Financial modeling is as important as the decisions supported by it.
Let me explain it with some examples:
- if you create a beautiful financial model with all kinds of variables that forecast exactly what could happen in different scenarios with your company but you don’t do anything with it, it’s worth $0.
- if you create a financial model and make a few mistakes either in formulas, manual inputs, or by intellectual dishonesty, and end up making wrong decisions because of it, it’s worth negative (you’d be better without it).
- if you create a financial model that works, even if it’s not perfect, and is enough for you to make decisions with a better degree of certainty than before, than it can be worth a lot.
So, financial model can be very important, but it can also be harmful depending how you use it, or even a 0 if you don’t use it for anything. I’ve seen all 3 cases in real world.
My suggestion, start with a simple one. In this post, I teach how to create a financial model in 20 minutes, give it a try.