An interactive Excel financial model seduces

That’s right. It engages, it draws people in. Remember ‘The Matrix’, the simulated reality sci-fi movie? Interactive financial forecasting models do the same for business proposals. Bang, without realising it, investors and lenders (the IDC, Banks, family and friends…) are suddenly inside the business. The model takes them to where the money is…

If you’ve ever witnessed ‘death by PowerPoint’, that test of patience which passes for a typical new business pitch to investors and funders, you’ll see the difference. Whereas by presenting your proposal whilst using one of my interactive financial models, people (bankers are sometimes people) start asking questions; “When do you see this happening? How does this work?” They become interested, they become engaged. On the other hand, when was the last time anyone interrupted a PowerPoint presentation – other than to answer their cell phone? Exactly.

In case you're interested you may like to look at an example of how we take boring financial data and turn it into eye candy for financiers and bankers:  

To be fair, financial models are ten-a-penny. Indeed, in-house financial models are common to all the main funding and lending institutions. The funders take the numbers from your pro forma financials, and put them into their own models, which have predefined constraints and parameters. And they tell you whether they’ll give you the money or not. That’s all well and good.

But it’s very rare that anyone comes to their prospective funders/investors with a fully integrated and dynamic financial model for their proposed new business/expansion/upgrade; a model where the projected income statement flows through the cashflow statement and into the balance sheet – all dynamic to the scenario changes you momentarily decide upon. A model where your key business drivers and variables have been identified and made fully adjustable, and where all the key outputs are pictorially represented in dynamic graphs.

Now don’t get me wrong. Your investors/funders/lenders will still take the figures and put them into their own models. The numbers must work. So it’s not a fix-it for a dodgy concept. In fact, one of my financial models will expose a weak concept in the time it takes to change the variables using the nifty scrollbars. What you get is live scenario analysis; and if your proposal’s not viable you’ll be the first to know. If time and money are important to you, this can be helpful.

But when you come to make your presentation, and you use the scrollbars to change the variables whilst you describe the best and worst case scenarios, you’ll see the difference. The effect is like demonstrating your pro forma financials using a pinball machine. Your potential lenders and partners want to have a go – and suddenly they’re engaged.

Make no mistake; there are plenty of ready-made software forecasting packages available. But as you’ll soon discover, there are none which allow you to determine your key variables and constraints and to easily adjust these and dynamically graph the results – whilst you present your case.

So taking a step back, the first point of the model is to financially stress test the concept. And once the model helps convince you (or otherwise) of the project’s viability, we then test it against all the known funding requisites and constraints you will face; so you won’t waste time pitching a proposal to funders that won’t make the grade. So far so good.

But as you know, with any proposal, the final ‘yes or no’ goes beyond the numbers. It goes into how well the overall concept is presented; the perceived degree of planning, the quality of the research, the financial viability of the project, and the competence of the proponents.

And this is where you gain another important edge. On the proviso, and it’s a big one, that your overall business planning documentation is professional (if you’re unsure, check out my business plans page), a professional interactive forecasting model gives you an almost unfair advantage against all the other ‘me too’ proposals out there – and not just because lenders find the model engaging.

Apart from supporting your argument by demonstrating the financial viability of your proposal, the broader, unmistakeable and possibly most important aspect of the model, is that it shouts “COMPETENCE!” And competence is the one sure thing – apart from basic numbers that work, that investors and lenders most want to see. And as a CD leave-behind, it continues to work as funders take it away and interact with the model; all the while focused on your proposal.

So if you’ve got a project in mind, and would like to test some of your assumptions, let’s build a model. If the outputs look promising, you’ve effectively killed two birds with one stone; you’ve satisfied your own doubts. And you have in your hands – actually on your laptop – a tool for selling your business concept to investors and funders which is second to none. It’s the difference between seeing the poster, or the movie.

If you'd like to have a look at another couple of examples, please see below.