When you built your first financial model, did you start with data or did you build the structure first?
For several years early in my consulting career, I worked with small business owners as they built their dreams after acquiring an SBA loan. In all cases, I saw their financial models. In many cases, the SBA loan officer gave them these models, and I learned that some did most of the work.
These models lacked structure. The focus seemed to be on the data, not how the business generated revenue, which filtered through gross profit and finally earnings before taxes.
I’ve read that McKinsey teaches structure-first before data when problem-solving (the attribution is at the end of this article). Accordingly, I believe that the same principles apply to financial modeling.
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