How to Build Superior Financial Models for M&A With Patrick McMillan

After years and years of modeling and learning and growing, I still make poor decision. I am still working on revamping my model. There's one little formula and that's broken. I know why it's broken. I don't know how.

What is it you enjoy so much about working on transactions?

What better way than through transactions than getting two businesses together and then creates.

More opportunities for more people, Communication, storytelling. What role do those play in doing a Q of E?

More important than the technical skills. In fact, I have been a a communicator in the past.

So what's the number one lesson you've learned during your career that's benefited you the most?

When someone says something or does something, a lot of time if I ask them, hey, I think 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 Modeler's Corner. I am your host, Paul Barnhurst. This is a podcast where we talk all about the art and the science of financial modeling with distinguished 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. I'm thrilled to welcome this week's guest to the show, Patrick McMillan. Welcome to the show.

Hey Paul, how's it going?

It's going great. So, just so our audience knows, Patrick's somebody I've known for a couple years. We've developed a friendship. So if I give him a hard time during the episode, you'll know why it's not me.

Just.

Or maybe it is. We'll see. All right, so a little bit of Patrick's background. Patrick is a fractional CFO and transaction adviser at Amplio. Amplio is a Utah based fractional executive firm and he is known as the Q of E guy. Doesn't quite have the ring of the FPA guy, but not bad. He he has over two decades of experience. He specializes in guiding companies through periods of growth, providing strategic financial oversight and playing a key role in M and A transaction, which we'll definitely get into a little bit later. At Amplio, Patrick collaborates with a team of more than 160 consultants. It includes CFOs, controllers, CMOs, HR professionals, all kinds of different fractional support to help businesses thrive and grow. He's known for his passion for numbers and energetic approach. He brings a fresh twist to the Finance world, often sporting his favorite shirt, which you can see in the background there. If you're watching this on video, warning may start talking about ebitda. We might even bring that up. Because ebitda, after all, stands for earnings before it tumbles down again, and earnings before I trick the dumb auditors.

I've heard the second one, not the first one. I like it.

There's others I've heard, but I can't remember, and I can never find them online. I should have wrote them all down. There's some great ones out there.

Topic, and I love the controversy around it. And all sides are true depending upon their point of view.

I go with the Warren Buffett school of thought. You know what Warren said about.

Oh, yeah, Charlie Bonger, specifically.

Oh, yeah, Charlie was brutal. I worked for American Express. That's where I started my finance career. And you know, anyone who knows Warren Buffett's history, you know what company he has the largest stake in for most of his career? American Express.

Yeah.

Is the largest stakeholder. And so we never talked about ebitda. So when I went to a private equity company, I'm like, why are we talking about ebitda? All righty. So that's a little bit of his background. He's also really passionate outdoorsman. He enjoys riding a bike. I use that term loosely. We'll talk more about that later. Hiking, Enjoy being on the bike. Yes. Spending time in nature with his wife, Aaron. All right, tell me that worst financial model you've ever seen. You knew it was coming.

Absolutely. And I'm actually going to share two quick ones. One that was from a long time ago and one that is very recent. So the one from a long time ago, I was with a huge conglomerate of companies. I was their cfo. Built basically after my job was threatened, rightfully so, because we had no idea what was going on with cash. I had no idea what financial modeling was. And so I just pretty much put together this huge, crazy, insane, long spreadsheet that I would go in and update every single day with cash in, cash out. And I'm talking. I don't even remember how many tabs that had. Hundreds of tabs. We had, I think it was 45 entities, 55 bank accounts, 550 employees. And I modeled out to even the timing of when on average, every single employee deposited or cash their paycheck. It was back when paper checks, you know, we're still. Yes, I updated that thing. It took me about an hour every day to update it. The reason why it was horrendous was because of how long it took me, how cumbersome it was. And then when I finally moved on and resigned in my position and was and was training, we actually hired a CFO and a controller to take my spot. So I was training the controller on that spreadsheet and he essentially just threw, threw up. That's when I realized how bad it was. I had since years later talked with him and he's like, oh yeah, we moved completely away from that very quickly. Don't blame him. So that's a long time ago. That was, I don't even want to say years ago.

