How Startup Founders Can Build Investor Ready Models to Win VC Trust with Arta Ramaj

Tell me about that horror story, that worst financial model. I know you have one.

Yes I do. I worked on a couple of months ago. I actually brought in to fix the model and There was over 150 tabs in both models combined. It was just a mess. Honestly, anytime I opened it on my computer, it would just freeze and God forbid I tried to edit a cell, it would just break the entire model.

What's the key to building Investor Ready Financial?

I think what it comes down to essentially is Arda is the co founder of 360 Finance where she helps PE and VC backed companies scale with confidence through expert financial modeling, FPNA and automation.

You started 360 Finance. Talk about what the journey's been like.

It's been a wild ride. Lots of ups, lots of downs. But overall it's been great. It's been really fun.

People say that sometimes being a financial modeler feels more like being a therapist.

Definitely agree. For me, FP and A is a front row seat into business.

I'm curious, what's the number one lesson you've learned?

It's called the 1:3. One approach, one problem, three solutions and one recommendation.

Will excel ever die?

I'm going to say no, but.

Financial Modelers Corner is the world's premier modeling podcast. It is brought to you by Financial Modeling Institute, the world's leading financial modeling accreditation organization. Welcome to Financial Modeler's Corner. I am your host Paul Barnhurst, AKA the FP and a guy. In this podcast 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 earned my Advanced Financial Modeler and I encourage you to do the same. I'm excited this week to welcome to the show Arda Ramai. Welcome to Financial Modeler's Corner.

Thank you. Thanks for having me.

Yeah, excited to have you. So let me give a little bit about Arda's background and then we'll jump into our questions. She is the co founder of 360, not 365 Finance, a boutique finance consultancy specializing in financial modeling, FPA and finance system implementation for private equity and VC backed companies. She has a background in private equity where she identified a gap in the market for flexible investor ready financial support that helps businesses scale, fundraise and prepare for exits. At 360 Finance. She and her team provide best in class financial modeling, strategic forecasting, and automated reporting solutions, helping businesses move beyond fragmented manual processes to data driven decision making. Their clients range from fast growing startups to PE portfolio companies. All looking for clear, dynamic financial insights to drive value creation and operational efficiency. She's passionate about automation and bridging the gap between financial data and strategic execution. How was that for an intro?

That was quite the introduction. Thank you so much.

Isn't it always. I always find it weird when I hear somebody read it because it always. I don't know, it just sounds different than when I read it. Do you find that.

No, I know what you mean. I was sat there thinking, wow, is that really me?

Yeah, that's what I do sometimes. Like, is that person me or is that someone else they're reading about? All right, we start all the time with this. Tell me about that horror story, that worst financial model. I'm. I know you have one.

Yes, I do. One comes to mind. Specifically one that I worked on a couple of months ago. I actually got brought in to fix the model, which is a bit of a trend these days. But this model in particular had. There was two, and there was over 150 tabs in both models combined. A lot of the tabs would go down to over a thousand rows. Hard coding everywhere, a million external links. The links to the working files in the background were broken. It was just a mess. Honestly, like, anytime I opened it on my computer, it. It would just freeze and God forbid I tried to edit a cell, it would just break the entire model. So, yeah, that was a really tough model to work with. Still haunts me, to be honest.

How long did it take you to kind of throw that model in the trash and start over immediately?

I was a little naive in the beginning, thinking that I could work with it and maybe I can save it. But no, I quickly looked and said, we need to start from scratch. I'm sorry.

Yeah, no, makes a lot of sense. We've all had those times where you try to rescue something and then you learn. No, there's just some things that are beyond rescue.

Yeah. And it's also in the interest of the. Of the client because it's quicker, more cost effective to just start from scratch.

Correct. Unless there's a reason it has to be fixed. And there sometimes is. You're often better off for everybody involved to just start from scratch because we've all been there. When you pick up a model and how much time do you spend trying to just trace out the formulas and find all the hard codes and the logic somebody used if it's not well structured. It's a nightmare to figure it out. I like to call them Franken models, you know, kind of like Frankenstein. That's. That's what I refer to those as.

That's a good name. I like it.

What was your kind of key takeaway from that experience?

I learned what not to do. Firstly, I always say this when I'm speaking to people, but I think structure is really important in the early days when you're building a model. And that's a key example where it's so worth it to spend that extra time at the beginning setting things up properly, just spending that extra time, like laying the foundations properly. Spend time mapping, spend time setting up the structure, clean the trial balance, just spend that extra time. Before you even start building any nice looking models, you just need to have that phase where you're setting things up properly. And I think with that model it just emphasized exactly the reason why you need to do that. Because people often say, oh, how quickly can you turn this around? Or, you know, why do you have to spend so long auditing? Or whatever the question might be. And that's the exact reason why. And I think it's important to just, yeah, spend that time at the beginning.

