Model from template or scratch?
I’m an intern and I want to learn how to do DCF and LBO models and have them as a project form my internship, should I start from scratch and follow other models or videos like WSO or would it be easier to work on their templates? which one is better for learning and adjusting for the first time?
Start from scratch for your first run through.
Start from scratch. This is the only way you will face modeling obstacles along the way and how to work to fix them.
After you do the plain-vanilla model from scratch, start implementing enhancements / complex formulas. At that moment, you can borrow some ideas from third-party templates.
I’m not a modeling expert, but I actually recommend using a template the first time. If you’re really starting from 0, I found it helpful to follow a template so you can see everything once and have some reference then practice building from scratch
Would model from scratch, if you are not require to show a standard output. Our summers can do whatever they want, given we only care about the returns and recommendation.
Would do this for whatever models you want to build, LBO, DCF, etc. Find 2-3 good precedents or templates. Spend a bit of time mapping it out in your head, seeing exactly how the assumptions flow, how the (minimal) tabs work together, how things are laid out. Diagram it out on paper. Be able to talk through how it works if someone asked you.
Then, think of what layout makes most sense to you, what would be cleanest. Get a blank excel and build, cross referencing the precedents as you go through. Once structure is in place, make sure it’s color coded, headings are clear, extra rows columns are deleted.
That is now your model and is it YOUR model. You know how it flows and how things connect. It will be robust as it has the best of all precedents. now when you have to create a new case at 1am, you’ll be glad you can do it in 15 minutes because you know exactly how it works vs. trying to find the right tab in a nasty precedent that is 21mb.
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