Excel Hacks for Financial Modelers to Simplify Valuations and Save Hours with Charles Keepman

Whenever you're building something, you always think, oh, I'm going to remember this. But you never do. As soon as you open those up, you just know that. Really hard to figure out what was going on. More time fixing than building a new one.

Do you believe financial models are the number one corporate decision making?

I hope not. I think what I've learned the most valuing a company.

Where do you typically start?

You look at their assets, comparable companies. Then you look at an income approach. In the beginning of my career, I always thought it was the right thing to just make the formula as complex as possible. Now I'm the opposite. I would rather create tons of helper rows or helper cells. It's a bigger measure of somebody's intellect if they can take something really complex and chop it into little parts to make it work. Excel's just such a blank canvas that you can do anything. We're all kind of geeks over here. We all love Excel. We've spent a lot of time.

If you could offer one piece of advice to our audience to be a better financial modeler, what would be your one piece of advice?

Don't fall for the Illusion of precision by Over Foreign.

Welcome to Financial Modelers Corner where we discuss the art and science of financial modeling with your host Paul Barnhurst. Financial Modelers Corner is sponsored by Financial Modeling Institute. Welcome to Financial Modelers Corner. I am your host Paul Barnhurst, AKA the FP and a guy. This is a podcast where we talk all about the art and science of financial modeling with distinguished financial modelers from around the globe. The Financial Modelers Corner podcast is brought to you by the Financial Modeling Institute. FMI offers the most respected accreditations in financial modeling and that is why I completed the Advanced Financial Modeler earlier this year. This week I'm thrilled to be welcomed on the show by Charles Keepman. Charles, welcome to the show.

Thank you. Excited to be here.

Excited to have you. So first question for you. Tell me about that worst financial model. I know you have to have a horror story. Worst one you've seen or built or dealt with.

Oh man, I, I can't remember, you know, the exact one necessarily, but I just remember whenever things were unorganized, it was really hard to figure out what was going on. Tons of hard coded cells, formulas not being, you know, organized in a good fashion. And as soon as you open those up, you just know that it's might be more time fixing than building a new one.

Yes, I know exactly what you're talking about. You open them up and you Start trying to figure them out. And you're just like, I could spend a week figuring this out, and I still not might. May not like the way it's built. Or I can just start over.

Exactly.

So what do you usually pick in that case? You typically starting over?

I would usually rather start over.

I. I agree with.

Especially when you're working. Like, it's hard when you're working for a client, especially because they may be really proud of it and not understand why you don't like it or whatever it may be.

But, yeah, I know a guy, he's like, yeah, they were pretty proud of this. And it had. He said something like 50 workbook links, and one of them was seven deep. So to get to the base file, took seven different workbooks that they had linked through. And I'm just like, no, that's not continuing. But he said, yeah, they weren't too happy with them as he rebuilt the whole thing, and. Cause they were proud of that. I'm like, oh, no, no, no, no. That's a nightmare.

Yeah, that's not ideal.

So what's been your main takeaway from those kind of horror stories, those models that just are terrible?

I think what I've learned the most is to follow best practices as much as possible, but also annotate when you deviate it from it. Because I feel like building a model is a lot like the English language in the sense that there's a lot of rules, but probably just as many contradictions to those rules. And so as long as I can annotate somehow, whether it's, you know, highlighting, throwing a comment in, or just putting a note off into the margin, I feel like that's the best way. Because whenever you're building something, you always think, oh, I'm gonna remember this. It's like when I set things down, I'm gonna remember where I put this. But you never do. I never do.

I should say I don't either. My wife's always having to find stuff for me.

Yeah. So from that perspective, I just try to annotate as much as possible in the moment to save myself time in the future.

And what would be your top. Maybe two or three rules, kind of your guiding principles with the model?

I think there needs to be organization. So, you know, when I started off my career at Ernst and Young and learned a ton from their modeling team, and it was kind of like, you know, inputs, calculations, outputs. And if you just follow that organization, you know, that's. That's rule number one. Rule number two is make sure. That all of your formulas are, you know, auditable. And I would rather, in the beginning of my career, I always thought it was the right thing to just make the formula as complex as possible and be efficient with the space in Excel. But now I'm the opposite. I would rather create tons of helper rows or helper cells to get me to the ultimate conclusion. That way somebody can just spend way less time auditing it, you know, f2ing it and figuring out what's going on.

It's amazing how early in our career we think complex is cool. The longer you spend, you're like, just keep it simple. And the truth is, simple is often harder. It is, you know, it's, it's kind of funny. But that's why I say, I say it all the time. I'm like, simple is hard, complex is easy. Don't believe me? Try figuring out how to do a lookup table in a formula versus some nasty nested if. The nested if is easier, but nobody wants to audit that or deal with it.