Couldn't have said it better myself. 100% agree. Know inch nor who I've had on several times from FMI talks about how design's the most important part of the model. It's almost always down to the design where it fails. And that's what you're talking about, the structure. You know, I like to liken it to having a house built. If you have a room full of people and ask them, has anyone had a house built? There's always somebody who raises their hand. It's like, did you have an architect do your blueprints first or did you just start building? Yeah, you know, but often we do that with models. I mean, I've been guilty of it where I just started building and end up with some horrible model at the end. It's like, why didn't I think about this first?

Yeah, I know it happened. But then you learn from that, right? And then you don't do that the next time.

Yeah, exactly. You learn. I think we all have to go through that. That's why often the horror stories I hear are, you know, models we've built ourselves because we've all done a few of them. I know a few I built where I'm just like, I hope nobody sees that.

It's all right. It's part of the Process.

It is, it's, it's life, it's how we learn. So you earned a bachelor's degree in geography. Are you doing financial? Building financial models? Tell me how that came about. It's not a typical career path.

Yeah, it's a bit of a curveball, I'll be honest. And everyone does ask me this question, but I think here in the UK you're like 17 years old when they ask you to choose your degree. I'm not sure how it is in the States, but 17 year old me had no idea what she wanted to do for a career in the future. And, and so my logic at the time was just choose something you like and something you're interested in. There was no real further thought than that, to be honest. And I just really enjoyed geography. So I studied human geography in particular, which I was really interested in because you get to learn, you know, why some countries are economic superpowers and why some other countries struggle. And it's, you know, all about migration and the movement of people and resources and trade and, and how that affects societies and global economies and, yeah, I don't know, I just was really interested by that.

So, yeah, I could see, you know, at 17, most of us are still not sure what we want to do as an adult. Some are, some people have a really clear outline, but most of us are figuring it out. So I'll do something that's fun, that I enjoy. So how did you make that transition then? You did geography, how did you make that transition to finance?

It was really hard. I think I did all the applications. I, you know, applied to every single grad scheme that was there. I was even tracking my applications and my rejections on a tracker in Excel. It was really tough. But at the time, whilst I was working at university, I was waitressing on the side and I was waitressing in this lovely place in central London that, you know, was close to all the offices and so business people would come in, have their meetings in there and I just thought to myself, this application thing isn't working, I need to think outside the box. And so I started talking to the tables I was serving and just telling them, hey, I've just graduated, I want a job in this. Do you have any advice for me? And yeah, someone just took a chance on me and that was my entry into finance.

It's amazing what networking will do.

Yeah, exactly. And you don't have to have a network to network. I think a lot of people say, oh, but I don't have anyone in my network. So where do I start? But I think just you've talked to anyone, that's how you start.

Yeah, I still remember, you know, kind of speaking about that one time. Of all the random things. I don't know if you've ever heard of Elizabeth Smart. A lot of people heard about her. About 10 years ago she was kidnapped. It was a big, huge international story. Cause she was found two years later. Anyway, I was out searching for her. Cause that happened here locally. My niece was going to the same junior high as her. So I remember being out, you know, searching for her and talking to this guy, he's like. And I was looking for a job at the time and he was telling me, hey, I could apply to his company. And you know, all these, all these things about it that job didn't end up working about. But you talk about networking, that's not a place where you expect to get an opportunity to apply for a job.

Yeah.

So you just never know where it might be. It's happen. Networking is just conversations and talking to people and learning and not expecting them to give you anything. Like I get all the time people sending me resumes, asking me to hire them and sometimes they're developers or different things. I'm like, okay, no, this isn't how networking works. First, I do content creation. Second, I have no need for you, so why are you sending me this?

Yeah, no, I know, I totally understand it and completely agree on the like on how networking has to be relationship based and you need to reciprocate value. It's not a one way thing. So again, I think when people say I hate networking or it's cringy or whatever, they might say it's because they're going at it from a what can you give me straight away point of view. Whereas if you approach it with like how can we help each other and how can we just build a relationship outside of whatever my goal is? It's so much better.

100% agree. I'll recommend a great book and then we'll kind of get back to a little bit of the finance side. But if you ever read the Go Giver, I don't know if you've read that, but that's a great book around networking. I recommend it to anyone to read. I mean it's based on cells, but the principles applied in networking just as well as cells.

Yeah, I love that one. Must have read it in like a half day or something. It was great.

Yeah, it's a, it's a really good book. It was recommended to Me by somebody that worked in hr, working with an HR firm. And like, here you need to go listen to this. This is how you should be networking.

Yeah.

