Creating a financial model
The Understanding finance section explains the process involved in building a financial model; suggests how to fund 'gaps'; and introduces endowments as a potential means of funding a Parks Trust.
A critical part of the parks transformation journey is understanding current and target financial operations.
A financial model will articulate the potential for increased revenues, cost savings and any funding requirements.
It will inform the viability of different management models, including a charity or Parks Trust, and allow you to clearly explain your business case and identify and reach out to potential investors and funders.
Before you can build a financial model, you will need to:
- Gather operational and financial data on your parks assets (see Understanding your assets)
- Split out the data so that it only contains the information you need
- Clean the data so it can be used for a financial model (e.g. check for formatting errors, inconsistency and mistakes in data input)
This requires dedicated time from both operational and finance staff within the Council (see Skills needed in the project team).
Once you have gathered the relevant data, you will need to build a financial model which clearly articulates:
- What the portfolio looks like today under “Business As Usual” (BAU)
- What the portfolio could look like in the future once it has reached its “Target Operating Model” (TOM)
- What it costs to get there
Building a financial model is an iterative process and is likely to build on principles established through public consultation, as well as taking in feedback from the operational team, stakeholders, and political decision makers. Developing the model may require external support (see Skills needed in the project team).
The animation below explains how the Parks Trust financial model could work.
Social Finance has developed a Financial modelling tool for those exploring the idea of a charitable Parks Trust. Download it from the link below and populate with basic information on your Parks portfolio to get an indication of what the portfolio could look like if you decided to transition to a Parks Trust. Before you start, read the accompanying User guide which provides detailed instructions on how to populate this tool and interpret the results. The User guide appendix provides more detail on how the results have been calculated.