Exactly.

Tell our audience a little bit about your background, you know, kind of where you started career, what you're doing today. Give us that, you know, two, three minute rundown.

Yeah. So I started Ernst and Young in their financial modeling group. It was, it was an awesome experience. I loved it. In fact, we, I probably would have stayed longer had not, you know, a few things kind of happened in my personal life that made, it made sense for us to move. But it was, it was a great experience and I loved it. It was challenging from the perspective. I never felt like I was getting good at anything specific besides just learning more and more formulas and, you know, complex, you know, series of formulas, I should say. But it was, it was a great experience. And then from there I went to Economics Partners, which is now known as Ryan Valuation. And so I'm mainly doing business valuations at this point. There's still a good amount of modeling from the perspective of we're building, you know, valuation models, but it's a lot more templatized as opposed to custom built from scratch or, you know, reviewing really complex big deal models. Like, you know, some of the things I used to do in the past.

Makes sense. That's helpful. So you've pretty much spent your whole career modeling from what I can tell. Right. Is that pretty fair statement?

Yeah, I guess so. I mean, I mean, I wouldn't say that, you know, the modeling is not complex in what I'm dealing with now. But yeah, I spent, I spent every day in Excel for the last who knows how long.

Yeah. So did you always know you wanted to be involved in financial modeling and kind of what you're doing or when did you know, hey, this is where I want to be, this is what I like doing?

That's a great question. I think growing up I always thought I would be in finance, given that my dad was in finance. And I, you know, I learned a lot from him. I would intern for him over the summers when I had availability and he was willing to take me in college and high school and things like that. But, but then when I went to college, I always thought I would go out and kind of prove myself and then come back and work for him. But it just, it just, I realized that I really liked a lot more of kind of the financial modeling side rather than just, you know, the lending side, which I still really enjoy that side, but he was more on the lending side. And so at ey, I really enjoyed working with all these different companies and then economic partners and Ryan Valuation, which is the name of the company today. I've really enjoyed just learning about all these different types of businesses and modeling out kind of, you know, whether it's explicitly or kind of mentally in order to select the property, you know, comparable companies. But I've really enjoyed figuring out how, how all these different companies work. And I think that's why, you know, I joined this company thinking I'd be here for a couple years, and that's why I've been here for almost seven now, is because I've just really enjoyed it.

And you know, if you find somewhere you enjoy, why move? If you're happy it meets your family's needs, they pay you appropriately and you feel challenged, you don't got to move. That's the beauty of it, right?

Yeah. Yeah. So I feel really lucky from that perspective.

That's great. It's, it's always nice when you find what you love to do. So I'm curious, what's your favorite part of modeling is that process of understanding different companies? You know, putting the model together in Excel or what is it that you really enjoy about it?

I think the most enjoyable part is not necessarily what I do on a day to day basis, but it's, it's laying out templates to create efficiencies and it's making things that are complex really easy to understand. I mean, even in my personal life, there's a lot of times where I need to build things out just to be able to make a decision whether it's you Know, buying a house or making an investment or whatever it may be. And I think the most enjoyable part is building something that's dynamic. Because, you know, growing up you had the, you know, the, the calculator, right? And it was, it was great. It's a great tool. There's one on your phone now, right? So you've got one constantly in your pocket, but it's not dynamic. And I think that's what really drew me towards models is the fact that you can make it dynamic such that you're in a conversation and you're, you know, trying to decide, or somebody's trying to decide whether or not to invest in something and they say, well, what if this happened? And the best part is that you've already theoretically figured out that potential question ahead of time. And you say, oh yeah, well, if the, you know, if the discount rate on your discounted cash flow model goes from, you know, 20% down to 15%, here's how it affects the ultimate value. And just that, that ability to be dynamic is, I think, the, the magic.

To me of modeling that, that ability to kind of do those sensitivities, the scenarios, make those adjustments and see what will happen. It's like when you, you create a table and you can be like, all right, if we can get EBITDA up by two, two more points, or it makes this much difference in value or whatever it may be, or hey, if my loans this rate, I ain't ever paying this thing off, or whatever the answer is, yeah, which, which we actually.