All right. So, you know, kind of moving back. You. You worked in FPA for a few years before you started your own firm. Kind of. What was it you liked about FP&A and what led to you starting your own business?

What did I like about FP&A? I think for me, FP&A is a front row seat into business. I loved how intertwined it was with the rest of the business. And you had so much exposure to not only senior people within the organization, but also other departments. So, you know, you weren't just in the back office churning out reports and looking at the past and what happened historically, but you were in the rooms with the salespeople and the marketing people, the product people, or, you know, getting to really know their side of the business. So I think you get a really good understanding of one, how business works, which, like, I'm really passionate about business as well. Growing up in an entrepreneurial family, I've always, like, I've always been wired that way, I think. So, yeah, I just really enjoyed that aspect of, of FP&A and yeah, that's why I stuck around in it.

So you grew up in an entrepreneurial family. So do your parents own their own business then or.

Yes, my dad.

What's he do?

He worked in construction.

Okay, so building.

Yes, building beautiful houses.

So did you get to go out on job sites some growing up?

Yes. Yes. I remember being a child running around and him saying, don't go there, it's dangerous. I loved visiting and seeing houses, even though they looked ruined on the outside. Just being able to see the vision of what it was going to look like at the end and then getting to see that at the end in real life was.

Was nice, I bet. Especially if you're doing kind of remodel projects where you see something that you're looking at it going, wait, that's supposed to look like this. I can't wait to see it actually look like that.

Yeah, exactly. And it makes you think a certain way as well. Like if I was growing up on building sites looking at what was getting done, and you almost learn to think that way. Like, if you can't see something currently, there's no reason why it can't look a different way in the future and you become a bit of a visionary in process.

I never thought of that. That's a good point. You know, you're Seeing a lot of remodel and things being restored and fixed and transformed. Whatever word you want to use, you can see how that could kind of lead to being a visionary of, oh, wow, I know what, what something can look like and what it can become.

Yeah, exactly.

And there's something to be said about that for all of us too. You know, we all start out at some point in life and what we can become, it's not just can apply to business, can apply to us, can apply to houses, whatever it might be. So that's interesting.

There's a lot of parallels between, you know, construction and private equity. I think it's a similar thing. You buy a business or you buy an undervalued asset, you do some work to it, streamline it, make it better, and then you sell it for a profit. And yeah, it's looking at it from a really high level. It's not that different.

You try to load them both up with debt so you don't have to put much. Your money into it.

Exactly.

So you can leverage that return. Yeah, that. I hadn't thought it. That. That's a good point. I had never kind of thought of the industries, but yeah, there is definitely some similarity there. Yeah, I like that. All right, so you started 360 finance about a year and a half ago. Talk about what the journey's been like, kind of. What was the thinking of, hey, I'm ready to start my own business. You're still fairly early in your career, done a few years of finance and decided to go out on your own. So maybe talk about what led to that and how has it been for you so far?

Yeah, so it's been a wild ride. Lots of ups, lots of downs, but overall it's been great. It's been really fun. What led me to taking the leap? To be honest with you, I always thought, like I said, I've been wired. My. My brain is very entrepreneurial. I've been wired that way for a long time. So I always knew I would start something eventually. But to be honest with you, I started a business a lot earlier than I thought. I thought I would work my way up in finance a little bit more and start something down the line. But yeah, like I say, it happened a lot earlier. And I think the reason for that was I was just itching to create my own thing. You know, I observed this trend where I would get a new job for six months. It would be great. Loving it because I was learning so much. And then the following six months, I'd start To get comfortable. And then the six months after that, I'd start getting it to your feet and thinking, I need a new challenge. You know, I need a new challenge. I need to keep learning. So after observing that cycle a few times, I was like, told myself, I think it's time to do my own thing because I'll be constantly challenged in that environment. And so I just took the leap and didn't think it through too deeply, which I think helps sometimes, because, you know, if you get stuck in an analysis paralysis, you probably won't do the thing that you want to do. So.

No, there's some truth to that. I have, you know, a friend that talks about, you know, when you're trying to find your passion, there's at some point where you almost have to kind of burn the boats, so to speak. Like, not always having that escape plan and just going full in and having that faith that you'll figure it out.

Yeah, it's a big thing, the faith.

Yeah. It's believing in yourself. And there are moments, I'm sure you've dealt with this, where you're like, cash isn't where I'd like this month, or I just lost three clients or whatever it might be. And you're like, should I go to work for somebody? Right. There's all those up and downs. It was like, oh, this month's great. And then you're like, oh, wait, next month not so great.

Yeah, yeah, it's definitely a roller coaster. You might have a good month. And then you've always got it in the back of your head that that might not happen next month. But I just tell myself, you know, there's. There's always jobs out there. I can, I can go back if I need to, but luckily it's going well. Well.

