3 statement LBO test from scratch (1hr time limit) - How do you model faster?
Currently preparing for a 3 statement LBO model test (from scratch) that has a 1 hour time limit. Have heard that I'll need to manually input historical financials from a physical CIM, so that will eat into the time as well.
I've tried cranking out 3-statement LBO practice tests over the past days but here are my results:
- PF Level 3: 2hr15min (135min), PF recommended time was 3hr from scratch
- PF Level 4: 2hr40min (160min), PF recommended time was 4hr from scratch
- WSO PE Course "UMM Associate Test": 2hr30min (150min)
Accuracy-wise, I haven't seen any glaring issues, but the amount of time it takes me to build these models is a bit concerning, even though I'm technically within the PF suggested time limit.
I know that the obvious advice here would be to keep practicing, but do any of you have tips on how to more quickly improve my modeling speed? Really want to make sure I can finish the 1 hour model test well within the limit and have some time to check my work.
Also for context, I'm a bit of a slow typer (~40wpm) but unfortunately that's not something I can work on in the near-term given the model test will take place over the coming 2 weeks.
I wouldnt worry about formatting until the very end if that slows you down. Also make sure to just copy / paste the debt schedule for each tranche to save time.
is this for 2025 or 2026 associate?
For an immediate start actually.
And yes, I try to do minimal formatting but also enough formatting for me to not get lost in my own model. I do the copy pasting for my debt schedule as well but makes very incremental difference in timing and could get tricky if your tranches each have very different features. Good tips for most people nonetheless.
I don’t know how many more practice reps it will take for me to finally break the 1 hour barrier.
General guideline that may be an obvious one - given the time constraint, focus on basic functionality over depth.
Get to something that works as quickly as possible. Once you have something that flows at the barest minimum level, you can go back and add depth to assumptions, optional builds, etc.
Also, to clarify, is this an actual upcoming 1-hour interview or some sort of personal goal? Because I think a 3-statement 1 hour model is a pretty aggressive modeling interview. I'd expect at least 2 hours.
What do you think is reasonable once on the job?
Recently made the jump over to the buyside and am getting crushed by my partner who’s an absolute maniac in excel. It’s taking me 1.5-2 hours to build a model from scratch depending on the complexity and I’m being told that I’m too slow because he can do it in 45 mins.
Your timing sounds pretty reasonable, though imagine you'll get maybe 20% more efficient once you get more comfortable with your firm's template.
Thinking out loud (and assuming you start with an existing template), it's probably 5-10 minutes of entering historical financials / management case, 20-30 mins. building out a thoughtful P&L with assumptions, 15-20 mins. linking up your LBO analysis/FCF build/debt schedule, 5-10 mins. on capitalization assumptions (purchase price, debt load, AVP, entry/exit multiples), 10-15 mins. of checking. Looks like that adds up to 1-1.5 hours, so my math 20% above probably foots.
I'd also add that any derailments will add time (e.g., weird fiscal year, odd financial trends to investigate, M&A to pro forma, revenue buy-in but EBITDA exit, blah blah blah).
His "45 minutes" is probably some back of the envelope little paper LBO versus something presentable to your committee (if I had to guess).
Question for you given you are very helfpul for technical questions on this site. In an LBO modellingtest where a three-statement model is required, would your firm or some firms penalise you for including DTL in your EV to Equity bridge at exit to get to sponor proceeds?
Few things that helped me speed up on model tests:
Build the model structure ahead of mechanically filling out the formulas (i.e., lay out the various items / assumptions you want to model first). For me it helped avoid context switching between high level thinking and the specific formula I was writing.
On formatting, just color code enough so you can troubleshoot quickly if something looks off and steal as much formatting from what they give you as possible. Then on model outputs (e.g., returns analysis, sensitivity tables) predetermine the format you want to use and practice so you don't have to think about formatting.
On checking, think through and practice sense checking as you model to take pressure off feeling like you need a large block at the end to thoroughly re-check. Some (maybe obvious) examples are things like 5 year CAGR in line w/ annual growth rates, margin expansion passing the eyeball test, debt waterfall flowing properly, cash balance above min cash, etc.
For the balance sheet, depending on how much detail they give you (e.g., if they give you a public company 10K) be aggressive about collapsing things into other assets and other liabilities.
when you were starting as an analyst, what was the time/difficulty expectation for LBO modelling?
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