We conduct financial models to evaluate or estimate the financial outcomes of various business decisions. These decisions include estimating returns on capital investment, capital budgeting, financial forecasting and scenario analysis. Our inputs enable you and your business to analyse how various business drivers produce financial performance in light of the context in which their business operates and the decisions they are making. This enables business leaders to make better strategic decisions with respect to the allocation of scarce resources in order to drive relevant business growth.
Capital allocation decisions are best supported through financial models
Any company or business leader needing to make strategic business decisions or wanting to allocate capital appropriately to generate optimal returns will benefit from the development of a financial model. By understanding the key business drivers relating to a decision and how they result in financial performance under various assumptions and constraints, financial modelling helps to inform robust strategic decision making. The outcome of this process will enable you and your business to understand the potential benefits that could arise given the inherent risk, assumptions and constraints embedded in each strategic business decision.
Financial modelling and forecasting:
Weigh up risk-return ratios
Experience has shown us that all leaders and decision-makers have the need to understand the potential returns available given the inherent risk associated with a given decision. Financial modelling enables business leaders to appropriately weigh up the risk-return ratio based on both risk appetite and the potential returns across various scenarios. Building a financial model unlocks an accurate understanding of the potential returns associated with a particular decision, as well as the assumptions and constraints that drive the variability in outcomes. By understanding the sources of variability through the financial modelling process, and the associated outcomes, business leaders are able to make more informed decisions and are able to monitor the key drivers’ overtime to ensure a favourable outcome. With a more robust decision-making process, you and your business can more accurately allocate capital and resources within the company in order to drive better business growth.
How can we help your business?
The Step Advisory approach to building a financial model hinges on:
- Taking a principled look at how to model the business – considering historic data – in order to inform the accuracy of assumptions and insights.
- Creating the model, with a particular focus on the income statement, balance sheet and cash flows.
- Validating assumptions with management and using historic data or, where applicable, industry data leveraged from a market analysis.
- Identifying and raising critical requirements or risks requiring further investigation.
Along with our extensive industry and technical knowledge, our process is best supported through collaboration with management to obtain pertinent business and market insight in order to build a robust model. A Step Advisory financial model is flexible and malleable, allowing for the manipulation of inputs to test key assumptions and incorporate varying sensitivity analyses. Our experts also test valuation models for sensitivity in order to highlight the most sensitive assumptions in the model.