Projections and Modeling
Entrepreneurship is fundamentally about seeing the future, then making it real. Projections and modeling are useful ways to quickly envision a variety of possible futures, at least as far as your finances are concerned.
For biotech, we recommend learning risk-adjusted net present value (NPV). The (clinical) risks of development are well known, comparable financial data is easily available, and timelines are only modestly variable. By accounting for the future probability of success and the time taken to get there, you can compare “apples-to-apples” across as many scenarios as you have spreadsheets.
Whenever key strategic decisions are made, a financial model or set of projections (e.g. best/worst/expected cases) is likely merited.
While financial projects are typically taken with a large cube of salt, the process of creating them is highly valuable. Forcing yourself and/or your team to go through each of your assumptions and risks in mathematical detail will help to focus the team on what matters. The persuasive value of projections and models is almost always overestimated by the projector/modeler, but they are also good practice in negotiations.
How to construct a risk-adjusted NPV model. Other models and projection tools, and their relative strengths and limitations.