Ideate, create, iterate.
Harnessing the power of accounting to drive business innovation
The financial data of a company is the story of the business in numerical form.
Over 13 years of experience in the accounting industry has taught me that the information you see in a set of Financial Statements is a direct reflection of how that business works. With close examination you can deduce the mechanics of a business from how the numbers behave. Turning this logic on its head however produces something which is much more interesting and useful.
By taking the mechanics of the business as the starting point it is possible to construct a numerical model of it, even when there is no previous accounting data to go by - a common situation in start-ups and new ventures. The model then acts as a prototype which can be used to assess the viability and robustness of the business idea and to make iterative improvements to it. It’s a tool for ideation, creation, and iteration.
Using accounting techniques to drive business innovation
is my specialty and my services include:
Business models and financial simulations
New Venture project management
CFO services
From an idea to
a simulation model
in 3 steps
Visualize the Business Model
The business model is at the heart of the enterprise and determines the logic by which the company operates. It’s what creates the value proposition to the customer and drives strategy. It determines how the company makes its money, what its cost structure is, and hence, how much profit it can make. It’s also instrumental in bridging the gap between ideas and numbers.
The business model can be thought of as a “machine” with moving parts, fixed parts, ratios, gears, levers, andspin-times. Visualizing it in this way makes it easier to understand the interaction and dependencies between the different parts of the model and opens the door to assigning numerical values to them.
Map out key processes
and activities
The next step is to focus on processes. The objective is to identify those key processes and resources that are instrumental to the business model. The well-known Business Model Canvas tool with its 9 elements is very helpful in doing this.
Once identified and listed the processes are mapped out and cost drivers are assigned. In essence, a high-level activity-based costing matrix is constructed.
Build a simulation model
(or prototype)
The final step is to bring the business model into life by putting all the pieces together in numerical simulation model. Having such a tool at your disposal makes building more realistic budgets, forecasts, and valuations possible. In addition, it’s a useful for pinpointing critical profit drivers and in this way helps set KPI’s and assess performance. Finally, it can be used to assess the economic viability of a new business project by subjecting it to scenario analysis and stress testing.
Robert Eden
I am an experienced and a highly innovative professional with a special interest in business models, new business projects and start-up ventures especially in the new green economy. With years of experience as a chartered accountant and a director in business I have the unique ability to combine finance & accounting with business innovation and strategy.