Every funding conversation eventually narrows to a single question, and it is rarely about the size of the opportunity. A lender or investor looking at a set of projections wants to know whether the numbers can be trusted, which is a different question from whether they are impressive. Most business owners arrive with a forecast: a tidy spreadsheet with a growth rate applied down a row of future months. What gets them through underwriting is something else entirely, a model that explains itself under questioning. Douglas Prohaski, who brings more than 25 years of financial and operations leadership experience, including serving as a CFO and CEO, and is now Chief Executive Officer of Fractional Finance Works, draws that distinction sharply. “A good financial model doesn’t just predict results, it helps you make better decisions,” he says. The companies that treat the model as a pitch document tend to lose the room. The companies that use their model to explain how the business operates give lenders and investors a stronger basis for evaluating the opportunity.
A Model That Mirrors The Business, Not The Spreadsheet
The most common failure in a forecast is also the easiest to spot. Growth has been asserted rather than built. “Revenue doesn’t grow because someone typed 10% into a spreadsheet,” Prohaski says. “It grows through customer relationships, pricing, sales volumes, and capacity.” That sentence is a diagnostic tool. Anyone reviewing a model can trace a revenue line backward and see immediately whether it decomposes into anything real or whether it simply compounds a number someone chose. When a model is driver-based, the drivers are visible, and a lender can interrogate each one. When it is not, there is nothing to interrogate, which is precisely the problem.
The practical consequence runs deeper than credibility with outsiders. A model wired to operating drivers becomes useful internally, because it tells a management team which lever moves which outcome. Pricing, volume, and capacity behave differently from one another and constrain each other in ways a blended growth percentage hides completely. A business that has mapped those relationships knows whether its next quarter depends on winning accounts or on adding throughput to serve the accounts it already has. A business running on a typed growth assumption knows neither and finds out late.
A credible model also connects projected earnings to cash flow. Growth can require inventory purchases, additional staffing, or equipment well before the related revenue turns into cash. The model should show when those demands, alongside existing obligations and debt payments, create funding needs—and how the business plans to cover them.
Assumptions That Survive A Lender’s Pushback
Polish is not evidence, and experienced capital providers stopped being impressed by formatting a long time ago. “Anyone can build a model that looks impressive,” Prohaski says. “The real question is whether it’s achievable.” The distinction matters because the person on the other side of the table is not evaluating ambition. They are underwriting risk, and their job is to find the assumption that breaks. An unsupported number in a well-designed model is still an unsupported number, and it will be the one that gets picked up.
What makes an assumption defensible is the work sitting behind it. “You must back your assumptions with past performance and current market conditions,” Prohaski says. “That way, when a lender pushes back, you can explain the results with confidence.” The scenario he describes is worth sitting with, because the pushback is guaranteed. The only variable is whether the owner has an answer. A founder who can connect a projected conversion rate to last year’s actual conversion rate, and then to something observable in the current market, has turned an opinion into a position. A founder who cannot connect projections to results has revealed that the model was built for the meeting rather than for the business, and that revelation tends to color everything else on the page.
The What-If Work That Happens Before The Surprise
The third discipline is the one most often skipped, because it requires the owner to model their own disappointment. Prohaski frames it as a set of plain questions. “What if sales comes in 10 percent short? What if margins slip? What if customers take an extra 30 days to pay?” None of these are exotic. All three happen routinely, often together, and the payment-timing question in particular catches companies that are profitable on paper and short of cash in practice. Running the scenarios does not make them less likely. It makes them less damaging.
Prohaski’s reasoning is about reaction time rather than prediction. “Testing these scenarios early on means you understand the impact and don’t simply react to surprises,” he says. A management team that has already quantified a ten percent revenue shortfall knows in advance what it costs, when the pressure arrives, and which decisions it forces. That team responds on a schedule it set itself. A team meeting the same shortfall for the first time in live conditions responds under pressure, usually by cutting whatever is easiest to cut rather than whatever is right to cut. Lenders understand the difference intuitively, which is why scenario work does double duty: it strengthens the business and it signals to the funder that the borrower has thought past the base case. In a credit decision, that signal is often worth more than the base case itself.
The underlying argument is that financial modeling has been miscategorized. It is treated as a fundraising deliverable, produced under deadline and shelved once the money clears. Prohaski’s three tests – real drivers, defensible assumptions, and tested downside – describe something a company should be able to produce on any given Tuesday. Trust from capital providers is the byproduct, not the objective.
Follow Douglas Prohaski on LinkedIn for more insights on financial modeling, scenario planning, and preparing a business for lenders and investors.