Do without a law, right? I mean, in our business we do a lot of compliance based valuations for financial reporting and also for tax purposes like trust, state or whatever it may be, related matters. And, but there's a subset of our practice where we're just doing purely strategic, helping people kind of review alternatives of, well, what should I do with this business? Maybe they inherited it from their parents, or, you know, maybe they started it a long time ago and they've just been running it and it's always paid the bills, but they're trying to figure out, well, am I being a good steward of this business that either was given to me or I've created? And it's really fun to be able to, in those circumstances, show them the sensitivities, right? Like, hey, if you can prove that your company should be in the higher end of the range of an EBITDA multiple, and here's how, you know, maybe you could do that from a qualitative perspective, here's what that means.

Quantitatively, if you can get a 12 multiple instead of a nine, that means, you know, 600,000 or whatever. Whatever the number is.3 million or. And it's like, oh, wow. It makes a big difference. Because the qualitative is what helps determine where you get in that range.

Yeah, absolutely. And that's something that, you know, in the beginning of my career, I think doing what I was doing, there was a lot more quantitative stuff. Right. We were dealing with large data sets. We were in Excel. Sometimes we're beyond Excel and Access or Power bi, because there's just too many, you know, too much data. But it was all kind of quantitative. And now the quantitative stuff in evaluation is really not that difficult. You know, it's a multiple of ebitda, multiple of revenue. Discounted cash flow can get a little bit more complex, but at the end of the day, it's really just a present value formula. And so there's a lot more, you know, cultural aspects and qualitative aspects that really have huge differentiating, you know, effects on the ultimate conclusion.

Yeah, I mean, at the end of the day, if all you're doing for evaluation, I'm careful to use the word all you're doing. I mean, I know it's work, but if you're just using comparables, you know, that that's not near as complex as this big M and A that has a bunch of debt with it, trying to combine two companies and have all these people doing due diligence and all kinds of adjustments. Right. That's a whole different level than saying, okay, based on the quality, based on everything. You've given me a few adjustments. Here's where we're looking at. And it's really more that discussion around what does that mean and what's the difference between these numbers, how do you think about it, versus trying to get that big, huge model to turn out what people want, and then having the discussions around, we expected it to be valued around this. Can we make these adjustments? You can. Doesn't mean they're realistic. And then we've all been there where there's times very much realistic, but there are times you're like, I don't know that you can ever achieve those. You know, obviously, if you can achieve them, here's your value. But Price should challenge those assumptions a little more.

You know, granted, there are some times where it's like, hey, if this is the result you really want, then here are the inputs that will get you there. Right. And sometimes that's important to know as well. And that's really where the, you know, where the rubber meets the road. It's Sometimes it's known. Okay, well, what do I even have to do to potentially get there?

Yeah. And then charting out a path to actually get there. I had one. It's kind of funny. My boss told me I wasn't there at the time. The merger ended up happening later. But there are company. Couple companies that were being looked at, and I had a boss one time tell me, yeah, basically that deal was sprinkled with, what do you put it? Unicorns and rainbows. It never happened. Lie. Because that was his words. Like, that's how it was spring. I'm like, okay, yeah, good thing it didn't happen if that was the case.

Yeah. Oh, definitely.

So I, I'm curious, what's the. You mentioned, you know, kind of using Excel in your personal life. What's the funnest or most unique thing you've used Excel for in your personal life? You built any unique models or kind of fun things that you've done?

I've bought like a. Like a couple of real estate properties. And so definitely using it from that perspective to benchmark against, okay, well, if I were to just put this money in the market, how would it do versus, you know, what benefits would I get from investing in, you know, a rental property? So it's, it's that. And I think, I guess the other thing that I was proud of recently is I had. I had a line of credit, and there was a couple of different projects that were all on the line of credit at once. And I had to figure out what portion of the balance, what portion of the interest was attributable to each project when these projects were drawing down and paying off at different times. And so it's not necessarily that complex, but it's one of those things where, you know, if all the projects were just completely me, would it really matter for me to, like, it probably wouldn't make sense from an efficiency perspective for me to spend the time building it out and figuring out what's going where. But when you have a variable interest rate and multiple partners, it's crucial that when you go through that process, you have to do it right in order to make sure that you're being fair to, you know, all the other parties involved.

That makes sense. And as you were saying that, I kind of had to laugh. I'm like, I can tell. I have a hardcore finance guy is all the. Everything is kind of that finance and valuing it and home. And I had one guy tell me he built a bathroom tracker in Excel. Yeah, he was tracking along, like, so it would go to the bathroom or something. Another one was. He built something to track. There was a show and he started noticing they swore a lot in it. So he built a tracker to count how many times it score in the show. So your, yours are tame by comparison to some of the fun ones I've had.

Oh, that's funny. Yeah, I guess to beat a game.

Show, if I remember right, yeah, maybe.

I need to get a little bit more adventurous.

So you need to get a little more creative in your Excel. You can come back in six months and tell us some, you know, crazy thing you built.

