From the course: Business Finance: Introduction to Financial Modeling
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Preparing for a successful financial model
From the course: Business Finance: Introduction to Financial Modeling
Preparing for a successful financial model
- [Narrator] Before you get too excited and start building your financial model, you need to consider the bigger picture. Hopefully, you plan to be in operation for quite a while, so this means that your financial models need to be built for the long term. How about we work with an example? Many years ago, I was reviewing a client's financial model, a 10 year lifecycle costing. It was kind of producing the outputs that it needed to, but I could just tell that the architecture of the model was fundamentally broken. By this, I mean, it was nearly impossible to make any changes to the model, and this is essential. Also, the stakeholders were questioning the integrity of the outputs. After spending some time working through the 50 odd Excel worksheets, I eventually figured out that this model was kind of like a mansion that started its life as a wee little cottage with each room progressively added on one at a time, as the owners decided that they needed more rooms. My client's model had…
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