As a finance and operations consultant, I’ve seen the unique challenges that aerospace and defense companies face firsthand. Given the rapid speed of innovation in the industry, the development of back-office processes can often take a backseat – particularly when it comes to financial modeling. Let’s take a look at how the disconnect between an aerospace and defense financial model and company innovation played out in my time working with a promising startup in the sector.

Preparing for Major Investment Round

This particular startup had successfully navigated the early stages of development. They had secured initial funding, established a solid customer base with both government and commercial contracts, and built a team of talented individuals. But as they prepared for a significant investment round designed to fuel their next stage of growth, their financial model revealed some vulnerabilities. Here were the key areas of concern:

Capex Uncertainty

Their capital expenditure (Capex) projections needed major refinement. While they had a general understanding of upcoming investments, more granular details were required to make informed decisions. Questions loomed about the optimal timing of equipment purchases and the financial impact of different technology options.

The Savings Imperative

As with most startups seeking additional funding, this client’s board of directors was keen to identify areas for potential cost reduction. The goal was to optimize their operating expenses without compromising their ability to deliver on their ambitious growth plans.

A Key Player on Leave

Adding an extra layer of complexity, the employee primarily responsible for managing the startup’s valuation model was about to embark on maternity leave. While we celebrated this wonderful life event, it created a pressing need for interim support to ensure a smooth transition.

Tailoring Financial Solutions for Operational Success

My team and I fully immersed ourselves in the startup’s operations, collaborating closely with their leadership to provide targeted solutions tailored to their specific needs. We addressed each of the key areas of concern and developed an aerospace and defense financial model that empowered better decision-making.

Demystifying Capex

We worked extensively with both finance and engineering teams to develop a more nuanced Capex model. This involved analyzing the timing of key investments, exploring alternative equipment options, and building scenario functionality to assess the financial implications of different strategic paths. The result was a model that empowered the client to make data-driven capex decisions with confidence.

Identifying Sustainable Savings

We conducted a thorough assessment of their cost structure, focusing on areas such as cloud computing, software subscriptions, and other operational expenses. By carefully considering the trade-offs between cost and functionality, we identified realistic and sustainable cost savings opportunities that could be integrated into their financial model without sacrificing performance.

Optimizing Adaptive Insights

The startup had wisely invested in the Adaptive Insights platform for financial planning and analysis, a software suite designed to integrate seamlessly with NetSuite. However, technical issues had hampered full adoption, limiting its ability to provide real-time insights. We addressed integration gaps, resolved data discrepancies, and ensured core forecasting tools were operational.

Results that Matter

The outcome of our collaboration was a resounding success on multiple fronts:

• Successful Funding Round: The startup closed their investment round within weeks of our engagement, a testament to the increased clarity and confidence their refined aerospace and defense financial model instilled in investors.
• Tamed Technology: Adaptive Insights became the valuable decision-support tool it was intended to be, with accurate reporting and forecasting capabilities that streamlined financial decision-making.
• Data-Driven Decisions: Throughout the project, we provided regular reporting to the CEO, CFO, and board, facilitating budget discussions and empowering the operating teams to make informed financial choices.

Key Takeaways for Any Aerospace & Defense Financial Model

My experience with this aerospace startup underscores the importance of having robust financial models in place, particularly during periods of rapid expansion or when seeking external funding. Startups often excel at big-picture thinking, yet the nuts and bolts of financial planning sometimes require specialized expertise and dedicated attention.

If your startup is grappling with similar challenges, consider seeking outside support. A fresh perspective, combined with deep experience in financial modeling, can help bring new insights and innovations to set your company up for future success.