Well, life always tells me I need to focus more on my creativity. So this is, this is the universe, you know, continuing in that direction.

Yeah, just tell her she's right.

I mean, she is, but yeah, I.

Was gonna say, if you want to be happy, just tell her she's right. I'm gonna get myself in trouble if my wife listens to this episode. All right, moving on to the next question. So when you first start, you know, to create a model valuing a company, where do you typically start? Kind of maybe talk a little bit about that process.

Most companies are going to have some sort of template model, right? They're, they're going to have already built out kind of their efficiencies. But assuming you didn't have one of those, I mean, I think the first place you start is really taking a step back and thinking, okay, well, how will this company be valued? And really, there's three main ways, theoretically that a company's valued. You look at their assets, you look at and mark them to market, like their balance sheet, and just market to market. You look at the comparable companies and figure out if some sort of multiple of revenue or EBITDA or, you know, price to earnings or whatever it might be makes sense. And then you look at an income approach, and ultimately, at the end of the day, the true value of something is what its future cash flows are going to produce, Right? And then discounted to today from the perspective that a dollar today is worth more than a dollar tomorrow. But the question is how much more. Right? And that's where your discount rate and time value of many comes into play and people's preferences and all that kind of stuff. But I think that, you know, the, the first place you start is just trying to figure out, well, what type of business is this? How does this business trade in the marketplace? And, you know, where does it look like if it's a really early stage business. Well, it might not have any revenues yet and so you're going to have to do some sort of cost or asset approach and a lot of those assets probably aren't even on the balance sheet. If it's a, you know, super stable company that has really consistent growth and margin characteristics, then, you know, an income approach probably makes the most sense. If it's a company that, you know, has some combination of, you know, growth and margin that's not extremely set in stone, well, maybe you're looking more so at market approach and trying to figure out how they compare to other companies on a go forward basis.

Yeah, makes sense. I mean, obviously a lot depends on the company, the size, the stage, the industry, etc. For you personally, is there a favorite method you like to use? Like saying all else equal, do you tend to like to do a dcf? Like if you were buying a company and you, you know, any method could work. Is there one you would prefer that you like to use that you think is kind of your favorite?

The nerd in me loves the discounted cash flow because that's right. But kind of like the person inside of me that craves like the simplistic, like, easy to understand. I love the market approach because it's like buying a car, right? You figure out what you want and then you go look for it and you compare it to all of the other cars and you adjust for color and mileage and features and all that kind of stuff up. It's the exact same with the business, right. You're looking at, at an industry, you're trying to figure out how comparable it is and the best way to compare it.

Yeah, I mean, it's kind of like when you buy a home, right, they do comparables. This many square feet, this many bedrooms, this big in the yard, this many bathrooms as a pool. It doesn't have a pool. You just go through a list, a bunch of things and say, okay, based on location, based on and everything else, it should run you X, you're going to pay roughly this amount and then you look at all the ones that are way outside that and you go, what happened? Why am I paying this?

Totally.

Yeah. Do you have a favorite industry? Like is there a particular industry you like to work in?

Reason why I've been here so long. I mean, I say so long, but the longer than I thought I would is because there's not an industry that I'm partial to necessarily. But the fact that I'm constantly seeing these unique businesses across multiple industries I think that's what really is exciting to me is understanding how each industry and each kind of business model would command different types of desire by folks purchasing them.

What's kind of the maybe most unique business you've seen? Like one that, like, you really like, wow, that's different. I would never thought of, you know, that being a business. Have you seen one that maybe kind of jumps out to you?

Oh, for sure. I mean, I feel like it's a. It's on a monthly basis where here in the office, there's, there's some wild company that, you know, we're so surprised by. I think there was one that was trying to rent silverware on like a subscription basis. I thought that was pretty interesting. And I think the more interesting piece of this is not the crazy businesses we see. It's the ones that actually succeed and the ones that don't. It's not always what you would imagine. And I think that's where the real, the real kind of interest occurs. It's like there's no way that going to work. And then all of a sudden they IPO for some crazy price or, or, or like, or like, oh, yeah, that'll totally work. And then they go under it and it's. I mean, yeah, maybe there's a reason I'm not in venture.

I remember I did an entrepreneurship undergrad and we had this class where the teacher had us work with companies that had come to him putting together some valuation stuff. I can't remember what the document was called now. It tells you how old I am. Yeah, this is 25 years ago. And I remember we had one of them and I missed a meeting because it was the teacher and the other person could only meet at the time. We all thought it was a bad idea. And we told them as they ended up raising the money they wanted. Last I knew they were doing very well. I'm like, that was what I know. Not a whole lot.