And that's what I told when. That's what I was like, are you taking a huge risk? And I'm like, my whole business was around content creation. I knew I was going to be doing a podcast and building a brand and talking about FP and A. I'm like, at the end of this, if I can't find a job, I'm the problem. You know, kind of, you know, like, if I. If I. And you know, today I build a pretty good, you know, following globally. So I look at it and go, okay, yeah, if I need to get a job, I'm sure I could find something.

Yeah, exactly. You've got a good skill set and a good brand and you'll be just fine. So.

Yeah, I think so. Yeah. You just have to think about it, right. And prepare yourself. But it's just different risk versus more risk or less risk than working for somebody.

Yeah, I agree, I agree. And risk is, is perceived differently by different people, you know, as well. So it definitely is risky leaving your job and starting a business.

But sure. And, and even more than the risk is, it's really scary. It's different.

Yeah, exactly.

So, yeah, I hear you on that. So I'm curious, I was reading on your website, you mentioned how 360 was kind of born out of the belief that finance is often treated as an afterthought, particularly with fast growing industries, fast growing companies. Why do you think that is?

Because it's a reporting function. People treat it as something that's backwards looking and not necessarily a growth enabler, but someone that just looks historically and tells you what happened rather than someone that can really partner with you and partner with other departments and drive the business. And I think as well, historically people have seen finance as a bit of a bottleneck within the business rather than a true business partner that can help grow the business. People like to joke around and say, oh, it's always finance that says no and it's always so I think there's a bit of a stereotype around that. And yeah, that's why I say on my website that I think it's treated as a bit of an afterthought. And naturally you've got people focusing on product and sales and that's also totally understandable. Especially in the early days. You want to spend money on things that directly generate revenue back. But I always say if you're, you know, scaling on, if you're scaling and your finance function isn't solid, then you're really scaling on some shaky foundations. And so it's definitely worth investing in it and not treating it as an afterthought.

I agree, I agree it's definitely worth investing. But like you said, you know, in those early days you're focusing on sales. Like right. If I asked you when you started your business, I'm gonna guess 80% of your time was probably focused on sales and marketing, not what accounting tool should I use and is my Excel file. Right. And you know, you build a budget, you, you thought about finances because you came from that background, but right. Even you spent the majority of your time on non finance activities. While my background is in fpa, I am also passionate about financial modeling. Like many financial modelers, I was self taught. Then I discovered the Financial Modeling Institute, the organization that offers the advanced Financial modeler program. I am a proud holder of the afm. Preparing for the AFM exam made me a better modeler. If you want to improve your modeling skills, I recommend the AFM program. Podcast listeners save 15% on the AFM program. Just use code Podcast.

Yeah, it's true, it's true. But even in the early stages, there are things you can focus on. Like you don't need a fully fledged out finance team in the early days, but you know, especially if you're a founder, you can do a course, you can do some basic training. There's. There are things that you can do just to make sure you're on top of things. Basic things like cash flow, knowing what's coming in versus coming out. You don't need a snazzy model.

Yeah, no, 100%. I completely agree. Every business should be looking at their financials from day one.

Yeah.

And early on there's benefit in having somebody that can help you with your model. Cash flow and FP&A. I mean, the best businesses have FP&A and finance that can serve a strategic role. They're not just backward looking, not just compliance. Right. There's value they can add and sounds like that's a lot of what you're focused on in your firm is how do we add that value.

Yes, exactly. How do we be true business partners?

So what do you. What is the key to being a great business partner from a finance perspective? You know, kind of. We'll get a little bit into the modeling here in a minute, but I'd love just to get your perspective on that.

I think commercial awareness is a big one. You have a lot of people in finance who very technically able to and, you know, can build amazing formulas and amazing spreadsheets. But when it comes to talking to people and partnering with the business and specifically communicating with people that don't come from a finance background, I think that's where they fall a little bit. So I think what makes you a really great business partner is having that ability to communicate, to paint a picture, to tell a story, to just say things in a way that's not finance jargon. You know, simplify it, break it right down and then communicate what's going on in the business in that way. I think that's what makes a great business partner.

Yeah, it's so funny almost, you know, in, in finance, financial modeling, fpa, all these different areas. The skill that makes someone great is almost always communication. Right. It's not being great at building complex models or. Yes. You have to Have a baseline, you have to, under Excel, you have to understand financial modeling, you have to just understand accounting. But at some point it's that relationship and knowing the business and the curiosity and yeah, communicating that really sets you apart.

Yeah, absolutely. Yeah.

And it's kind of funny how that works because, you know, if I go on to LinkedIn and I talk about Excel, I'll get three times as many views than if I talk about the soft skills. But yet what's going to really help us the most? So it's just, it's, it's iron. It's always been a little bit ironic to me.