Recently.

Yesterday I was working on one of my own models. I did a pro forma for a gal who acquired a company and some. A lot of things changed, I mean change drastically in it. And I am still working on revamping my model and there's one little formula in there that's broken. I know why it's broken. I don't know how it's broken. So I'm still trying to fix that. So it's one of those things where Paul, after years and years and years of modeling and learning and growing, I still make poor decisions. And so, yeah, they're my own.

I don't know make you feel any better. I think my wife tells me that every day. And you realize that was a poor decision.

You deserve it.

Yes, yes I do. And I'd like time to go up to my room and think about it. That's usually my response. If anyone knows Jeff Foxworthy, that's where it comes from. So we'll, we'll take a side note for one minute. So Jeff Foxworthy. There's a song where he goes. When I was first married, I used to say to my wife, honey, what's wrong? It's like I've since learned now when I can tell something's wrong, I look at her and go, honey. Although I don't know what I yet said or did, I'd like time to go up to my room and think about it.

I love it. And I'm from the south, so I love Jeff Foxworthy.

Oh. Anyway, I probably just got myself in trouble with half the audience, but let's jump into the main section. I'm here to have fun too. So you are the self proclaimed Q of E guy.

You gave me that name by the.

Way you use it. What can I say?

I do use it. It was great. I thought about it for about 10 seconds and I changed everything.

But what can I say? I'm creative. So tell our Audience, what is qov? Give an explanation of what that is.

I love it and I love this subject because it's so, in my eyes, so important. But of course, we all think what we're working on is important. So I want to break the word down. So qv, quality of earnings. Let me break that word down. Quality, okay? Something can be of high, medium or low quality, and it's in the eyes of the person that's holding it, right? Eyes of the beholder. So quality of earnings.

Earnings.

How much is a company producing? Could be. And here's where we get controversial, right? Could be net income, EBITDA cash, you know, so there's so many ways to look at earnings. So quality of earnings. Let's talk about what it isn't first and then let's talk about what it is, what it isn't. It's not an audit. A lot of people think, oh, my cpa, my tax guy can do a Q of E for me. Well, an audit will tell you what a company's doing that's in compliance with gaap. A quality of earnings will tell you how they're doing it and why they're doing it that way. So that's really the difference. And it really digs and dives into not just the earnings, not just the income statement. But it takes a balance sheet to build an income statement, right? And so it looks at everything on both sides. Stable cash flows, networking, capital. It looks at customer and vendor concentrations, it looks at trends. It's like, looks at benchmarks and metrics. Hey, how's this company doing compared to other companies, you know, and it, it also, there, there's the word, right? Ebitda. So it really looks at, how do you adjust for EBITDA on a normalized basis there. So here's, here's my bible right here, right? Quality of Earnings by Thornton O Glove. This was published, I think in 85. And he really set the precedence. There's two things, non operating and non recurring. Those two things need to be normalized, not operating. Let's say you as a financial modeler, let's say you go and start doing car sales and you put those car sales in your income statement. That's not part of your normal operating income. That's not what you do on a normal basis. So we've got to strip out the sales and all the associated costs of those cars that you're selling, right? And then a non recurring item, let's say you go to Abu Dhabi, you know, for a family vacation. It's not Operating because it's a family vacation and it's a one time event because you don't normally go out there. And so it's really a non recurring item. And so we really look at normalizing earnings that way we can understand a buyer can understand how a company would operate on a normalized basis if and when and after they acquire the company. And it's important for both buyers and sellers to understand that. A lot of people don't understand that a sell side quality of earnings is very important too because it helps a seller truly understand how a buyer's perspective is going to be on that.

I like it and I get what you're saying of all those non recurring items. I use that term kind of loosely because I still remember some of the company that worked with every year they were non recurring. You're like, okay, at what point are they no longer non recurring? Right.

You know what I'm talking about.

