Hi all - was wondering if y'all have ever come across really, really detailed bottoms up, operations heavy models in your career. By Ops heavy I mean someone smart sitting out of your OpCos CFO office has made a "real" input heavy model.
In your opinion, have these kind of models given you more faith in your UW or have they only caused analysis paralysis?
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My fave approach is doing kinda 80/20 - 80% of revenue that matters / is material - go into detail and then simplify the immaterial / basic stuff 20% (for example)
I think it really depends on the sector. Doing home by home on a care home / elderly residential business might be possible up to point - but eventually may need to simplify by region (for example)
Although Im not in PE but great points by AVP above (I really like the Pareto principle). I think it's really dependent on the sector. E.g. for infrastructure sector (my area) the models are, frankly speaking, quite detailed. However, for more classical companies, I think, its all about key revenue driver's and how confidently you can forecast those at least 5yrs out. But it also depends on ur snr ppl -> i.e. how neurotic & detail driven they are. I personally dont think that forecasting every single topline detail of 100m business will be materially more accurate than forecasting a few key revenue segments.
what about very well documented sectors like say hospitality or renewables?
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