How to deal with making mistakes in financial modelling
I am a 1st year analyst at a CRE brokerage.
I passed on a financial model to my superior before heading onto my annual leave. I asked for the new version today when I got back, and the director told me they found many mistakes and they had to do a overhaul of the model.
The feedback was given in a matter-of-fact way and not in a bad tone, so the relationship is still fine, but the message is that I made plenty of mistakes. I feel demoralised as I did my best as I did the model, and yet I didn't realise what I did wrong as I did it. TBH, I thought I am decent, but today I feel like I suck at financial modelling and how do I improve when I already did my best at it?
I wonder how do you guys deal with this feeling on days where you get feedback like this? It sucks.
Perhaps a cliche answer, but simply take it as a learning opportunity.
I’ve been there and it was hard to sit with the initial embarrassment and shock. But the most important part is how you take this feedback and improve. Look at each mistakes you made, try to understand what went wrong, ask questions if you still don’t get it, YouTube the functions/ concepts and practice. It also helped that I kept a list of mistakes I made and check it off until it becomes a habit. Now I always check my total so they tie, my parenthesis, and spell check...!
You are learning so it’s normal to make mistakes.
What kind of errors were found in your work? Were you building a model from scratch or importing data into your team’s template?
You are going to make mistakes in your career, especially as an IS analyst. Use whatever happened as a learning opportunity, and don’t be too hard on yourself.
Happens all the time. Just make sure to show humility instead of defensiveness when mistakes come up. Make sure you find out what mistakes your boss is referencing - only way you can fix it and improve going forward. Make sure you haven’t repeated it elsewhere in past work and if so bring it up immediately, you’ll feel stupid in the moment but not at stupid as someone finding it months after you’ve supposedly learned your lesson from it.
Lastly it always helps me to stress test my results before handing over a model. Simple example: I have a building with $1 MM NOI and cap at 5.5% rather than 5.0%. My change in value should be the $1 MM / 0.5% nothing more nothing less, take that simple concept and make sure the incremental value from leases, changes in budget, etc. all pass a mathematical gut check when looking at your return metrics. Sometimes it helps to have a template model you’ve vetted with someone else to serve as your baseline as you do this, you can even go so far as to check every single input you’re changing individually and see what it does to your outputs to determine if something in the model is working incorrectly. It’s not rocket science but there are a lot of variables that are easy to lose track of. This type of baseline comparison helped me isolate my mistakes a lot in my career. And if you’re building a model from scratch I honestly would expect to see at least some mistakes and many, many things that could be improved given you are still learning and a few years out of school. Lots of firms I’ve worked for/with have entire teams working collaboratively for weeks or even months to make institutional-quality models, so don’t be hard on yourself.
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