Rant: Is Your Financial Model a Strategic Tool, or Just a Spreadsheet?

et's be honest. For most founders, the financial model is that dreaded spreadsheet. The one you dust off for a board meeting or a funding round, pray the formulas still work, and then promptly shove back into a digital drawer.

It’s seen as a necessary evil, a box to tick for investors who want to see a hockey stick graph.

I think that's completely backwards.

If your financial model is just a set of static numbers showing a 10% month-on-month growth because "that looks good," you're missing the point. You've built a fantasy document, not a strategic co-pilot.

Does Your Model Actually Tell a Story?

A great financial model doesn’t just show what you think will happen. It shows why. It tells the story of your business. It connects your actions to your outcomes.

The "Static" Story (The Bad Way): "We'll grow revenue by £20k next month because we grew by £18k this month."

This tells me nothing. It’s a guess based on a previous guess. It’s not tied to reality.

The "Narrative-Driven" Story (The Agile Way): "We will sign 10 new customers next month. How? Our model shows that to get 10 customers, we need 100 qualified leads, based on our 10% conversion rate. To get those leads, we need to increase our marketing spend on LinkedIn by £5,000, because our current Cost Per Lead is £50. Hiring that new salesperson last month means we have the capacity to handle those leads."

See the difference?

The second story is alive. It's a chain of cause and effect. It’s based on drivers – the real-world levers you can actually pull.

• Marketing Spend

• Cost Per Acquisition (CPA)

• Sales Team Headcount & Quota

• Customer Churn Rate

• Pricing Per User

Your model should be built around these drivers, not arbitrary growth percentages. When your model is driver-based, it stops being a report card and becomes a flight simulator.

From "What If?" to "Here's How"

This is where the magic happens. A dynamic, story-driven model lets you make real decisions, fast. You can stop guessing and start strategising.

• "What if we hire two new developers?" The model shouldn't just show increased payroll. It should show that the product roadmap accelerates, a new feature launches in Q2 instead of Q3, and that feature is projected to decrease churn by 0.5%. Now you can weigh the cost against a tangible benefit.

• "What if we double our ad spend?" Your model shouldn't just show a bigger marketing bill. It should show the expected increase in leads, new customers, and revenue, based on your current conversion metrics. It should also show you when you’ll run out of cash if it doesn't pay off.

• "Can we afford to give that early customer a discount?" You can model the impact on your long-term revenue and cash flow, not just make a gut call.

Your model becomes the source of truth that connects your strategy to your bank balance. It’s about iteration. You make a decision, you track the results against the model's forecast, you learn, and you adjust the model's assumptions.

That’s how you move quickly and intelligently.

The One-Minute Sanity Check

Take one look at your financial model right now. If you change a single, operational input (like "monthly marketing spend"), does your revenue and cash forecast for the next 12 months change with it?

If the answer is no, your model isn't telling a story. It’s just a spreadsheet.

As finance professionals we should be doing better, as business owners we know we can think smarter.

If you are looking for support with your business and building out a financial model and thinking about how to strategically grow your business reach out!

#finance #modelling #fundraising #CFO