Exactly.

So you just, you never know. I mean, I talk to a lot of startups around FP&A software, and the one thing I've learned is just how important the team is. So much of it is, you know, great founder over great technology. Give me the great founder, great management team any day. Now, obviously I want both and I want it at a low price, but that's usually not reality.

Right, of course.

You know, I'm curious, on average, how much time do you spend kind of working in Excel versus working on a deal?

What do you mean by in a deal or on a deal?

You know, like talking to people, working with the business, not not working on the model kind of, you know. Right. Because you have a lot of other stuff there's telling the story. There may be talking to people, asking questions versus the actual model building or the, you know, the fun time you get to spend in the spreadsheet.

I would say that the majority of time is really spent tweaking assumptions based off of the research associated with those assumptions. You know, I think we're all kind of geeks over here. We all love Excel. We've spent a lot of time, I mean, if you summed up the hours, it's insane perfecting as much as we can our template model such that it's as efficient as possible. And so it still takes a lot of time to build out just because there's all the financials and the capitalization table information and all that kind of stuff. And especially when you're building like complex waterfalls and option pricing models to determine the value of common stock when there's preferred stock involved. It does take a lot of time to make sure that number one, that you get it in there, but mainly that you get it in there. Right. And there's no errors in it. But the majority of the time I think we spend mainly debating kind of on like the internal deal team, if you will, the assumptions and whether the, you know, the multiples should be 6x or 7x or whatever it may be. Because that's really where people are paying us for this. Right. And I think that especially with AI and software's coming out, like, you know, you could probably do a lot of this with a software, but there's that human element, the, you know, the art, if you will, associated with the science that the gut check, the ability to kind of put into each valuation what we've seen in all of the other valuations and what we've seen in company purchases and so forth, that is really hard to nail. I feel like in some sort of software AI, FP and a guy here.

And as you know, I am very passionate about financial modeling and the Financial Modeling Institute's mission. I have been a huge fan of the FMI for years and I was super excited when they decided to sponsor the Financial Modelers Corner. I recently completed the Advanced Financial Modeler certification and loved the entire experience. It was top notch from start to finish. I am a better modeler today for having completed the certification. I strongly believe every modeler needs to demonstrate they are a qualified financial modeler. And one of the best ways to do that is through the FMI's program earning the accreditation will demonstrate to your current and future employers that you are serious about financial modeling. What are you waiting for? Visit www.fminstitute.com podcast and use code PODCAST to save 15% when you enroll in an accreditation today.

Yeah, no, I hear you. That's what a lot of people say. There's the human element and the judgment and, hey, does this pass a sniff test? Like, we've all seen times, if someone puts an assumption and you're just like, no, sorry, it's just, it's not doable. Like, you know, in 2022, 2021, if you assumed 1% inflation next year, everybody's going to look at you like, I don't know, we just came through 7%. One might be a little off. Right. Or. And so I'm with you, I think. And that sniff test is so important, that ability to look at something and be able to tell it's off and then have a conversation because there is no right out. You know, it's. It's why I love. George Box has a quote. He was a scientist, modeler, physicist, and he said all models are wrong. Some are useful. I think that's really the goal. Is, is it useful? Can we support the assumptions? Not are the assumptions right?

Well, and that's another debate that I think we often have internally at the firm. And I think just in general of is, you know, we could go in and do these complex Monte Carlo analyses and all this kind of stuff, which sometimes we, you know, we. That is the best approach. But it's always the question of is, does, does the added complexity give you a better result? And sometimes the answer might be yes, but oftentimes, especially in my personal life, I think it's, you know, generally I will err on the side of simplicity because, you know, you can get analysis paralysis. You can, you can look at things a million different ways and, you know, it doesn't mean that you're going to get a better result or a better answer.

Yeah, be more complex sometimes will create a false sense of precision. Complexity doesn't mean precision. You could do back of the envelope and if you know something really, really well, be quite precise. And there's other times where you need to do a full risk analysis or really detailed sensitivity scenario. Monte Carlo, what list goes on and on and on. Right. All kinds of different ways you could do that. And you know, what the right level is, is going to vary by project your knowledge, the people you're working with. I mean, we Always say, err on the side of simplicity. I like to say keep it as simple as you can because whoever you're working for will complicate it by the time you're done.

