We have been working to solve the problem of creating realistic financial projections for over 2 years now and I feel like we are on 1st base. This is such a huge problem, and I am quickly starting to realize why it is so hard to solve with software.
When we started ProjectionHub I thought it was pretty simple. We would just take an Excel template and recreate it with a software platform. We did just that, but we are still so far away from solving the problem and here is why:
1. Every Business Needs a Custom Financial Model – There is no such thing as a 1 size fits all financial model. We have tried to create a flexible model that can work for any business, and with enough effort, our model could probably work for just about any business model, but that is the problem. It works OK for everyone, but it doesn’t work GREAT for anyone.
2. Categorizing Similar Businesses is Hard – When we started ProjectionHub I thought we would just simply categorize each business and then put similar businesses together in the same pile and use that data to make recommendations to future users. For example, I thought we could put all restaurants together in one pile and then analyze their projections and come up with an average Cost of Goods Sold for a restaurant. Then, when new restaurants used ProjectionHub we would notify them that their projections are out of line with the average. Here is the problem – Every restaurant is different. A fast food restaurant should have a different COGS than a high end cuisine establishment. So it is actually really hard to determine if 2 businesses are alike and can be put in the same category.
3. Excel is Still Dominant – I used to use Excel for all financial projections, and even after I created ProjectionHub I still used Excel in some cases. It is a bad sign when you don’t use your own product, but the problem was that I needed to create such a customized financial model that Excel seemed easier. Now we are to the point that I would always use ProjectionHub as the base model, download it to Excel and then customize from there, but it took a long time to get to that point. Now our challenge is to educate business owners that you can use ProjectionHub as a base model and then customize your projections from there. It is much simpler than trying to create your projection file from scratch.
We have so much work to do, but the good news is – we have time. I don’t think any company is going to be able to solve the financial projection problem overnight. It is a complicated and time consuming process to solve, but we are committed to sticking with it for years to come.
Check out what we have done so far with ProjectionHub