A business model is used to describe how an organisation creates, delivers and captures value. It looks at all aspects of a business including: customers; value propositions; communication, distribution and sales channels; customer relationships; revenue streams; key resources; key activities; key partnerships; and cost structure. Describing a business’ model allows business owners to understand any opportunities and weaknesses within their business.
A financial model is built and tailored to each business and is used to test different scenarios or variables including budgeting and forecasting, business valuations, margins, cash flow and a range of what if analysis. The sole purpose of creating financial models is to assist business owners in making informed decisions.
I use business and financial modeling hand in hand to ensure that business owners are well aware of how different decisions and changes will affect all financial and non-financial aspects within their organisation. This analysis is used to assist business owners in setting targets, KPIs and goals in their overall strategic plan.
Informed managers will more often than not make far superior decisions than uniformed managers.