Yeah, yeah. I think finance is changing though, which makes me really happy. And I think there's a real movement towards what they call the modern day CFO and what that person looks like and what skill set they have. And it's really focused more around those soft skills and those, you know, conversational skills, storytelling, presenting, things like that.

Agree. They're, you know, it's continuing to change more and more. I mean, CFOs have always helped with the business, but often have been viewed, you know, that first task is compliance. Now compliance is table stakes. It's about the commercial, the strategic. How can you really move the business forward and help them grow intelligently, smartly, you know, and, and kind of speaking to that, one of the areas you mentioned you focus on is investor ready financial support. So what's the key to building investor ready financials? Like, you know, kind of maybe talk about how they're different from other financials and the key to having financials that are ready for that type of thing.

Yeah. So when it comes to raising funds specifically, I think what it comes down to essentially is trust. If somebody is thinking about lending you very large sums of money, they want to know that that's in safe hands and they're going to get return. And so if we take trust at the top of the triangle, for example, when it comes to modeling, I think how you build trust is two things, credibility and clarity. So if you have those two things in mind as the North Star at all times, when you're building your financial model, that's how you become investor ready. And so that means, you know, are you being logical? Have you benchmarked your assumptions? Where did your assumptions come from? Are they realistic? Just really being able to display that you know your business inside out and you know what the levers are and you know your market, you know, the outside influences as well. I think bearing all of those things in mind, when you build a Financial model will get you clarity and credibility, and that's what will get you trust, and that's what makes you invest already going the long way.

Yeah. And when you say building trust, it's basically making sure those investors can have trust in what you're projecting, where you think you're going.

Exactly.

How do you help them find that balance between that trust and optimism? Right, because CEOs and founders by nature are very optimistic and often, hey, we're going to shoot for the moon and hit these numbers. And you're like, hold on, that may not be realistic. So how do you. How do you manage kind of that balance of the unbridled optimism versus that kind of realism and maybe that risk nature of finance and financial modelers when you're putting those together?

Yeah, I think just so you don't come across as this, you know, person that's bringing them down, you have to manage it carefully. But I think that's where data and benchmarking comes in. So it doesn't look like you're storming into the business and saying, this is unrealistic. Bring it down. That's not a good image to have.

Right. You mean running in and telling the CEO that his numbers are all wrong is a bad way to build trust?

Yeah, you know, just telling them they're dreaming way too big and just settle down. No, I'm joking, but I think approaching it from a data point of view and saying, hey, you know, you're operating in a business. Here are some similar businesses that are in your space and their numbers are public, and this is what that looks like. So just taking it like that. I was working building a model for a SaaS business recently, and the way I approach it is I will build the model with the assumptions that the founder wants. Whether I think they're right or wrong, I just build them into the model, and then I will go through the outputs at the end and be like, can you see how the gross margin has come out at 97%? And can you see why that's unrealistic? Because this is what we've done here, here and here. And that's my way of kind of, instead of being like, no, that's far too high, that's not possible. That's not going to make them feel good. Right. So I just, listen, take it in, show them the results, and then explain why we can't do that.

Yeah. And that's definitely a good approach of. Yeah, I'll just step back, let me get the whole picture together so I can show you in the model what this means and then let's talk about is that realistic? So they, in some ways you're almost helping them come to the conclusion versus coming in that kind of bowl in the china shop approach of, well, this is wrong and this is wrong and this is wrong and they're just kind of like somebody I want to work with.

Yeah. Even if you know straight away that that assumption is totally unrealistic and, and silly, quite frankly, you don't want to just bulldoze everything and it's not a good way to do business.

So I've done that a few times. Don't do it the dig number. And they're looking at you like, get out of the room.

Yeah.

So I tend to have to remind myself sometimes like, okay, just step back, let them get through everything and then, you know, we can discuss it.

Yeah, it's. I relate though, because you've done this a hundred times and so you can see what the end result is before you even had that conversation. And so it's hard not to be like, oh, I've already seen this play out, I know how this goes. Let's just cut to the chase. But yeah, yeah.

So it sounds like as I'm hearing you, when you're working with a client, the first thing you do is really just kind of taking everything they give you and you start by just giving them back what they asked and then starting to work to help them realize, are those realistic or not? Is that kind of your typical approach when you're working with a client then?

