HOW TO PREPARE A FINANCIAL MODEL
A financial model is needed by the owner to see future revenue, expenses, financing needs and possible profit before investing money. It answers the questions: how much needs to be invested, how many goods or services need to be sold, when the invested money will return, and what changes if the price or sales volume is different.
UBC can build a calculation using data from the specific business for a launch, loan, investor or expansion.
Revenue, Cost of Sales and Fixed Expenses
The owner starts with what the customer pays for: a unit of goods, an hour of work, a subscription, a hotel room, a restaurant order or another specific sale. A price and realistic sales quantity are defined for each type of income. If the business is seasonal, the months are calculated separately. This shows the turnover that the actual capacity of the shop, production facility or team can generate.
Expenses are divided into those that arise with each sale and those the owner pays regardless of turnover. The first group may include purchase of goods, delivery, acquiring fees or contractor remuneration. The second includes rent, fixed salary, accounting, software and other regular payments. Taxes and VAT are included according to the selected system and nature of the transactions.
The break-even point shows how much needs to be sold for revenue to cover all expenses. After that, each additional sale can generate profit. This indicator is especially useful to the owner before renting premises, hiring a team or making a large purchase: the owner sees the minimum monthly turnover and can compare it with actual demand.
Cash Flow, Investment and Working Capital
Profit and the amount of money in the account are different indicators. An entrepreneur may have a profitable transaction and still face a cash shortage when the buyer pays in 60 days but the supplier must be paid today. The owner therefore calculates the timing of receipts and payments separately. This shows the greatest working-capital requirement and the month when the business may need a loan or owner contribution.
For a new business, the starting amount includes purchase of goods, repairs or equipment, a rental deposit, advertising, salary before the first sales and a cash reserve for the first months. For an operating business, the owner calculates the cost of a new shop, employee, equipment or entry into another market. A long payback period is a reason to change the scale, price, financing method or investment date.
A loan is assessed together with interest, fees and the payment schedule. An investor is assessed together with the share of the business and the rights the investor will receive. The owner's own money also has a cost because it could have been used elsewhere. Comparing these options shows which financing method leaves the entrepreneur with more profit and control.
Growth Scenarios and the Owner's Decision
A few realistic calculation variants are enough for a decision. The owner sees the base sales plan, lower turnover and higher expenses. The purpose of this comparison is to determine the figures at which the business remains profitable. Sensitivity to a small decline in sales shows what financing reserve and level of fixed costs are suitable for the launch.
A financial model is useful to a bank or investor when the figures can be explained. The entrepreneur should know where the price came from, how many clients the team can actually serve, what payment period customers receive and how much purchasing costs. UBC can link the calculation to contracts, taxes and corporate financing terms so that the figures correspond to the future transactions.
After launch, the owner compares the calculation with actual sales and expenses. If the goods sell more slowly, the purchase price changes or clients pay later, the owner immediately sees the effect on profit and the cash reserve. After the work, the client receives a file with source assumptions, income, expenses, cash movement and payback indicators that can be updated when the price, sales or expenses change.
Why Choose UBC?
The principal activities of the UBC group of companies include financial and investment services, assistance with obtaining finance and attracting investors, the purchase and sale of established businesses, IT services, commercial property development in Ukraine, Europe and other countries, company registration in Ukraine, business expansion into EU countries, corporate law, offshore jurisdictions and offshore companies, business consulting, audit, certification, LLC registration, registration of financial companies, asset management companies and mutual investment funds, registration of joint-stock companies, securities and bond issues, support for foreign investment, construction licences, permits for design and construction, and other services for successful business in Ukraine. We guarantee our clients a full range of turnkey business services within the shortest practical timeframe.
Our continuously expanding network of regional and international partners helps resolve our clients' issues effectively when doing business both in Ukraine and abroad.
We consistently work towards the result you need and will do everything possible to achieve it within the required timeframe, taking account of your wishes and objectives. Why is it better to start a business in Ukraine with UBC? The answer is simple: we have considerably more practical experience, resources and capabilities. We have been and remain a leader in Ukraine in corporate services, and the UBC corporate structure comprises more than 10 companies operating in different business sectors.
Frequently Asked Questions
How Does a Financial Model Differ from a Budget?
A budget shows planned income and expenses for a certain period. A financial model additionally links sales, expenses, investment, financing and cash movement and allows the owner to change the main assumptions.
Do VAT and Taxes Need to Be Included?
Yes. Taxes and VAT affect cash and profit, so they are included according to the specific business and tax system.
How Many Calculation Variants Are Enough?
Usually a few variants showing normal turnover and changes in key indicators are enough. The number of variants should help the owner make a decision quickly while keeping the table understandable.
Who Should Update the Model?
The owner, finance director or accountant may update the source data depending on the size of the business. The important point is that the responsible person understands the source of every key figure.
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