There, there's a lot of subjectivity in that. I'd love. How do you, how do you make that determination if you see it, you know, kind of something similar year after year. And I, I would imagine you get a. Asked a lot of times. Can't we just consider this all non recurring? It's really one time. And how do you make that decision? Because that can make a big difference in whatever that earning is. Right. Is it ebitda, cash flow? Whatever you're looking at, that number can be quite different depending on what goes into those adjustments.

Yeah, and that's, we do get that question quite a bit. The answer to that is, is really if it is actually reoccurring over a certain time frame, then you know what, it's an operating thing. It's something that happens in the business. I'll give you an example and I see this not often, but at times. Marketing. Okay. We tried a marketing project and it didn't really spin off any revenues. And so let's count that as non recurring because it only happened over a three, six month period. But I'm not going to remove that because that market typically, I'm not going to say all the time, but typically I won't remove that because it's a cost of doing business. You're trying your best to increase the revenue it's associated with that. It's a failed project, but it was still cash. It's still something that you paid that just didn't produce any fruits. And so things like that. And I still.

Employee. Right. If you have an employee, it's like you're not they were going to work on something for six months. You can't just be like, well, if that project had failed, we would have fired them and then brought them back after six months.

Yeah, but you nailed it too, though, as it's still very, very subjective. It's very dependent upon, you know, and. And that's where when I do, or my team or our firm, when we do a quality of earnings, we really try to understand the holistic picture. And that's the thing a lot of people will ask, you know, well, what sets us apart or, you know, other firms or anything, what we have sat in those seats as controllers, CFOs, VPs of finance, FP&A professionals, where we really understand how if I pull this lever over here, what's going to happen way down the road? And you got to look at a QV that same way as well. And that's all part of FP&A. It's all trying to find out the levers and the knobs, how does that crank out stuff, you know, and everything. So all of this is. It's really combined and it's super important.

I hear you. There's definitely down the road implications and how does it impact everything? But let's step back. How did you get into qab?

So when I first joined our firm, Amplio, back in 2020, the CEO, or our director at that time, called me with a project. One of our clients had inbound interest from a private equity firm and they needed their financials cleaned up and presented to the private equity firm. So I got in there and did that. Presented, got the deal closed. And after that deal closed, the partner that was overseeing it called me and said, you just did a quantity of earnings which normally costs X amount of money, and we just charged Y. And I'm like, why? Why did we do that? Why? I need to learn how to do this. And so for the next several months, I really dug into and learned what QVs. I'd never heard of them before, so really dug into what they are, how to develop one, created our first model, which looks absolutely nothing like how it looks today. It was very, very rudimentary. And since then we've really honed on that. We've gone through many renditions. And this became important to me, Paul, because I'll even rewind the tapes back a bit. So years ago, before I was the CFO of that company that I made that really bad model, I bought and sold a company myself. Super duper small. But I went through a transaction, I had no idea what quality of earnings, networking, capital, or any of that stuff was not before, during, or even after the transaction. I didn't understand what I did until now. And so all this really started kind of coming together, and I'm like, oh, my gosh, this is fun. This is something I really, really enjoy. And so that's how I got into it, and it's a blast. That's why I got the shirt. May talk about I can't know a point. Can't. I may talk about ebitda. I may talk about quality of earnings. I may talk about buying or selling a business because it's a blast for me. It's a numbers game. I've always loved numbers. I just really like them when they have dollar signs attached to them because they're fun. It's a game.

I love that. It's clear you really love and you have a passion for what you do. But, you know, right. You can deal with numbers in a lot of different areas in finance. Why do you like dealing with transactions? And I say transactions because usually a QOV has to do with someone exploring a transaction, whether it's a sell, a buy, a change of hands, a new investment, you know, a merger, whatever it may be. But what is it you enjoy so much about working on transactions and the whole transaction side of Q of Es?

