Cornell Tsiang

Back your strategies with compelling data, using concise presentations and visual aids to demonstrate how your plans align with the company's strategic goals. This approach helps clarify the benefits and feasibility of your proposals. Frame your financial strategies as starting points rather than fixed solutions. Facilitate open dialogue, allowing management to express concerns and collaborate on refining the approach. This inclusive method can build trust and encourage collective ownership of the financial direction. Ensure your strategies are linked to broader business objectives, such as increasing profitability or market expansion. Senior management is more likely to support plans that directly contribute to key business outcomes.

Start simple. If you've just launched a startup, then your needs are basic. There won't be many transactions. In fact, it will mostly be costs at the beginning. You can even use a spreadsheet at the start. Then migrate to low cost software such as Quickbooks or Xero. They will be sufficient until your startup gains traction.

A P&L forecast is an attempt to predict the future of your business. This is captured within a financial model such as a spreadsheet. If you only create one version of it, then you are predicting only one version of the future as the drivers in your model are static. The market and the overall economy are not static. Many variables are continually changing. As soon as a variable deviates from your one model, then your output from such model becomes irrelevant. Scenario analysis is a way to predict what the future may look like under differing circumstances. The exercise itself also reveals your vulnerabilities and strengths.

There are many variables within a P&L forecast. You can create many scenarios that are only subtle variations. The challenge lies in creating distinct, independent scenarios that are feasible for your business. This requires a deep understanding of the strengths and weaknesses of your business model vis-a-vis your market. Moreover, layering this with macro-economic conditions.

Forecasting is about predicting the future. There are a lot of variables involved. Especially macro factors which you cant control. Scenarios allows permutations of these variables (upside, base case, downside) so you can be better prepared as the future unfolds.

The post-pandemic layoffs in the tech sector have revealed shortcomings in assessing opportunities. It's critical to not only research your target audience and competitive landscape but also delve deeper into the macro environment. For example, Facebook is largely an advertising company. Hence, it's no surprise their earnings weakened in a downturn. We're currently shifting from a low interest rate to a high(er) rate market. This will impact investment decisions across the economy. When expanding operations, this must be kept in mind.