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I found the best way to model was to just start doing it. Your first model is always poor in structure and documentation. But you get better over time (you learn tricks, things that didn't work in the prior model, and better ways to structure your model).

But here are a few takeaways:

-1- Invest in one good book in Excel and look for highly-rated books in Amazon. Read every page, do all the examples, and keep it near your desk.

-2- There are some really good websites that focus on Excel too ... bookmark those and visit regularly (ExcelUser, Chandoo, and Financial Modeling Guide come to mind and are my favorites).

-3- Regarding structure, build your output first. That is, what do you want your output to look like as in the reporting? Create those sheets first.

During this phase, you need to nail down your time periods. Will time periods be monthly, quarterly, or annually? Will you have actuals or just plan data. Do not wait to figure this out as you start the modeling phase ... nail it up front.

-4- Now include sheets for each significant assumption area. One sheet could be used for AR/Inventory/AP and include those assumptions.

Ditto for COGs, headcount, etc.

-5- Master some of the most important formulas that will make your life easy. Examples include vlookup, sumif, match, and several others.

-6- Make sure your model is heavily documented.

-7- Always audit your model during and after.

-8- As you get better, you'll find that you can recycle your models for future projects.

That's the 30,000 ft. flyover. Having said that, I generally do my modeling in vendor tools like Alight, Whitebirch, and Quantrix. But Excel is still a nice solution for smaller, and simple models.

Jeff Moskovitz

Outsourced CFO/Advisor/Coach, JMM Advisors

Posted on June 23, 2011

Hi Lori,

For purposes of clarity, do you want to create a business plan or a financial plan? I ask because a business plan includes various elements, one of which is the financial section. A business plan would include sections on your target market, demographics, marketing plan, sales channels, competitive landscape, pricing, etc. Here is a link to a brief article I wrote not too long ago.

http://www.jeffmoskovitz.biz/the-top-ten-things-you-need-to-develop-a-busines...

The financial portion of the business plan essentially translates everything I just described into financial projections, which should include certain elements, with a particular focus on cash planning, which is of primary importance. Based on the fact that you asked about Excel, I assume this may be what you're referring to.

In either case, I would recommend following a template. Even if you only want the financial piece, it might be worthwhile to take a look at a simple business plan template, to make sure your financial projections cover everything.

In either case, I would be happy to send you some of the templates I've used, whether it be for a business plan, or a projection. I can also send you some Excel spreadsheets, which you can use as a guide. Let me know if you'd like them and how to send them.

If you are preparing financial projections, not to dissuade you, but you'll most likely need some guidance if you're not formally trained in that area. At a minimum, you'd want to have someone take a look at what you've done to give it the "sanity test."

The other choice you have is to purchase business plan software, which may be helpful, because some of the better ones guide you step by step through the process. You can Google "business plan software" or visit entrepreneur.com, which has some pretty good resources for small business, including business plan tips, as well as software.

Again, let me know if you'd like some templates, and, if so, which ones. I hope you find this helpful.

Jeff