Yeah, there's a, there's an individual who, you know, I'm lucky enough to have kind of as a mentor, Kevin Yiannopoulos. And he, he always talks about the illusion of precision with, with me and some of my colleagues and how, you know, sometimes, you know, especially for like financial statement auditor related stuff. And it's not their fault necessarily. They just need something to be able to analyze and audit and stuff like that. And so if you come with a simplistic approach or a pragmatic approach, you might be just as right as the super complex models. But they just want to see more. And so he always, you know, talks about, and I've really, you know, appreciated his focus on, you know, don't fall for the illusion of precision by over complicating things.

I have a tendency to overcomplicate and I have to remind myself of that one. So I always appreciate that. So I know today you're a director in the role you have. So are you doing any auditing of models? Do you do much of that?

Yeah, I would say most of my time is revealing the models that we're creating internally for clients. And ultimately we don't generally share our valuation models. It's, it's the, you know, the analysis per se that we're coming up with. But yeah, most of my time is spent, you know, reviewing that. And our firm is not set up in the sense where we have, you know, pure business development folks and pure execution folks. We all kind of need to do both, right? We need to keep the lights on. But it's really hard, I've found, to be efficient and effective at, you know, getting new business when you can't really talk the talk. And if you're not, if you're not doing this work on a consistent basis, it's even harder to, you know, stay sharp and be able to present well.

So I hear you. I don't get to build models near as much as I used to. And sometimes like it's trying to stay sharp. Certain things ask questions. Like, it's been a while since I've done that. I might be a little rusty.

Yeah, well, especially when technology is moving as quickly as it is and Excel's coming out with new formulas and, you know, all that kind of stuff.

No, it's pretty amazing to watch how much Excel's changed Over the last years, it has me excited. That's one area I, I follow closely since I do Excel training and things, but just amazing what you can do today versus 5, 10, 15 years ago.

Yeah, for sure. And I really appreciate how they're like trying to simplify things. Right. They noticed that. For example, I'm sure this is, you know, you know this. Probably most people listening know this, but like the Index Match formula was something that was just kind of created by blending two formulas together. And then they were like, well, let's just make it xlookup. That way people can actually understand how it works without having to Google it or look at somebody else's, you know, examples.

Yeah, well, exactly. I mean, xlookup, they said, let's take the best of Vlookup and Index Match and try to create something. And in 90% of situations I think it's easier to understand. I can see why people do Index Match. It's whatever you're familiar with. And there are cases, there are some things you can't do with xlookup. But in general, I love when I have to train people. I wish I didn't know Vlookup at all because xlookup just is easier to train. It makes sense. Like, I taught two 18 year old girls, they're getting ready to college, their dad paid me to teach them Excel and they're like, why would I ever use Vlookup? Why do I even need to know this? I'm like, trust me, plenty of people will use it during your career. You want to at least know it. But they're giving me this look like, why are you even teaching me this? And I explained it. Oh, that makes sense. That was kind of funny. What's your favorite Excel shortcut? Everyone has one shortcut.

I think it's the ability to like the, like the alt es. So alt E S either like V or F or whatever. Because when you're modeling, sometimes you want the format because you want it to look pretty and sometimes you want the formula and sometimes you just want the value. And so just having that like quick functionality to do that is really nice.

There's even times when for me it's alt ESV with a add or subtract, a D or an S or whatever. You just have some numbers you need to subtract into something and you know, hopefully not in a model. I'm doing that or someone's going to hate me.

But yeah, yeah, yeah, exactly.

You know what I mean? When you're just doing something quick and dirty. Sometimes, like, okay, I just got to get these numbers roughly where I need them to be.

But I think the most helpful is that, like, when I'm. When I'm dealing with large data sets, it's altam. So to, like, sort and filter the unique ones.

Yeah, I love the unique. I use the unique formula all the time to create unique lists of something. Makes sense. Yeah. Altam as well. Yeah. Remove those duplicates. Definitely use that one more than once. All right, so what's the number one lesson you've learned during your career that's helped you the most?

Ironically, I think it's a lot of what we've already talked about. It's the importance of creating something that's, like, simplistically built and an auditable. Right. People like, it's great if you create something crazy complex for yourself, but it's a bigger measure of somebody's intellect if they can take something really complex and chop it into little parts to make it work. There's so many times where we'll have a really complex, you know, formula or, you know, data set that we're trying to figure something out on. And I learned this from, you know, a guy that I worked with at EY that was also a mentor to me. And what we were trying to figure out, or what he would always do is he would say, build a really simple example and just see if the formula works, and then slowly add in, like, additional complex layers and see if you can edit your formula such that it's going to work on the big one. Because if you can make sure that that formula is working on a subset that's small, that's audit, like, that's understandable, and you can know what the answer you're trying to look for is, then you can transfer that kind of, like, formulaic process to the bigger, more complex model. And obviously you're still going to run your tests and your, you know, your checks and things like that. But it's a lot easier to start small and, like, increase the complexity rather than just build something all at once from scratch in one cell for something you're trying to figure out.

