Home › Resources › Knowledge › Financial Modeling › Business Drivers. Business drivers are the key inputs and activities that drive the operational and financial results of a business. Common examples of business drivers are salespeople, number of stores, website traffic, number and price of products sold, units of production, etc.
What are Business Drivers? Business drivers are the key inputs and activities that drive the operational and financial results of a business. Common examples of business drivers are salespeople, number of stores, website traffic, number and price of products sold, units of production, etc.
Continuing with the example above, now that number of stores has been identified as a key business driver, it is important to track that metric, along with the size of each store, the number of salespeople per store, the volume and price of products per store, and, finally, the revenue.
How to determine what the business drivers are Drivers impact all financial aspects of a business: revenues, expenses, and capital costs. In identifying what the main drivers are, it’s important to do a root cause type of analysis. Start by looking at the company’s financial statements, and ask the question, “What drives this line item?”
Business drivers are the key inputs and activities that drive the operational and financial results of a business. Common examples of business drivers are salespeople, number of stores, website traffic, number and price of products sold, units of production, etc. In order to make internal choices about business strategy.
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When building a financial model in Excel, the process begins with building an assumptions section, which includes all the main business drivers. Once these inputs are all in place, a forecast can be built and a basic three-statement model can be created.
When you’re forecasting revenue for your financial model, you need to make certain assumptions. Those assumptions should be based on data, whether it be past performance, industry benchmarks, or something else.
Unless you’re just lucky (and luck isn’t a strategy), you’re going to need to spend money to drive revenue for your business at some point. Growth doesn’t happen auto-magically.
As I mentioned earlier, adding revenue drivers into your model gives you more flexibility and control over your growth plans.
If you have a sales team, they likely drive a big chunk of your revenue. You can model what your revenue growth looks like based on their performance.
As simple as it may sound, that single question is something a lot of startups overlook.