Hi All,
How important is it in REPE to know how to create a Excel model from scratch, complete with waterfall structuring and sensitivity analysis, VS. being very familiar with any model if handed to you? I think I'm fairly comfortable using an advanced model once I can play around with it for 10 minutes. I understand the assumptions to make, and the triggers and the levers I can pull to show if a deal works and doesn't work. I've tweaked already-built models to my own liking and have used it to put in offers on deals of my own and to communicate with other GPs and prospective LPs.
However, I suck at building a model from scratch. I've taken several courses on how to do this, but I can't for the life of me memorize the individual formulas and create one with a blank workbook. I understand in theory what the formula should be but don't remember all the clauses that needed to go into it (especially around modeling Debt!)
I'm wondering if I should just take the L with trying to learn how to build a model from scratch or focus on my strengths and practice deal-structuring with models that already exist.
Any advice would be much appreciated. Thanks in advance.
Yes, you need to fix this. My advice, print out a complete model or save as PDF. Then open up a clean excel sheet and start building. Struggle with each cell and the formulas, links, and references. You essentially have an answer key, when you get all the same results given same inputs, you are done! Resist as much as possible going to the spreadsheet to look at formulas, only do so in a last minute pinch. Seriously, HARDCODE the number then keep going, go back and try again, last last last option is looking at the formula in excel.
Do this for all the main models you want to learn and you will be a pro. Note, it will take time and be frustrating, but will be fun when you solve the model. It is worth saying, you should understand the model and it's concepts before doing this, but it sounds like that is not the issue.
Being able to build a model from scratch is essential to being able to consider outside-of-the-box scenarios and identify when a model is broken. For example, if you have a model for an apartment development, and want to add in a ground lease, you will need to rewrite large chunks of the model. You will also need an intimate knowledge of Excel modeling to see if anything breaks in the process. Being able to use existing models is the first step, but being able to build a model is essential for continued career growth.