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Don’t build financial models that look like @$%*&

Header Image - Don’t build financial models that look like @$%*&
January 2019  |  Model Build

I had a meeting in Soho house the other day. It was a sunny Wednesday afternoon. It was packed with beautiful people, media and PR types, chilling by the pool. Seemingly their job are to see and be seen – a triumph of style over substance. I was there in my suit, a slightly overweight middle aged man, attracting nothing but awkward sideways glances from the beautiful people. What are YOU doing here with US?

It is a sad fact, but in this world, appearances can count for a lot. For many people, if it looks good, it is good. If it looks bad, it is BAD.

And so it goes with financial models.

I have seen many financial models, which are beautifully presented, but when you take a look under the hood at the substance, they are shockingly put together, badly structured and filled with horrific formulae.

And guess what……..people love them. Many senior managers do not have the time (or the inclination) to delve into the detail of financial models and so, if it looks good they will take as read that the answer is right and they don’t care about the underlying structure. As we all know, this often does not end well.

On the other hand, I have seen many financial models that are beautifully structured, the calculation logic is simple, robust, transparent and easy to understand, but…….no time and effort has been given to the look and feel. Output information has not been well laid out and charts and summary information are either not present or are poorly presented. Guess what, many senior managers don’t like them at all. If it looks bad at a superficial level, it is BAD. If the model looks bad, trust in its output will be low.

Do yourself a favour, build models with substance AND style. When it comes to financial modelling, as in life, good looks can get you a long way.

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Danny Leitch


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