The Tea Leaves of Business Strategy: Financial Modeling

Strategy drives the direction of a business. Many business leaders confuse what strategy is and others are just simply not good at it. But whether your company is good at it or not, strategy is just theoretical ideas until it is put to numbers. A good financial leader is able to determine the viability of a strategic direction, not by feelings or opinions about the ideas, but by numerical evidence. Challenge strategy by showing the potential results of the strategic actions. The way this is accomplished is through financial modeling that projects future results based on a given set of circumstances. A static business can get by without modeling, but it is a necessity in a dynamic business where critical decisions need to be made regularly. You must have a model that changes future results based on changes in business variables and use it to challenge strategic decisions. The financial model is the tea leaves of business strategy. It should be your regular tool for communicating where your business is going. Look forward and point the way.