Determine the business drivers or triggers of the model
Triggers are what we like to call the main driver/s of a business. In most businesses there is one or two key metrics that will drive what happens in that business. So for example:
In a mine it may be the tons mines
Mobile companies might be driven by number of subscribers
Engineering company by number of projects
As much as possible we try and link ALL calculations, either directly or indirectly, to this driver.
The reason we do this is so that when we come to running sensitivities, we can change these driver/s and the whole model will scale up or down and give a fair reflection of the likely result.
This concept is easy to apply to direct income and costs. If we make widgets, the sales is simply the number of widgets multiplied by the price, and the cost of sales is as easy to calculate. More widgets sold means more sales and more cost of sales