Financial modeling: what to know

What the job involves, what changes the price, and what to ask a pro.

What financial modeling is

An analyst builds a spreadsheet model of your business or project, projecting revenue, costs and cash flow under different assumptions to support planning or investor discussions. Founders and owners use models when raising money, planning growth or deciding on a major purchase. This is general information, not financial advice, and models show scenarios rather than predictions.

Signs you need it

  • You are preparing to raise money and investors have asked for projections
  • You are deciding whether to hire, expand or buy equipment
  • You want to know how many sales you need to break even
  • A lender asked for a forecast with your application
  • Your current budget is a list of numbers that does not connect
  • You are valuing a new product or location

What the pro does

  • Learn how the business earns money and what drives costs
  • Gather past financial statements and key assumptions
  • Build a spreadsheet linking revenue, costs, hiring, capital spending and cash flow
  • Set up scenarios with different assumptions for sales, costs and timing
  • Document the assumptions so you can change them later
  • Walk you through the results and the limits of the model

What changes the price

Every job is different, so we do not publish prices. These are the things that move the quote up or down.

  • The complexity of the business and number of products or locations
  • The length of the forecast
  • Quality and availability of historical data
  • Number of scenarios requested
  • Whether the model is for investors, lenders or internal use
  • Whether training or updates are included
  • Whether financing or valuation sections are needed

What a written quote should spell out

  • The model's purpose and time horizon
  • Scenarios included
  • Assumptions documentation
  • Training on how to update it
  • Number of revision rounds and delivery format

Questions to ask before you hire

  • What similar models have you built, and for what type of business?
  • How will you document the assumptions so I understand them?
  • Can I update the model myself afterward?
  • What data do you need from me?
  • How do you check the model for errors?
  • Who owns the model when it is done?
  • How do you present risks and uncertainty in the results?

Red flags

  • An analyst who promises accurate predictions
  • A model with hidden or hard coded numbers and no assumptions list
  • Refusing to hand over the editable file
  • Assumptions copied from a template without your input
  • No review for formula errors

What you can do yourself

You can start with a simple monthly spreadsheet that lists revenue, direct costs, expenses and cash. Write down each assumption in a separate section. Consider help when you are raising money, need scenarios or have a complex business. Questions about investor offerings belong with an attorney and tax questions with a CPA.

Licenses and permits

Financial modeling does not require a license, though providing investment advice to others can be regulated. Ask about experience, sample work and whether the analyst gives advice or only builds models.

Financial modeling questions

Can a model predict my results?

No. A model shows what could happen under assumptions you choose.

Do I get the spreadsheet?

You should. Confirm ownership and editable access in writing.

Will investors accept the model?

They set their own standards. Ask them what they want to see.

Pro reviewers

Pros who offer financial modeling remotely can improve this guide, like Wikipedia. We check every edit before it goes live. Every approved edit is credited in the edit history and on the pro's profile.

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