The Role of Financial Models in Strategic Business Decisions

Effective strategies always circle back to one fundamental question: "How will this choice affect the bottom line?"

Drawing on my experience as a Director of Financial Planning and Analysis for the top Gaming studios in the world, I've seen firsthand how financial models transform uncertainty into clarity. Whether you're considering a major product launch, expanding into new markets, or evaluating a shift in monetization, a robust model ties every decision to real numbers. No guesswork required. Well, at least you try to get the guesswork to a bare minimum.

A financial model is essentially a structured framework, often built in a spreadsheet, that projects revenue, expenses, cash flow, and any other key metrics based on historical performance and future assumptions.

In gaming, that might mean estimating, based on cohort analysis, how much in-app purchases, ad revenue, or subscriptions will be generated over the next 12 months (or further). Added with information on MAU (Monthly Active User), PMAU (Paying Monthly Active User), 30d Retention, ARPU (Average Revenue Per User), CPI (Cost per Install), Customer Acquisition Costs and churn rates, you will have a base line of understanding how your game performs and you can create a "what-if" scenario where each strategic choice can be evaluated quantitatively.

When I first adopted financial modeling in a large studio environment, I realized its impact wasn't limited to just fundraising or board presentations. For example, before approving a marketing campaign, a model helped the team understand exactly how many new players we needed to break even. Equally important, it provided a clear timeline for returning value, so we weren't left scrambling if initial traction lagged behind expectations. Rather than asking, "Should we increase ad spend?" we could ask, "If CPI rises by 20%, what does that do to our projected revenue and runway?" This shift in perspective ensures every conversation about strategy stays focused on measurable outcomes.

Building a useful financial model starts with defining the specific strategic question: Are we creating a sequel title to an existing Game IP? Evaluating a pivot from a subscription model to a live-ops revenue model? Or planning a fundraising round to support global expansion? Once you have clarity, gather all the historical data you can obtain, including revenues, marketing costs, development budgets, MRR, and churn rates. If some figures are incomplete, use industry benchmarks, but document any assumptions you make so you know where the model is most sensitive.

Next, outline your key assumptions: projected retention, expected CPI on different ad networks, or anticipated server costs. Ground these assumptions in past performance or credible external research. Build the model (Hello, my dear friend Excel!) to project monthly revenue, expenses, and down to EBITDA and your break-even point. Tie your model to the cash flow forecast, so you can follow up easily on the projected outcome as close to real time as you can.

The final step is Scenario Planning. Slightly tweak one assumption, such as retention, by a few percentage points after a content drop, and observe how cash flow and profitability shift. Then compare it to a less favorable scenario where acquisition costs rise. This side-by-side analysis clarifies which levers deliver the most significant impact. Those insights guide decisions about hiring, marketing budgets, and whether to seek outside capital.

To be honest, though, the Excel model will get you quite far, but at some point, you will reach a place where you will have multiple contributors to the model, you need audit trails, version controls, and frankly, you just want to be able to calculate your scenarios faster. When you reach that point, I highly recommend getting a planning solution and integrating it with your ERP system. It will ease everything from headcount planning to cash flow forecasts, and ultimately will make your FP&A team a bit happier.

In any business, whether releasing a new game or scaling a Saas product, financial models are not optional. They turn ambition into actionable strategy by anchoring every choice in data. When you know exactly how a decision affects runway, profitability, and growth potential, you move from guessing to knowing. The clarity makes it possible to navigate risks, optimize resource allocation, and communicate with stakeholders in a language everyone understands: the language of numbers.