Scared Shitless: How Did You Actually Learn How To Competently Build Financial Models
So I get that everyone's read the WSO guide on how to walk an interviewer through a DCF, LBO, etc., and most of us took classes in college where we've built simplified practiced models of one form or another. But I'm about to start work (investment analyst at a REIT) next week, and as far as I know all training is going to take place on the job. So my question is - how did you learn the technical skills of your job and how long did it take you to master the type of financial modeling you do? Were you baptized by fire? Slowly given more and more sophisticated projects to work through? Designated training week where you learned the fundamentals?
I'm scared as hell that I'm going to be thrown into the thick of things upon my start date and crash and burn. I'm a quick learner and I get the gist of financial modeling but when it comes to assembling one from scratch I just wouldn't really know where to start and how to get all of the proper inputs.
WSO Technical Interview Guide. For sale under Courses.
It's fine. You'll learn on the job.
If you're really that concerned, go onto adventuresincre.com and watch the tutorial guides for every single model that they make.
The modeling itself is not rocket science, you'll be fine. If it's a REIT, there's a good chance you won't be doing anything truly 'from scratch' for quite a while. They generally have lots of templates and processes in place. It's a lot different than going to a boutique firm and basically re-inventing the wheel for the senior partners since the only person who knew excel was your predecessor who has left already.
The way to get ahead is take good notes when you first start so you are organized/remember things after someone explaining it to you one time. Then when you learn where all the files are, start looking through/reading the different models and materials you're given and deconstruct them on your own/come up with good questions to ask the senior analysts/associates training you. This seems like common sense but you would be surprised how many dumbshits there are that do not do this when they start.
Knowing where to go for what information just takes time. And sometimes this is what separates the good acquisition people from the bad ones if you are able to get asymmetric/better information than your competitors. This will make you lose some deals you shouldn't have won even if you wanted to, and will let you win some deals you wouldn't have otherwise.
Big proponent of dissecting an already made model. This is how I learned. That's how I learn best at everything though (ask my mother about her thoughts when she came home and saw the TV taken apart).
I imagine if you weren't asked to build a model from scratch during the interview you won't have to day 1 of a new job. Absorb everything you can and don't be afraid to ask questions. Different models will spit out different results for different reasons. Also, there's nothing wrong with being baptized by fire. A damned good way to learn, and learn fast.
It probably takes between 6-12 months to understand everything and be able to model out the scenarios. It takes probably another 6 to be able to do things really efficiently/close to perfect every time. It takes probably another 2-3 years in my opinion to really get savvy with respect to understanding capital needs, rent forecasts, expense estimates, etc. to the point where you are better at it than most. This also depends on how much ground you're covering. I started off in a single market, then gradually evolved to covering more ground. So while the subsequent markets each took less time for me to learn than the one before it, there's definitely an adjustment period. Takes time to understand the economic landscape, the major players, the properties themselves, local/state municipality impact and involvement, etc.
I wasn't going to say anything because I know I will get MS for it, but honestly a lot of this type of work/skillset will become obsolete in coming years. There is literally software that does everything for you.
Financial modeling skills shouldn't be a big concern. Learning how to pull data from software and analyze it is what will help you get ahead. Also learning various programming/querying languages and advanced analytics software is what every upcoming accounting/finance professional should be focused on.
The software itself isn't the value add from the education, it's understanding how the math works and being able to look at a cash flow and know what is legit and what is BS. The actual modeling part of it is just a stepping stone to learning the financial metrics/market knowledge in my opinion. One thing that won't be automated (not for a very long time at least) is experiential information. For example, let's say you have two buildings right next to each other, same general size, specs, etc, except that one of them is has inferior loading/truck maneuverability to the other, and therefore should command a lower rent. But the algorithms (at least as they exist today) wouldn't have a binary way to code for this, and therefore you'd only be able to know this from touring the building or knowing the market well going into it.
Every analyst starting out is in the same boat as you and every Repe God out there has been in your position at some point in time. Just make sure when you work on a project you really, really think about what you're doing and absorb the logic of it - even when they start you out with the lighter projects. Modeling is hypothetical in nature. You're building a model of what you think should happen according to certain assumptions. The model is the easy part, the hard part is understanding the value drivers and factors that affect those assumptions. There are a lot of analysts out there that are incredible with excel but can never be trusted to actually identify solid deals. Likewise there are many high level employees, making a killing that are embarrassingly unsophisticated with excel but understand exactly what to look for and avoid in a property. Don't let the modeling intimidate you, it's just a bunch of multiplication and division in a spreadsheat.
You'll get the hang of it, we all have faith in you
I actually consider if you ever were unable expected to produce your unit out of scrape while in the occupation interview you simply will not have got to working day 1 on the innovative occupation. Take up anything you might and do not worry so that you can check with problems. The latest models of is going to throw outside several success to get several explanations. As well, nothing at all is improper by using remaining baptized by way of shoot. Your darned surperb way to educate yourself, plus master speedy.
This may be the most grammatically incorrect post of 2018, congrats.