Totally agree. It's a lot easier to troubleshoot and test when you start with a small data set. I mean, this was. I did a lot of SQL coding. Sometimes I start with something really small and go, okay, did I get all the right answers or all the steps right? And then you'd start adding more and more complexity, much like a formula. I did report writing for about a year, year and a half as One of my jobs and.

Oh, cool.

So very similar to Excel where you're just like, okay, let me start simple and. And build. Because if you start complex in front of you don't even know if it's right. Think it's right. Exactly right. We'll just drag it down and hope they're all right. Not that we'd ever do that, but. All right. So we're going to move to rapid fire. I have about, I think it's 1214 questions here. The way this works, you can't use the answer of it depends. You pick a side, we'll run through all of them. Then at the end, if there's one or two you're passionate about, because all of these could be. It depends. You can elaborate on a couple of. So you ready? Right. Circular or no circular references in models?

Oh, gosh, no, if I can avoid it.

VBA or no vba?

No, if I can avoid it.

Horizontal or vertical?

Vertical.

Dynamic arrays and models. Yes or no?

No.

External workbook links, yes or no?

No.

I knew where that one was going to go. Named ranges. Yes or no?

Yes.

Do you follow a formal standards board like ST Fast or one of the others? Smart? Some of those that are out there.

Not to my knowledge, I may inadvertently base off of my training.

Sure. There may be some of it you're following. Makes sense. Should financial modelers learn Python in Excel?

I could see a lot of benefits. Yeah.

So is that a yes or no?

But no, I'm a purist.

I get it. What about Power Query?

Yes.

What about Power bi?

Yes, absolutely.

Okay. Will Excel ever die?

No way.

Will AI build the models for us in the future?

I'm not going to be so pompous as to say no because I honestly think that there's a way to do it.

There we go. She cell protection in your model? Yes or no, sir? Yeah, I get it. All right. So which financial statement in your view is most important for financial modelers? Balance Sheet P and L or Cash Flow?

Cash Flow.

All right. Do you believe financial models are the number one corporate decision making tool?

Ooh, I hope not. No.

What is.

I think it's all of the context.

Go with that. What is your lookup function of choice? Do you like choose Vlookup xlookup Index Match? Something else.

I used to be Index Match. I use xlookup more often just to make sure that people reviewing can understand it. But I will agree that I think there are some unique things you can do with Index Match and Match Match that are pretty awesome.

Yeah. And xmatch allows you to do even more now.

Oh, I haven't tried that one.

Yeah, because XMatch will have a smaller or larger. The same as XLOOKUP. Oh, and Wildcard has those same four options. So you can do index, X match, X match. Wow.

I'm gonna have to check that out. I haven't been dealing with as large data sets as I used to, so I haven't needed it as much.

But yeah, and I like, you know, if I need to do a nested, I'll do a nested xlookup. If you've ever done that. To do it like an index match match, you can, you can nest your X lookup. Oh, that's your return array. You do your second xlookup and your first lookup value is the second value you're going to look up. And your second array is the entire inside like the match. And it will do a two way. So you can do xlookup, xlookup and return both the rows and the columns.

Oh, that's great.

So there's a fun one for you. I did a YouTube video. About it. I remember. I think I picked it up from Oz is where I learned that he's an Excel mvp. I think I saw. I took his dynamic arrays course. So I knew early on they took it right as they came out that you could do that. And so I've always done it that way. Most people are like, wait, you can do that? So there's a fun one for you. All right.

Yeah, I think that's the reality. Like the biggest takeaway I have with Excel is there's just so many things you can do. Like, I love Power bi, and I think that there's tons of opportunities there, especially because I used to deal with access, which Power BI I think is.

I'm here, I get it.

It's a much better approach and you've got all the kind of sexy things that you can bolt on top to review and things like that, and slicers. But Excel's just such a blank canvas that you can do anything with, so it's hard to like.

That's the beauty of the spreadsheet interface. And Excel is the domino one out there. Whether it's Google Sheets, Excel, whether you use something else, it's just great to start with something blank and be able to build just about anything you want. It really is even, you know, that's why I say it's kind of the art and science. Right. There's a ton of art you can do in Excel. But if you don't follow the basic kind of science, those basic principles, you end up with one ugly painting, so to speak, that everybody wants to get rid of, nobody wants. When it's done.

Yeah, absolutely.

Yeah, it's a lot of fun. All right, so we're coming up on the end of this, but is there one or two of those answers you wanted to elaborate on, one that you were kind of passionate about?