Yeah, it's a couple of things, really, that it hones in on. Number one, I love the idea that someone, a seller, who has built a business, however big or small it is, can really find a way to hand that business, pass that business on to someone, or hand it over to someone who can crank it up to the next level. And while they're at it, the person that's selling it can really pull out what they've put in. Plus more. That, to me, is exciting because that person has built that business. They've supported their family, they supported their employees families. And now through that transaction, they're able to do that again or do it more, or those employees will continue growing or they will learn from that and go on to bigger and better things. So that's one. The other thing is something that I'm very passionate about is just learning about people and their stories and communication about it. A CFO really is nothing but a communicator about numbers and a communicator of stories of businesses and how those numbers have reacted in that business. And so what better way than through transactions than getting two businesses together? Whether it be a person and a person or a company and a private equity firm or Something like that and can really combine their stories together. And that synergy just goes on and then creates more opportunities for more people, more families, more stories behind that.

So when I'm ready to sell my business, I need to come to you is what you're telling me. Please.

Jeff would love to help you do it. If anybody is ready to buy Paul's business, call him today.

I don't know how much it's worth. It's kind of hard to sell the brand since I'm the logo. But yeah, there might be a big goodwill impairment when I sell it.

Right, yeah, because you're going to sell it for hundreds of millions when you only produce a few thousand a year anyway.

Pretty much, it's all about the brand. I have my balance sheet.

That alone is a big million.

The beard. All right, back to serious stuff. I'm curious with dealing with Q of either. Are you usually the one building the transaction model? Are you building pro formas of how the company will look? So what part of modeling you're doing and kind of how does that work in the overall process?

Love this question. Because we've really developed kind of three very specific ways that we can help a company. Number one is so the quality of earnings itself is more about historical analysis and then adjustments for what would look like a pro forma. We're not going to pro forma out five years on a Q of either, but will really kind of help build a model to where you as a buyer, as an acquirer can roll that into your performance. So that's one way. Another way that we can help is we do financial due diligence, which is quality of earnings is a, is a component of it. But let's say you're going to buy a company that's not quite necessary to get a qv. Maybe it's, you know, several hundred thousand dollars of revenue, not quite a million or a million and a half, but we'll just do, you know, kind of a block of hours or hourly rate and do some financial due diligence, looking at historical stuff. And it's a very, very watered down workbook on a qv. Now, financial modeling, we also do pro formas and I do this quite a bit on, on leverage buyouts, you know, for example, or on a lot of private equity deals. So I'll do an LBO model where I'm doing a pro forma. I'm looking at the valuation, I'm looking at, you know, the returns, I'm looking at the debt ratios, I'm looking at you know, the waterfalls and I will perform that out for five years. And so that's. And, and that doing the pro formas really helps me to be a better Q of E guy because I'm able to look at things from a future standpoint and say, okay, well hold on a second. If the, if the buyer is looking at doing this with the company, then I need to make sure and include that on my adjustments for the quality of earnings. Because I'm basically, I'm doing the adjustments on how will the company run it on a go forward basis. Right. So it's really, that's the art and the science combined together. And so yeah, modeling has a huge role in it because in modeling you got to look at things holistically. There again, well, it's the same thing for qv. You've got to look at things holistically.

So I would assume at the end you're giving a report with a lot of write up, probably your model and some graphs and analysis. Is that the way to think of it? They get a package at the end, they decide to look at that and say, okay, what does this mean to me on what I know about the company? So I'm assuming the Q of E is what I've seen that's usually done is once you get into due diligence, you go out and hire a third party source to do your Q of E. Most common is what big four.

They're doing a lot of those.

An investment bank.

Big fours do a lot top twenties. Then you have a lot of small, small individuals that kind of have a small farm or the. Or you get a boutique firm like us to do it.

Yeah, I remember on the few transactions I worked in at one of my last companies, we were using one. I don't remember if it was PwC or KPMG, but one of the big four to do all of our QOV.

They charge a lot and they throw a lot of bodies at them. Yeah, I still remember the knockdown, but they're expensive.

The one we got was a company that had been on a cash basis. So they tried to normalize everything in the Q of E. And that was fun to read.

Yeah, our report and you can actually, I think you'll have the link in our show notes, but you can actually go to our website, to Ample's website. We, we have a sample QV that you can download and actually see what it looks like. It's typically a 30 to 60 page report.

