Repeat after me… iterate, iterate, iterate.
All the steps of business planning require iteration, and none more so than building the financial model.
The goal of the model is to understand when your company is likely to break even and how much money will be required to reach that goal. Nearly always, the first draft plan predicts that it will take far longer than you expect to reach that milestone and far more money than you have.
Even if the plan predicts that your business will do well, iterating your plan can help you find ways to succeed faster or with less initial funding. That is a win for any business!
When I have built these models myself, I have iterated through every cell in the spreadsheet at least a dozen times. Every cell. For those cells filled with potential revenues, the question to ask is, “Might this take longer than expected?” For those cells filled with expenses, the question to ask is, “Can I do without this for a month or two?” And for every cell, the question is, “Does this seem reasonable?”
When there is no more revenue to reasonably add and there are no more expenses to reasonable postpone, the financial plan is “done.” Done is in quotes because it is really just done for the moment, until more information is learned and you can update, rework, and iterate once more.
