Advice for a Financial Modelling business

[FinancialModeller]

I'm seriously considering setting up a business offering Financial Modelling services. I wanted to sound out my idea with forum to see where the holes, weaknesses and risks are with my plan.

My background: Big4 qualified ACA in audit followed by 3 years in a specialist Corporate Finance business modelling team. Since then I've moved around a couple of jobs before realising that Financial Modelling, software and website development is, and no s******ing at the back there, turning out to be quite a passion and something that's intellectually satisfying because of how technical things can be. I'm not as technically good as the PHD Quants in the Investment Banks but enough to support most businesses (excluding Banking) to make complex decisions.

I'm in a relaxed permanent employment role now and this has been really helpful to get my head straight and strategise. I hope to:

1. setup a website that becomes a focal point for all things related to financial modelling by:
a) Writing blog articles on this site and publishing an article every two days on modelling, excel tips, etc.
b) Offer free as well as some "paid for" add-ins to Excel
c) Launch free short video tutorials but sell a more in-depth course (e.g. Building a small business model with fully integrated P&L, Balance Sheet and Cashflow forecasts).

2. move into contracting full time. The website should help boost my day rate as I become more established as an authority on financial modelling.

The problem is that this is entirely a one man show and I may do OK from this as I am confident in my skills. I just don't know how to scale this business. At the moment I'll basically be selling my time and that's not sustainable in the long term.

Is this something that seems feasible to you? How can such a business be scaled up over the coming 10 to 15 years?

 

[tony84]

So your intending to build a free website with general info a blog etc and use this to promote your services?

One tip with the blog would be to start writing them now, that way when you are looking at promoting your website you have the content ready that you can upload without thinking about topics etc - its easy for the first 10-15 but after that it gets more difficult i have found.

As to whether its feasible, you need to to do some research on search terms that are relevant - how many searches a month are made. You need to see how many potential people you have that would be interested.

Its not a topic i know much about so i cant be more in depth but after havign a quick search it seems like there is probably enough out there to get work from it.

 

[FinancialModeller]

Almost yes. A free website where the blog, forum, video tutorials and some Excel add-ins are free. I would like to supplement my income with perhaps some "paid for" advanced Excel add-ins and tutorial video sets.

That a good point Tony about running out of ideas. Time will tell if I run out of creative juice for topics or just get bored. Hopefully neither, I just have to try at least.

So I have done a little work already. Don't laugh at this and there is some dummy content on there so nothing too serious but I was just testing my systems. Have a look at AdvancedModelling.com.

And talking of website, I have the option of using AdvancedModelling.com, AdvancedFinancialModelling.com, ModellingExpert.com and FinancialModeller.NET. What do you think would be the best URL?

I've also done some Google searches for "financial modelling" etc and I mainly get the recruitment websites with job posts about it. Hopefully with sufficient SEO I can come near top but again, this is something I just need to get on with and see what happens. Recruitment websites have a lot of traffic coming in but maybe I'll score higher on the relevancy.

 

[Strontium Dog]

It sounds daft, but how do you know there is a market for this.

Are there many people searching for, eg, "financial modeller" on google.

Much as I do not wish to pour cold water, I think you may be choosing a business with little demand.

Also, it would be well to think who your likely customers are. Exactly what problems do they want solved? Then you could present yourself as a solution, rather than a service which few people will understand. It is the solution they are interested in.

The other part is, although if you could find a suitable client base you could generate a reasonable day rate for your own time, but I doubt the business is very scalable unless you could work up a back office setup, in say India. Still though, you would be reliant on generating the sales in the first place.

You need to decide on the size of your target companies. At the micro end of the SME sector, companies struggle to afford many days worth of external consultants. Larger companies have more in-house expertise, so less of a need.

I wish you well with your venture, as someone who likes moving numbers around in excel myself! However I think you need to think a bit more about

a. Your likely target market, and
b. What your actual business proposition is.

 

[Wild Goose]

Interesting Idea.

There was a time when putting together an integrated P&L, balance sheet, and cash flow forecast and dressing it up in a business plan was the only way to get a business loan from a bank. That changed more than 10 years back as banks began distributing their own hard-copy and sofware versions of forecasts to would-be applicants. Nowadays of course the banks no longer lend to small businesses if they can help it, so one way or another that market has gone.