Yeah, I'd say pretty much, yeah. I think that's also a good way to get them to understand how the model works and therefore how to use it going forward. Because in our line of work, you kind of build the model, you do a bit of a handover and then you're gone, you disappear. And they have to learn how to use that. That thing, which doesn't always work. So I think with that approach that I described earlier, I'm showing them how changing the assumptions affect different line items within the model. And in that process they're learning how to use it and how to update it going forward. So that's kind of my approach, especially with early stage startups where assumptions are unclear, business drivers are unclear, and maybe the founder needs some handholding on what actually moves the business. But how I work with every client at the very beginning is pretty much just starting with a conversation, just chatting to them, understanding their story, understanding their ambitions, like their current setup. What I try to do Is I need to understand what point A is, which is the now what point B is, which is the goal. And only when I really understand that and I get deep into the business, that's when I can make a roadmap of, okay, how can we get from A to B? So, yeah, just kind of starting with a big old conversation.

Yeah. And when you mentioned starting with conversation, wanting to know kind of their hopes, where they're hoping to go, what I thought of. And I've had a few other people, few other people say this. Sometimes being a financial modeler feels like more like being a therapist.

Yeah, definitely agree. It's a lot of hand holding because a lot of founders are doing this for the first time and, you know, they don't have mentors who have been through fundraising rounds or have sold and exited businesses. It's a really hard thing to go through. So, yeah, it's definitely a lot of emotional support as well as building models.

Yeah. Yeah. Which definitely is not what you think of when you think of somebody who spends all day in Excel or that's what everybody we know people you're a financial model or that's what they think.

Yeah. But going back to the soft skills, you do need both. So that's another scenario where it's useful. Right.

Yeah. Totally agree. So I'm curious if we have somebody out there listening. We have someone listening to this podcast and they're looking for some advice of, you know, how to start working with a client, kind of, you know, building a financial model to help them raise capital. Where would you tell them to start? I mean, obviously they need to listen, but just kind of maybe talk a little bit of what advice you'd give to somebody out there. If they're like, I know I got to build a model for the first time to help our company raise capital, how should they think about it?

I think especially in the early stages, keeping it simple is your best bet. You know, make sure your assumptions are transparent. Try to build in toggles where you can flex different scenarios. Everyone knows what happens today in a startup might well not be the same tomorrow, and everything changes every day. So building those kind of toggles within your model, I would say is useful. And I would also say, especially in the early stages, focus on maybe three to five key metrics that really move the needle in your business. In fact, 3 to 5 might even be too much. I think at any given point, there's probably only really one or two things that move the needle in your business. So just focus on those. I'd say that would be my advice for somebody in the early stages who is thinking about building a model. And I think I always say a financial model is like a simulation. It's like it's not a fortune teller. This isn't what's going to happen. It's just telling you based on this past data, based on the historics and based on the assumptions we've got in here, this is what could happen. So yeah, making that clear as well.

Because yeah, very, very important. It's.

Yeah, yeah.

This is not, I'm not forecasting this will be your number. I'm saying based on history and everything, here's where we. Here's a reasonable projection of what could happen.

Yeah.

Not here's what's going to happen.

Yeah, exactly. And going back to the credibility point, I said earlier, I think people hate surprises, investors hate surprises. And I think just going through your model and making sure your assumptions are correct and they're based on data and just the, just the fact that your model is defendable and you can talk to every single number, why it's that number. How you got there and how you're going to do that in real life, I think is really key.

Yeah, investors are going to. If you have unrealistic assumptions, they're smart enough. Any sophisticated investor is smart enough to know they need to discount it. Unless you have a story around why you're going to be different, why that number should be different than kind of what the average is or what others do, they're just going to discount it back anyway. All right, so you mentioned every business maybe early on there should be one or two metrics. What's the one or two metrics you look at for your business? Bad financial models can lead to bad decisions or worse. So how do you minimize the risk of a bad model? You make sure the models you build are great. Financial Modeling Institute developed the Advanced Financial Modeler Accreditation program to help modelers like you. The AFM program offers a step by step step approach to building world class financial models. The program ensures that you know the best practices in model design and structure and will help you brush up on your Excel and accounting skills too. Be the one on your team to build great models if you want to impress your boss and your clients. Get AFM accredited podcast listeners save 15% on the AFM program. Just use code podcast@fminstitute.com podcast sales.

Of course you need to keep coming in if I want to keep paying the bills. Of course sales and I would say time taken to complete A model. Every model is so different. Right. You know, it's. I know it. Modeling is so custom, depending on the client and the requirements and lots of things. But I'd say time taken to complete a model because, you know, we want to get more efficient in the work that we do. So that's something.

Yeah. And everybody would love to just be able to use a template for everything, but rarely can you just roll out a template or templatize things you can do. But, you know, I haven't found a good template that works for most models.

No, exactly. It's just too custom. It's too bespoke. I get asked this all the time. People say, surely you have some templates and you can just whiz through a few hours. To which I just laugh and say, well, now I know you've definitely never built a financial model, because that's just not how it works.

