Can you explain how your business makes money? Not just what you sell, and how much money you could make, but how your revenue minus expenses can create a meaningful margin.
If you're scratching your head, here are two sample Excel financial models: a coffee shop and a web design consultancy.
Use these spreadsheets to understand how to figure out what variables you need to fill in core business assumptions, revenue, and expenses, to calculate your operating cash flow. Many businesses need a certain scale to realize profitability.
By creating a spreadsheet like this of your own, you can determine how and when your business will be profitable.
Discuss: What core business assumptions drive your model?
Originally published on February 7th, 2012