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How to Set the Right Goals for Your Financial Model

3 min Read

As you set out to build a financial model for your organization, it is important to consider the guiding principles below. They will help keep you on track and focused on achieving your desired results.


It is imperative to set goals up front as they will have a direct impact on the scope and design of your model. If you forego this step, you will encounter many challenges.

Review the following list of questions and bullets below to help set your goals:


  • Why are you building your model?
  • What questions are you trying to answer?
  • What analysis are you trying to do?


  • How are you going to visualize the answer to your questions?
  • Are there particular metrics, reports or graphs needed?
  • Are there thresholds or ranges that need to be met or kept?
  • How are you going to answer the questions?
  • Are you trying to answer a yes or no question? Or is there a range of acceptable answers?


  • Who are you trying to communicate the answer to?
  • How can the audience best visualize the answer to the questions?
  • Does the audience have any sensitivities you should be mindful of before you set out to answer your questions?
  • Is there a particular narrative you need to develop?


  • Is there a particular date when you need your question(s) answered by?
  • How long do you have to complete your model and analysis?
  • Are there deadlines along the way?


One mantra that may be helpful to you as you set your goals is the following:

“Consider what you need versus what you want."

There will always be elements of a financial model that are foundational to answering the questions you have. These are your needs. You should focus your attention on these areas to ensure that you are positioned to truly achieve your goals. Wants are nice, but not critical. Sometimes they enhance the exercise, other times they can get in the way of needs and derail the process altogether.

For example, your model does not need to match the real-world behavior of all aspects of your business to provide an accurate answer to your questions. If you want to calculate debt service coverage ratio you need not model every single employee at your institution individually. If you embark on that exercise you may get caught up in the details of the data requirements, logic and intricacies of the exercise and lose sight that the point of building a model in the first place is to figure out if your debt service coverage ratio meets certain criteria.

By setting goals up front you will avoid many of the challenges modelers encounter. This way you have clearly stated the scope of your model and always have a point of reference to ensure that you are on track to achieve what you've set out to accomplish.