I'm guessing you don't quite say it that way to the customer, though.

Not quite. That was a little too direct.

Yeah. It's definitely an adventure building models, and it's going to be fun to watch how AI continues to impact that, and technology makes it easier, allows us to standardize some things. There's always going to be some customization conversation, I think, but will be interesting to watch.

Yeah, I'm really excited for that, actually.

No, I am as well. All right, so now I have a kind of some fun questions we ask every guest. So the first one is, what's that favorite Excel shortcut of yours?

Oh, mine is so basic. It's Control Shift L, to take off filters and put them back on. Super basic, but I just love it.

That's what. I use that one all the time. You're not alone on that. I had someone I worked with who. He hated me doing that. He's like, no, no, you should just clear the filter. You shouldn't take it off and put it back on. And he always tell me what the shortcut for that was. I'm like, I'm doing it this way. I don't care what you say. He's like, nobody could mess things up. And he had one experience. I'm like, oh, well, I'm good with it.

I use that one the most, honestly. So I'm gonna say that's my favorite.

So someone uses tables a lot.

Yes.

Which is good. I'm a huge fan of tables, so. All right. I haven't had Control Shift L. That's the first time I've had that one. So I like it.

I'll take that.

All right. What's the most unique thing you've created in a model for your personal life? Funnest. Most unique thing you've done.

Oh, okay. I do love a good model for my personal life. It helps me make decisions. So I'm currently wedding planning. So I have.

Yeah, I figured there might be a wedding thing in here.

Naturally, I have to model that out, right? Yeah. So one thing I tried to model. Successfully or unsuccessfully, I'm not sure, but I'm trying to model out my guest list. So putting in the guests, cost per head, trying to give them an emotional value ranking, and then trying to give them a probability on what's the likelihood of attending based on xyz.

So you have multiple rankings in there. Probability of attending. What were the other ones?

Probability of attending, emotional value ranking and cost per head.

Now, so what goes into the emotional value ranking? It has to be quite subjective. I'm just curious how you think about that.

It's so subjective, which is why I think it's a bit hard to model. But more than anything, I'm just having fun trying to do this. But what goes into it? It's subjective. So, like you said, whatever you want. So for me, it's, you know, are they in your nuclear family? Are they in a wider circle of your family? How often do you see them? Yeah, things like that.

Yeah. I can't say I ever thought about actually writing down, but I think everybody goes through that as you're talking with your significant other and be like, okay, what would happen if we left this person out? Like, well, mom would never speak to me again. All right, well, they're in, you know, or whatever it might be.

That's a perfect example. Yeah. You have to, like, make up these hypothetical scenarios, and that tells you lots of things.

You're like, okay, that one's a nine, that one's a two. All right, I need to save some money. Okay. Take out all the twos. Yeah.

And then if it's, you know, a nine for me and a two for my partner, you just have to take an average.

But what if it's a 10 for your partner and it's like a 2 for you? They almost have to take the tens.

Yeah, possibly. There's always exceptions as maybe hard code. That one.

Hard. No, no, no. Shame. No hard coding.

Joking, joking, joking.

Oh, I know. All right, well, I think everybody else is probably, like, how much time they spend covering a wedding model.

So we'll.

We'll get back to things here. I'm curious what's the number one lesson you've learned so far in your career that's helped you the most.

Oh, so one comes to mind straight away. It's called the one three one approach, and somebody taught it to me in my early career. So by one three one approach, I mean one problem, three solutions, and one recommendation. So early on in my career, naturally, as a junior person, I was still learning. I didn't quite know what I was doing. So I'd identify a problem and I would just go to my boss and say, we have a problem, and that's it, as a junior would do.

Right.

You learn these things. But now, one thing that's really helped me grow in my career, whether that was for past bosses or today, it will be clients. It's identify the problem, come up with three possible solutions based on your knowledge, and then come up with one recommendation. And then you present that to your stakeholder. And not only does that take off so much pressure off of them, but you position yourself as somebody who knows their stuff and, you know, you just help them a lot. So big, big career hack for me.

Got it. Love that one. So one problem, three solutions, one recommendation. So one, three one. It's not just a basketball defense sense anymore.

Yeah.

All right, so now we're going to move into our rapid fire section. So I'll lay out how this works. Reminder, you can't use it depends. You have to pick one or the other. Because you could probably say it depends to all of these. The idea is to kind of rapid fire, go through them quickly, and then at the end you can elaborate on one or two, because I know there's nuance to every single one of these. So you ready?

Yeah, I'm ready.

All right. Circular references. Yes or no?

Avoid. No.

All right. Vba, yes or no?

No. Probably ruffle some feathers with that one.

Do you prefer a horizontal model? So lots of sheets or vertical? Kind of do it all in one sheet.

