By Anurag K

Key to really FAST modelling!

It took Fred three months to build his first model, needless to say he didn't get lot of sleep during those periods. The second model, Fred started, though a different business, large parts of the model required the exact same logic as his previous one. And the same happened in the third model as well. Fred started wondering, should there be a universal template which consists of all the logics he needs very frequently. Will this help him in the long run?

Templates are not the answer!

A template model is by nature a static spreadsheet designed to achieve a specific purpose, which in some cases may be suffice, but in many cases requires a lot of ongoing manual maintenance, which is both time consuming and risky relative to automation and modular development. This is explained as follows

a) Categories: Using templates require that a template either includes many spare (i.e. redundant) categories, or that categories are manually added when required. Manually adding categories is not only painful but high-risk procedure, such that even adding a single additional revenue category requires many manual edits and creates a risk of the financial statements being made erroneous if not done properly. Also, creating key person risk in case others haven't worked closely on the model.

b) Time series extension/rolling: I'm yet to see a template which simply allows any model user to easily roll forward and/or extend time series sheets, meaning that as with categories, templates need to be built for a specific time series construct, include a large amount of redundancy, or manually be edited by an experienced model developer.

c) Functionalities: Without manual editing/customization, templates are limited to the functionalities included within them. For example, a template will or will not include a DCF, and may or may not allow for driver-based revenue forecasts. If the template does not include a DCF or driver-based revenue forecasts, these can only be added by an advanced model developer, once again at a high time, cost and risk investment.

d) Templates are generally specific to a sector and not generalized. It's difficult to adapt a template to a change the business context, as these templates are hardwired for what they are built for. For instance, an Oil & Gas model will not work for a SAAS model.

So what's the key to fast modelling?

The EModel Factory
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