OREANDA-NEWS. March 02, 2012. At Digital October, PwC held a seminar on The purpose of the financial model and how to build it as part of the Rules of the Game series, dedicated to the most poignant issues in building a start-up. The seminar featured experts Dmitry Repin, General Director of the Digital October Center; Anton Abashkin, from PwC's Center for Technology and Innovation (CTI); and Vitaly Lazorin, Founder and Managing Director of the NovStream centre for the promotion of innovative projects, reported the press-centre of PwC.

The first question addressed at the seminar was why do start-ups need financial models. According to Anton "creating financial models isn't rocket science; it's  a relatively simple and easy tool that every entrepreneur needs", adding that financial modeling lets you grasp whether your idea is actually realisable. Dmitry added that "financial models are an asset".

Of particular interest was the question of model detailing. Vitaly Lazorin recommended using the "measuring spoon" approach - thoroughly and explicitly examine the potential expenses and actual cost of your product. He also advised making the model in your operating currency and accounting for inflation.

Anton followed with an actual example of a financial model and explained in greater detail the nuances of building models. To ensure that attendees remembered all they'd learned, two were called up to draw the profit and loss structure of their own start-ups. Afterwards other participants were given a chance to ask questions and challenge the presenters.

Anton stressed that all models are built based on certain assumptions, which means that mistakes happen. That said, the better you understand your business the better chance you have of creating an accurate model.