Do you feel like Power Query still being used with Power BI now? Kind of. I feel like Power BI has kind of taken over a lot of that functionality that could have been just how I was using it in the past.

I think it depends on what you're doing. I definitely still think there's a lot of places for Power Query. But yes, there are a lot of people that are using Power Query and Power bi or it all depends on how, how structured your data sources is and what you're trying to accomplish. Right. If you're building data models and trying to visualize stuff and you have Power BI in your company and multiple people are going to use it, and why would you continue to do Power Query and Power Pivot? But like, let's say maybe you're just trying to do things ad hoc, you use a different BI tool in your company, or you're just wanting. You're just trying to bring some data sources together. I still see Power Query a lot of times getting used. So I think it depends on the use case and what you're trying to accomplish in my view. But I definitely believe there's still a lot of room for power.

And how have you seen AI already been utilized?

From what I've seen, the biggest areas we're seeing AI use, one helping with Excel formulas is one of the most common out there. From a study I saw, not surprising. When I had to write an in a nasty indirect the other day, I'm like, I don't remember. Want to remember all the little single and double quote. And so I just threw it all into chat GPT in about 20 minutes. I had this big old long indirect and I was like, it all works. Instead of spending 45 minutes going okay, where's that stupid bracket? You know what I'm talking about? And so I think that's one area. I think the other area great at summarizing data, transcribing, helping write emails, being creative for you, where I still think we have a ways to go and this is generative AI. I think when it comes to modeling, machine learning is still the dominant using statistical modeling, you know, Profit, Arima, whatever, Monte Carlo, all those different things to help with that. Generative AI is good. Hey, give it some data, tell it what graph you want, do some basic analysis, do benchmarking against different companies. You know, rip apart that 10k or 10q and have a summarize it for you. A lot of those areas definitely with coding and having Python you're seeing some people use that, but I think most people are not yet. And the other challenge is very few people have it built into their workflows. So you got still have some security cerns, you still have some. Well, it's not in my workflow. Is it really going to save me that much time? I think we're getting there. So that's, that's kind of what I'm seeing is I think people are still struggling to figure out all how to use it, but I think just about everybody's at least experimenting with it. Then the other issue, especially smaller and mid sized companies, bigger companies often have the money to have this in a better place. But is your data good enough to actually use with AI? You know, because garbage in, garbage out, AI isn't going to make your data good. What are you seeing? What's your thoughts?

I think that it's going to have a profound effect. I just think it's like the security concerns are huge and there's, I think that the, the art of the AI will be humans figuring out the best way to utilize it. Right. So you could say, hey, you know, do all this analysis and give me this answer. But if that answer isn't auditable, if it's not adjustable, if it's not, you know, understandable how they are, how it arrived at that conclusion, it's no good. And so I think, you know, as humans craft how to use it and say, okay, here's what I want to understand but I want you to break it out by you know, this with it.

Tell me the logic you use, what are the assumptions versus just give me a number like I have no idea.

Exactly. So I think it's going to be really cool once you know, it's more integrated and I think it's, you know, everybody trying to figure out, okay, what's the best way to use it, what's the best, what's the safest way to use it and all that kind of stuff. It's going to be interesting.

I agree. I think we can all use it today and there's ways it can make us all more effective but over time is really start figuring out the agent workflow and get it built into more and more tools, feel comfortable on the security side, have a little more transparency. It's going to become even more useful than it is today, I think. Quite a bit. It's exciting.

Yeah, for sure.

All right, so last question for you. If you could offer one piece of advice to our audience to be a better financial modeler, what would be your one piece of advice?

I mean, probably your audience is better at modeling than I am, but I would say that just keep it simple, make it easy to understand. If you're grandma can understand what's going on, then I think you've done it right.

Say if my dad can understand it, you're doing even better. He's not the modeling type. I like that. Grandma. Dad. Yeah. Try that person that knows nothing about modeling. Any idea? And if you can explain it to them, you're doing a good job.

Yeah.

All right. If our audience wants to learn more about you or get in touch with you, what is the best way for them to do that?

Yeah, just shoot me an email, Charles keatmanyan.com I'd love to, love to learn more about you.

All right, great. Well, thank you, Charles, and thank you for carving out some time today. Enjoyed chatting with you.

Yeah.

Likewise, Financial Modelers Corner was brought to.

You by the Financial Modeling Institute. This year I completed the Advanced Financial Modeler certification and it made me a better financial modeler. What are you waiting for? Visit fmi@www.fminstitute.com podcast and use code podcast to save 15% when you enroll in one of the accreditations today.