How Do You Build A Basic Income Statement Model In Excel?
Building a basic P&L model is really quite simple. With a working knowledge of excel and how a company operates its business you can project future revenues and profitability. Identify the top drivers of revenue. For example consider an online media business that has banner advertising as its sole source of revenue. The main drivers of revenue are traffic, number of sold ad spots per page, and CPM rates for sold inventory. Identify the top drivers of expense. Using the same example of an online media business the drivers of expense will generally be marketing and content and any additional operating expenses necessary to run the business. These may include things like personnel, rent, and basic office supplies. Decide on appropriate growth rates for your revenue drivers. Unless there are major changes planned for the business these growth rates should be in line with how the business has grown historically. Decide on how the business will be run going forward. Are you able to operate t
