Who is it for?
It is ideal for businesses that are looking for investment, disinvestment, business valuation, fundraising etc. The Idea is gaining more clarity over your business and investments. This can be used by an Entrepreneur, Business Owner, Investor etc. It enables to make clear financial decisions for your business growth.
Basic Financial Models
- Three Statement Model – most basic setup for financial modelling, consisting of the three-statement model such as the income statement, balance sheet, and cash flow.
- Discounted Cash Flow (DCF) Model – most used valuation method, built on the 3-statement model to value a business’ future cash flow based on its Net Present Value (NPV)
- Budget Model – this is a popular model for creating a budget plan
- Forecasting Model – best use in a financial plan, to do a forecast, projection, and analysis
Advanced Financial Models
- Initial Public Offering (IPO) Model – commonly used by investment bankers and corporate development professionals to do a valuation of their business before going public
- Merger Model (M&A) – usually used by advanced financial modelers to conduct a merger and acquisition
- Leveraged Buyout (LBO) Model – another advanced financial model for creating a sound debt schedule
- Sum of the Parts Model – this kind of model is usually built by taking several DCF models and summing it up together
- Consolidation Model – in this model, instead of just one business, there will be multiple businesses added to one single model
- Option Pricing Model – there are actually two ways you can create with this kind of model, but basically, this is usually presented purely as mathematical and acts as a calculator rather than subjective
Benefits of financial modelling
- Find potential areas for improvement by identifying parameters which are not optimal compared to industry benchmarks. This will be a big help for you to identify synergies in M&A transactions and focus areas to work on when trying to increase a business’ valuation.
- Obtain a deep understanding of what value the business has and how the value is influenced.
- Obtain a better basis for capital allocation decisions and avoid making blind decisions. With financial modelling, all decisions can be justified in a traceable and rational way.
- Develop a solid budget and financial plan to obtain visibility on your financial future.
- The best way to achieve your business goals is to have a clear foresight and spend your efforts on the right areas in business. Before breaking the business into discrete pieces and asking yourself which direction each will go, first, look at the business as a whole and understand both what you, as an organization, are trying to accomplish as well as what the intended purpose of the model and start-up financial projections will be. Depending on the industry and use case, you will need to develop an optimal financial model.
- Income Approach – valuation method used for income-producing properties where it calculates the value based on the entity’s past, current, and forecasted cash flow to determine the intrinsic value. Under this approach are the commonly used and popular methods like the Discounted Cash Flow (DCF), Capitalization of Earnings (CoE), and Economic Value Added (EVA).
- Market Approach – used to determine the value of an entity by taking into account the market prices of entities that are comparable. There are three known methods that utilize this approach such as the Precedent Transaction Analysis, Stockmarket Multiples Analysis, and Relative Valuation Comparisons.
- Cost Approach – the value is determined by basing it on the balance sheet, generally used to value entities based on the market value of assets, cost to build, replacement cost, and liquidation value of the assets.
Each approach has advantages and disadvantages but depending on how you use it, you can definitely count on these approaches as a basic guide on how to value a business or an asset. After deciding which approach best suits your needs, the next thing to do is to create a valuation model. This will need you to spend time researching, calculating, and analysing. Sometimes you would need the need of experts to assist or guide you.
Purpose of Financial Modelling
- Valuation: Valuing a company or an asset
- Forecasting: Preparing a budget business plan/financial plan
- KPIs: Forecasting important key metrics such as break-even point, payback period, etc.
- Scenarios: Analysing the effects of different growth and financing scenarios on your business
- M&A: Buying/selling a company or an asset
- Investment and Capital Allocation Decisions: Making enhanced and rationale investment-decision based on solid financial analysis
- Fundraising: Bank financing, equity
- Financial Analysis: Obtaining a better understanding of the economics of your business and its value drivers
- Managing and Tracking: Keeping track of data metrics and to help with business management.
Contents of Financial Modelling
- Executive Summary sheet
- Financial overview
- Key assumptions capacity, market prices
- Charts and Graphs
- Project Metrics such as required Funding, total expected Profit, IRR, Payback, and NPV
- Uses and Sources of Funding Table
- Assumptions including currency, inflation rates, interest rates, depreciation period, tax rates, costs for Operations & Maintenance, etc.
- Sensitivity analysis for the key-value drivers
- Financials sheet
- Pricing forecast
- Revenue projections splits
- Detailed costs
- Income Statement
- Balance Sheet
- Cash Flow Statement
- Fixed asset schedule
- Forecasted financial ratios such as Debt/EBITDA, current ratio, etc.
Why Choose us?
Synergy can help you to develop financial model for your business and subsidiaries in Dubai, Abu Dhabi or other Emirates in the UAE for your local and international businesses and investments.
- One stop advisory solution
- Professional expert approach
Contact us for your requirement of:
- Energy Sector Financial Model
- Real Estate investment Financial Model
- Discounted Cash Flow (DCF) Valuation Model
- eCommerce Valuation Financial Model
- Mining Investment Financial Model
- Hotel Valuation Financial Model
- Internal Rate of Return (IRR) Project Finance Analysis
- Private Equity-Leveraged Buyout Model
- Farming Financial Model
- SaaS Valuation Financial Modelling
- Dairy Farm Valuation Financial Model