Financial Modeling Showdown: A Game to Teach the Basics of Entrepreneurial Finance

Financial Modeling Showdown: A Game to Teach the Basics of Entrepreneurial Finance

If your students get bored (or anxious) when you start talking about finance, you know what’s waiting for you:

Disappointing and unrealistic financial projections.

Financial modeling is incredibly difficult to teach in an engaging way.  That’s why, in addition to our Financial Projection Simulator, we’ve developed a new game to play with your students that makes finance fun and memorable:

The game works in two phases:

  1. Theory: Introduce a lightly competitive game that teaches students the core elements of a robust financial model
  2. Practice: Using the same concepts they learned in the game, students create a financial spreadsheet for their own business model

Check out this quick demo / summary video of the Financial Modeling Showdown:


STEP 1: CREATE TEAMS

The first step in the Financial Modeling Showdown is to divide your class into two teams. Before revealing what choices students have for their teams, you’ll want to make big deal out of the fact that these two teams are mortal enemies and “disagree on just about everything” with the implication that the teams may be political in nature or represent major cultural differences.

Then you’ll tell your students to pick which team they morally align with most:

  • Team Pineapple: People who believe pineapple is a perfectly reasonable pizza topping
  • Team No Pineapple: People who believe pineapple has no business on pizza

Tell your students you’re going to play a game to determine if pizza topping preference is a predictor of entrepreneurial success.

This lighthearted way to create teams is quick, evenly distributes students, and sets a fun tone which is especially helpful for financial modeling exercises.


STEP 2: OPTIMIZE PROFITS

Tell your students they can put their pizza toppings preferences aside for now because they are all now inventors of a new product:

They’ve created a solar-powered cell phone charging case and their goal is to bring it to market in a way that will result in the most profitable financial model possible.

Students will then answer financial questions about their new product via a Google Forms survey (e.g. “How much will you charge for your product?”, “What do you want your salary to be?”, etc.).


STEP 3: THE WINNER IS…

As your students answer the financial questions, behind the scenes, the survey is automatically averaging the responses by team.

That means, as an instructor you’ll get a report that says (for example) on average:

  • Team Pineapple members want to charge $29.42
  • Team No Pineapple members want to charge $42.10

…and this is where the competition begins!

“It looks like Team No-Pineapple wants to charge more for their product. Of course, the more you charge, the more revenue you can make, so I’d say say they’re winning at this point. Next, let’s explore what effect conversion rates have on revenue, and we’ll see if Team No-Pineapple is still ahead.”

And just like that, you’re using financial vocabulary in a way that keeps students engaged because you’re using simple examples and leveraging a competitive game mechanic.

You’ll go through each of the major elements of a financial model this way, covering topics like:

  • Customer Lifetime Value
  • Customer Acquisition Costs
  • Salary, Taxes, and Benefits
  • Real Estate Costs
  • Unit economics
  • Etc.

And at the end, you’ll get to declare a “Winner.”

Or rather, you’ll get to demonstrate to students how hard entrepreneurship is to win. While one team will technical “do better” than their other team, it’s most likely that neither team will be profitable:

The game ends this way because we want to show students that:

Designing a financially sustainable business model takes iteration and experimentation.

Like everything in a business model, our initial assumptions are often wrong…and that’s why we do financial modeling!

Financial modeling is a tool to help them understand what assumptions they’re making about their business model that might set them up for failure.

If they begin modeling the finances for their own company, they’ll be able to see if they’re on the path to riches, or the path to ruin.

And this is the perfect segue for students to…


STEP 4: BUILD THEIR OWN MODELS

To apply the principles they learned playing the game, each student gets their own spreadsheet to model their business’s finances:

The results are financial models that are more realistic because students actually understand the concepts they’re based upon.


TRY IT THIS SEMESTER

If your students get overwhelmed by financial modeling, this exercise will help. Combining a competitive game with real-world financial modeling tools, students learn the core elements of a financial model in a way that keeps them engaged and results in realistic financial projections.

Get the Financial Modeling Showdown Lesson Plan

We’ve created a detailed lesson plan for the “Financial Modeling Showdown” exercise to walk you and your students through the process step-by-step.

Get the Lesson Plan

 

It’s free for any/all entrepreneurship teachers. Please feel free to share it.


What’s Next?

In an upcoming post, we will share exercises shared with our TeachingEntrepreneurship.org community by Business Model Canvas creator Dr. Alexander Osterwalder!

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