Vertical.

All right. Dynamic arrays in your model, yes or no?

Yes.

What about fully dynamic models, like a hundred percent, using dynamic arrays for the whole model?

Probably not.

That's usually what I get. External workbook links?

No, if I can help it.

Named ranges. Yes or no?

Yes. Where it's useful. Sorry.

All right. Do you follow any kind of formal standard for your modeling, like FAST or smart or any of the others out there?

Lightly. I think structure is key, but you don't need to be robotic about it.

Got it. Okay, here's an interesting one I'm curious to say. Should financial modelers Learn Python in Excel?

No.

What about Power Query?

Yes.

Okay, good. Had a debate with one of the guests the other week about that one. How about Power Bi?

Absolutely. Yes.

Interesting. All right. Will Excel ever die?

I'm going to say no, but I want to elaborate on that later.

All right, we'll, we'll let you elaborate here in a minute. We just have a couple more left.

Okay.

Will AI build the models for us in the future?

Yes, but with a catch.

Yeah, that's the normal. There's still going to be human judgment and interaction involved in all of it. Yep. All right. So do you believe financial models are the number one corporate decision making tool?

Absolutely, yes. I wouldn't be a modeler if I said no.

I've had some no's.

I really.

Yeah, I've heard quite a few people say no. I'd say about 30% say no. Oh, my favorite no answer was somebody said no politics. Like, how do I argue with that one?

Fair, fair point. Very strong point.

You know, so you get different things. It's always interesting to hear the perspectives. What's your favorite lookup function of choice for, for doing lookups again?

Probably Basic by index match. I, I've been liking the XLOOKUP recently. It's winning me over a bit.

I like XLOOKUP. Have you used Index XMatch?

Oh, no, I'm gonna, I'm gonna write that down.

Check out XMatch. It has more options as far as small, next largest or smaller items. Similar to xlookup. It gives you more options in how it does the lookup.

Nice. I'm gonna check that one out.

So it can be handy in certain situations. I've started using it more recently, so.

Lovely.

All right, which ones do you want to elaborate on? You can pick one or two there to add a little bit of context.

Maybe the Python Power Query. Power Bi. Couple of questions there. So Python, I mean, it's such a cool skill to learn, right? I think if I had endless time, I'd just learn it because it's a cool thing to say that you know how to do, but I don't think you need it within financial modeling. I think these days there are so many no code tools out there, meaning you don't need to go and learn this big complicated thing. And I think as a modeler, you know, your time is finite. And there are other skills that add more value to the business than knowing how to code.

No, that makes sense.

When it comes to Power Query and Power Bi, I think definitely, definitely need to learn those. Like Power query, just for cleaning up messy data and you know, it helps you do the legwork so much easier. And then Power bi, I think, especially to our point earlier, we were talking about business partnering. I think Power BI helps you there. Just making nice visualizations and helping you paint that story that your model is telling you. It's a good intermediary, especially when you're presenting to non finance people. So I'd say yes.

Great. Anything else you want to add on Rapid Fire before we wrap up here?

No.

All right, thank you. I like it. It was fun. Always fun to see the different perspectives. So before we let you go here, if you could offer one piece of advice to our audience to become a better financial modeler, what would you tell them to. To do? What would your advice be?

I would say, personally, I've learned best by just doing things. I've done lots of courses, they're great. I learned best just doing things. So start by doing model things in your personal life. Whether it's a wedding, maybe not a wedding, but maybe you might be buying your house or whatever's going on.

Wedding and emotional value model that actually.

It'S a good start because it's quite hard to do. So if you can do that, then you'll make a good modeler. Yeah, just model things in your own life. There's a lot of resources out there as well, especially on LinkedIn these days. So much resource and the best thing is that they're free. So if you're someone that likes to learn, there's really, really no excuse out there. You can, you can definitely. Yeah, you can definitely learn.

Agree. There's, there's so much opportunity today. It's so much easier than it ever has been. If you want to learn something, sometimes it can be overwhelming, but you just have to get started. So you learn.

Exactly.

Again and try.

Yeah.

All right. If, if someone's listening to this episode and they want to learn more about you or get in touch, what's the best way for them to do that?

Best way is on LinkedIn. Find me on LinkedIn. I love to have a chat with new people on LinkedIn and then my website, www.360finance.com.

Right, great. Well, thank you so much for joining us, Art. It's been a pleasure chatting with you. I'll let you go so you can enjoy your weekend. I know it's Friday evening for you.

Yes, thank you. Thank you so much for having me.

Yep. Thank you for joining me. Financial Modeler's Corner was brought to you by the Financial Modeling Institute. This year I completed the Advanced Financial Modeler certification and it made me 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.