MANAGEMENT • PROFIT • SVETLANA TATAUROVA
How to build a financial model for an existing business
How to build a financial model for an existing business. A practical walkthrough for an owner: which figures to check, how to find the root cause and choose the next managerial step.
Author: Svetlana Tataurova · Updated: 2026-09-26
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Quantify the problem
A typical starting point: decisions are made without forecasting the outcome. Don’t begin with layoffs, discounts or increased advertising. First fix the comparison period and check sales volume, prices, margin, payroll, rent and CAPEX. The same external problem may have different causes.
Separate symptom from cause
A drop in the bank balance doesn’t always mean a drop in profit, and rising sales do not guarantee improved unit economics. Compare sales, gross profit, fixed costs and cash flow. Then break down the result by products, channels, employees or locations — depending on the business model.
Check data quality
Before drawing conclusions, make sure revenues and expenses are assigned to the correct periods, and that returns and discounts are accounted for, and that metrics across divisions are calculated consistently. If figures are collected manually, spot-check them against primary documents. A managerial decision based on incorrect data can worsen the problem.
Choose a limited action
A practical next step is to build a base, conservative and stress scenario. Each action should have an owner, a deadline and a performance metric. Don’t change prices, advertising, the team and the product at the same time: otherwise it’s impossible to know what actually influenced the outcome.
Introduce regular monitoring
After making changes, compare plan vs. actual weekly on a consistent set of metrics. If results deviate, record the cause and the next action. The aim of a management system is to detect deviations earlier and make decisions before an issue becomes a cash shortfall or crisis.
When you need an external review
If the owner can’t identify the cause of the deviation, the team argues about the numbers or decisions are constantly postponed, an independent audit is useful. For an initial review, anonymized figures on sales, expenses, liabilities, team structure and a description of the main problem are sufficient; bank passwords and customers’ personal data are not needed.
Frequently asked questions
Where to start if there is little data?
Collect the minimum: revenue, gross profit, fixed costs, cash balance, mandatory payments and accounts receivable for comparable periods.
Do I need to implement a complex BI system right away?
No. First define the metrics and the rules for their calculation. Automation is useful after the managerial logic is clear.
How quickly can Svetlana assess the situation?
Prepare a business description, the main problem, sales and expense dynamics, team structure and upcoming obligations. That is enough for an initial diagnosis.
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