also headcount, operations, equity and asset calculations.

3. Research and Validate Key Assumptions

Once the basic structure is in place, we will research the key assumptions for the model. We believe this step to be the most important of the entire process. Having validated assumptions will give you - and your investors - the confidence that your business will generate its promised returns.

4. Run a First Draft of the Model

Once we have validated the assumptions, we will run a first draft of the model. We sit down with and go over the model in detail, so you and your executive team have an opportunity to identify and discuss any concerns and inconsistencies.

5. Revise and Update

We use output from our meeting(s) in Step 4 to revise the model, incorporating the best knowledge and insight from your organization and the market. We deliver a complex and comprehensive model in which you can have the highest degree of confidence. Because of you and your team's detailed involvement in the project, you can maintain the model yourself as you refine your assumptions and as the business environment evolves. Alternatively, we can maintain the model for you, allowing your team to focus on higher value-added activities.