With this post, I don’t mean to give you any criticism. You have the right to do and be what you want, without harming others’
Why do I say that? Because I have come across cases where people told me that they have difficulty working with a model that is structured differently to what they thought was the right way of doing things. For example, recently I had a conversation with a very smart young man who told me that he had studied financial modeling using the FAST standards and now he has difficulty working with models that do not follow those guidelines. I was surprised and could not understand why he has this issue.
After my call with him, I thought about it and realized that when I learned financial modeling, they didn’t teach me about standards and rules for how to design and structure spreadsheets. It was only later when people like Kenny Whitelaw–Jones, Rickard Wärnelid, and others started introducing standards in financial modeling that I learned about them. When I started learning and adopting the standards it was enjoyable for me, because I knew that if these standards became widespread then it would make the work of a financial modeler much easier in long run.
Today, we are in a market where people are mostly aware of standards and Prof. Bodmer was even telling me about job descriptions where the employer indicates that they need “FAST modelers”. It seems to me that these standards have become like buzzwords. The problem when a concept becomes a buzzword is that people just take it as given and start following it like a religion. Your mind becomes accustomed to the notion and you follow the guidelines systematically. The worst thing is that you then tend to reject other structures that might say the same thing as what you believe in but with slightly different formatting or presentation. This is exactly what is happening in the financial modeling community today.
I should not forget the other extreme of those who think Excel is rubbish and that we should be replacing it with Python or Power BI. I‘m not going to go there — on this topic I just have to say that there are still so many of Excel’s capabilities that we are not using and there’s still so much room to improve financial models built within Excel.
So my advice to modelers who‘ve just started reviewing and building models is to be open to working with models that do not follow the same design and structure as those you were taught at school. Think of financial models like houses and the financial modeler as an architect. Not all architects build the same exact houses with the same exact design. They all respect the basic rules of design like balance, proportion, and scale, but then they all apply their own touch. So when you open a new model, don’t necessarily expect it to have the exact same design and structure as what you are used to seeing. What you should care about are the basic principles, such as is the model is well designed, with a structure? Is it flexible? Is it transparent? Are the inputs accurate? Is it simple? Is it running quickly? Can you use it in the long run for your transactions?
But whether the model is modular or a one-pager, vertical or horizontal, or whether the input cells are colored yellow or blue should not be a concern as long as there is a structure and it is applied consistently throughout the model.
