In light of the most lively discussion about how much modelling you do @ //www.wallstreetoasis.com/forums/how-much-modeling-do-you-actually-do , I AM curious...
Does your boss care about a model built using the "best-practice" methods? "Best-practice" methods include keeping formulas short, clear model documentation, minimize the use of macros, etc.
Would be interesting to hear from various folks from IB, PE to CF, etc.
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lol, I was just taught the best practice is just to do exactly as the person before you did it (so whoever else was staffed under the same boss under a similar project). I'm guessing this is how it works elsewhere too.
As long as people can audit it easily you should be fine. No one wants to read long formulas and your VBA code though. Hardcodes in blue, formulas in black helps as well.
Yes, coloring cells appropriately, formatting cleanly, and keeping formulas short all improve auditability and contribute to a "better" model.
Basically, it's an important part of producing quality (rather than sloppy) work
this is 100% yes for several reasons:
if you are on a live deal, your client may request the model. if it looks like shit, you may have to go and rebuild it. presentation is everything when it comes to banking
you will fuck your fellow analyst over if you don't format/color cells correctly using best practice rules. they will waste their time trying to trace cells where they otherwise be able to identify easily.
its hard for YOU to audit the numbers when questioned, will take you extra time especially if the deal dies and comes back
From a director's perspective, yes. I often run through the model, particularly when the analyst/associate doesn't quite understand some tax technicality or sensitivity impact. I also like to check the model's logic and kick around some sensitivities to see what does what. Sometimes I rewrite parts of the model.
If the model is crap or formulae unauditable because there's 10 if statements embedded in a line, I'm not a happy man.
I'm in a relationship-banker heavy area and I'd say 1/3 of directors take the same approach I do.
also... please, please, PLEASE footnote your hard coded numbers
Yes. In PE, at a minimum the senior guys are going to want something that is clearly laid out and easy to follow so they can quickly see whether a deal pencils or not.
More often than not, in PE your model will be shared with a bunch of other people (banks, lawyers, management, accountants, insurance underwriters) so your model definitely needs to be accurate, clear, and well documented. On one of my deals, my waterfall model even served as an exhibit to the SPA, so I had the other side and their lawyers poring over it in addition to the usual third parties. You can bet I made sure to keep my house in order on that one.
But even if others didn't care, you still should, because you are professional and you should take your work seriously.
ER = KISS (keep it simple stupid)
Is it just me, or are sell-side ER models (even the FS outputs) incredibly shitty? The formatting is always fucked up, and I'd say at least once a week I find inputs that are just fucking wrong. Depreciation is the biggest offender, but interest expense and stock-based comp gets fucked up pretty regularly as well. And I'm talking historical figures too, not just forward-looking shit.
No offense, I'm sure you're great at your job.
Don't firms have a template for each type of transaction?
I'm an outsider so I could be off base a mile, however it would seem like a waste I time to have to build Excel models over and over. Shouldn't it be a one and done deal. Basically if you are a new analyst here are your base templates .
You'd be surprised how quickly it becomes second nature to build a clean "best practices" model. Sure, you may have to jam something together sometimes to get it out the door, but after a few months you'll keep your formatting tight without even realizing because you've become OCD about all the stupid crap people have gotten on you about.
It's intelligent laziness. Get it right the first time and save yourself hours fixing it up later. So much time would be saved if people were more intelligently lazy.
Senior guys never see your models, just the outputs. After sometime (6m in or so) even your associates do not look at your models
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