A model filled with numbers means little… unless it tells us whether we’re actually on track to meet our goals. That’s why I always run a Strategic Fit Check—to make sure the assumptions and projections in the model are aligned with what the company is really trying to achieve.
From Assumptions to Action
It is essential that every financial model clearly communicates whether the company’s core goals and KPIs are realistically achievable under the given assumptions.
The purpose of presenting model outcomes in this structured way is to keep the focus sharply on these strategic targets, so decision makers can immediately see where performance is on track and where further action or adjustment is required.
Let’s interpret your alignment table, reading each line as a story about whether your model supports the achievement of each strategic aim.
The first section, centered on healthy business growth, reveals positive news: the model projects revenue, EBITDA, and net income CAGRs of 18%, 18%, and 19% respectively, all exceeding the required benchmark of 15%.
This suggests that, under the current assumptions, the company is not just meeting its growth ambitions but slightly outperforming them.
Additionally, you set a goal to double company assets by period end, and the modeled outcome (12,487 vs. the required 9,500) confirms this target will be achieved.
Turning to the profitability measures, there is a mixed picture.
The model falls short of the desired 40% gross margin, settling at 37%, signaling increased cost pressures or more competitive pricing than anticipated. However, operating margin (15% vs. target 14%), and EBITDA margin (16% vs. 15%) both meet or exceed goals.
The net profit margin at 11%, lagging behind the 13% target, suggests either higher than forecasted non-core costs or financing expenses.
These discrepancies highlight for stakeholders exactly which areas of profitability may warrant closer monitoring or more aggressive cost optimization efforts.
For workforce efficiency, the results are clearly positive: sales per employee and EBITDA per employee both comfortably clear their respective thresholds (591 vs. 400, and 188 vs. 60), implying strong productivity within the modeled scenario.
In the area of financial health, the model projects a debt ratio well below 20% in the final year (15%), a current ratio safely above 2 (2.29), and wages as a share of revenue right at the targeted maximum (8%).
All these factors signal robust balance sheet management.
However, the equity ratio at 63% is lower than the set cap of 70%.
While this is still healthy, it indicates there’s slightly less equity and/or somewhat more leverage than the very conservative target, which leadership may wish to discuss.
Finally, capital efficiency shows another nuanced story. Return on assets (ROA) and return on invested capital (ROIC) outpace goals (25% vs. 15% and 31% vs. 25%), meaning assets and investments generate value efficiently.
The return on equity (ROE), however, comes in lower than desired (39% vs. target 55%).
This gap may arise from higher equity levels in the denominator or subdued net income relative to equity, suggesting an opportunity to improve equity deployment or profitability.
Interpreting the table as a whole, you can see where the model supports the company’s ambitions and precisely where there are shortfalls.
This approach allows executives to focus on actionable insights—confirming that the plan as modeled is solid in most areas, highlighting specific KPIs (like gross margin or ROE) that require further scrutiny, and fostering a clear dialogue between modelers and management about what adjustments are necessary for all goals to be met.
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