Financial Model Pros

This morning I was building a financial model and it gave me enormous pleasure. That's right, I just said that financial modeling gives me “enormous pleasure” 😎

Why doesn't it give more people pleasure?

There are two recurring themes that give financial models a bad name in early stage startups:

1. "This is nonsense" thinking - many investors will proudly say that modeling early stage companies is nonsense, when you're pre-product, how can you possibly know what's going to happen in 2 years time? 🤔

2. "Jobs to be done" thinking - many founders see their model as a tick in a box in a fundraising deck. Not important but necessary in case someone asks ✅

The reason models are valuable isn't because they are likely to be "right" or "wrong" or because they tick a box, it's because the process of building a model forces the model builder to think deeply about the business, its key drivers, the merits of various revenue models, overlooked costs (and therefore hurdles), the realistic people requirements and it therefore helps the builder develop clarity and conviction 🚀

In this sense, like writing a memo or an essay, building a model is a journey (of enlightenment) rather than a destination 🛳

As I was building this morning, it occurred to me that the number of AI tools that help build models might actually detract from the purpose since they accelerate the builder to the finish line (jobs to be done) and away from the journey. But then one of my formulae wouldn't work and I was spinning wheels debugging it. One quick lean on an AI tool later and the bug was resolved. And this is the pertinent point: AI tools should not detract from the main thinking of building a model but they should debug them - there is nothing, and I mean nothing, in spending 30 minutes debugging a typo in a formula.

At TMA we help founders get their model to work for them, to save them money and time and to give them purpose and clarity.