Is there a market sub-contracting to accountancy practices? I'm sure there must be firms in need of decision-making and sensitivity-analysis models whose accountants are not geared to produce such models internally. My guess would be that marketing directly to such firms would be difficult - it's not the sort of thing small and medium sized firms would invest in without seeking approval from their accountant.

Incidentally, on a Lynne Truss note, you should on your web-site be a Chartered Accountant with eight years' experience. That's years' with an apostrophe :redface:

 

[FinancialModeller]

Thanks for the feedback, I need this kind of critique.

The market for financial modelling is based more on my experience as an employee and contractor. The demand comes from mid to reasonably large companies and government. Essentially addressing the market of companies who can't afford the big consultancy rates for projects that don't require a full-time employee.

The issues with presenting a solution is that the problems are so ad hoc and specific that this is what drives the demand in the first place. Wild Goose for instance has an interesting observation that creating an integrated set of financial statement is provided as a software solution by banks. So any problem that becomes common will eventually have a software solution but my skill-set comes in before that point. Mainly the ability to breakdown a complex decision and rapidly build a model that allows a framework to make that decision while being aware of key sensitivities, fundamental assumptions, etc.

The back office scaling could work more for a software house than a modelling solution as it requires a lot of client interaction and it's generally fast turnaround under tight deadlines. With my experience of using outsourced Indian developers, they fail on both counts. But this is precisely my issue of scalability, I'm not sure how to grow this and so far I can only think of Excel training so books, videos, and such "products" that can sell independent of the hourly charging contracting entails.

Sub-contracting to accountancy practices might be a good idea. Where these services are offered to their end clients by the accountants themselves. Almost like a Corporate Finance arm but that will require handling of more than my core competency (modelling). I also want to avoid working with small businesses as they don't have the complexity of business problems that I help to solve.

The site is OK I think for now. It was a few evenings work just to make sure everything was working. Lynne Truss point noted and fixed

Thanks again for taking the time to respond. In need of plenty of guidance.

 

[Moneyman]

I definitely had need of your services over the last 10 years on several projects but I now have a guy who works full time on them for me.
I would aim your marketing at third parties trying for an overview. Such as venture capital, business angel networks and recovery specialists. Many accountants would use this as part of their overall services as they are not normally very good at drilling down into the process so much as playing with the numbers as if they are the reality.
The most useful thing you guys do is sorting out mergers and acquisitions as well as subcontracting where one is trying to see what is “fair” as far as profit share is concerned. A range of new scenarios need to be able to be programmed into the basic model and then extrapolated into firm figures and graphs.
As for expansion, i wouldn’t get too worried about this yet. It is your expertise that is needed primarily to understand the process that the model will be based on. I would suggest that you eventually find someone who is able to work alongside you doing most of the spade work such as building the data input tables and generally tarting the spreadsheet up. There is also the training etc and ongoing tweaking that can be done with another. Slowly you would build up a group of people who would work like you and be able to take more and more of your work away from your shoulders. It is the team that will get you to the size you want to be . you will need to find someone who thinks like you and can be your right hand man and know exactly what you mean all the time allowing you to be just the front end.
Things should operate the same way an architect practice has a technical drawing guy and a regulations/planning expert and an engineer or two. The architect just does the squiggle and says “right big curve of glass like project x and the same sort of plumbing as y with the lifts like z” and before you know it another Rogers “masterpiece” is up and the big guy has his name on 20 new buildings per year. You would be doing the same. Seriously i would use architecture as a good model for your services.

 

[FinancialModeller]

I LOVE the architecture analogy and the M&A work is very much bread and butter Corporate Finance work.

Gosh this really does tear one apart thinking about it. On the one hand I have modelling / programming and the like which I enjoy technically. On the other hand I could pursue the "safer" option of setting up a small practice doing company accounts, tax, payroll and the like but I suspect I might get incredibly bored of it.

But anyway, one venture at a time. The modelling route could work out after all. Strontium and Wild Goose have bought out the prudence in me though.

 

[Moneyman]

Strontium and Wild Goose have bought out the prudence in me though.

err are you snorting heavy metals and poultry or what?

 

[FinancialModeller]

LOL. Though that in and of itself is surely a sustainable product . No, those were the two posters preceding your advice.