Oh, is that only 30 to 60 pages?

I thought it was A whole. That's it. That's it. You know, it's. It's an easy read. You know, five minutes. Read it before you go to bed. You'll absorb it.

Well, I'll keep that in mind if you could send me over one to help me go to bed. All right. Well, there. So you've been doing fractional work now for several years, sounds like since 2020. What has kept you doing fractional work versus just going to work for somebody full time? What is it you enjoy about the fractional?

Yeah, and actually even before 2020, I was doing a fractional work, but just as an independent.

Okay.

So when I left, when I left the big conglomerate of companies, I picked up just some independent companies myself as their fractional CFO and helped them quite a bit and then joined our firm in 2020. The reason why I enjoy that, Paul, is because I really like learning from several different opportunities and combining those best practices together. Plus for me, I just, I guess it's my. Where I'm always, always like to have my hands in different pots and looking at different things and, and you know, okay, so I like to go mountain biking, then I want to go hiking. You know, I like variety, but I'm able to really apply those things in various ways. I've worked at the big corporate companies and it's been a blast. I really enjoyed, you know, my times doing those. But then now the small companies, really seeing them with that growth excites me. And then being able to work with, you know, the CEO who's also, you know, doing the marketing, who's also doing some of the accounting and saying, hey, you know what, let's take that off your plate and let's put that to an expert's plate and then let you do what you do best, which is actually running, growing, being divisionary for your.

Company, FP and a guy here. And as you know, I am very passionate about financial modeling in 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 Modeler 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. Sure. It's being held at will allow them to focus on what they're good at, maximizing their abilities and their skills. Because we all only so much time in the day and so many things we're good at. We can't all be expert QOV guys and expert mountain bikers, as I like to say.

Now you're pinning me down.

All right, so I know you recently completed your mba, I think just a few months back if I remember right. So I know you know you did that probably a little later than when a lot of people go to go to grad school. What made you decide, hey, I'm, you know, in the middle of my career, I'm doing these quality of verings and I should go back to school and get a mba. What, what was the thinking behind that?

Okay, you know I'm going to pull something back here and show you real quick. So this is a. Because I said I would look it up if you've never heard it, because I said it would. So when I was doing my undergrad, I knew I wanted to go on and get my mba. I thought I was going to go straight through and get it right after, but I had a great job so I wanted to continue on with that. And it kept just for the next 20, 25 years. It was, oh, I'll do it next year, oh, I'll do it later. It takes time and money. And so a few years back I finally, I was telling some, I was talking to some friends. We watched this actually I handful of times over a couple of months. We watched this, the TED Talk because I said I would and I said, you know what, it's time. I said I'm going to do it. I'm tired of saying it, I'm just going to do it. And so I did. I'm glad I did, Paul. I'm very glad I waited because I did the, the and you can call it the part time professional executive whatever program.

Sure.

Okay. I was working while I was doing it and I was able to apply, apply things every single day. The day that I learned that I was going down the class Tuesdays and Thursday evenings down to Utah Valley University and then driving home and that night I would log in, be like, I've got to do this right now. Or the next day I'd be like, hey, we learned about this last night. I'm going to implement it Paula was life changing. Absolutely loved it. So my why for going back to get my MBA was threefold. Number one, I love learning. I love education. Lifelong learner, right. Number two, I love networking and getting to know people. Connecting, that's the key. Connecting with people. I'm an accountant, right. One plus two equals three. So one, two, three. So my third reason is combining those two together. It's really learning together, connecting with people and building businesses together. And I love that. And so I stay in super good touch. We're actually next week we have our alumni networking group. I'm super excited to go and, and reconnect with people. It's just, yeah, for me, it was absolutely worth it. And I know people are like, oh, well, you know, what's. I'm not going to change jobs. I'm not going to go and, and, you know, work for another firm or anything, at least as far as I know. I mean, that's not my plan. But this education really helps me to be a better QV guy, a better cfo, a better individual, a better spouse, better, A better person in my community. It's really helped me to look at things from a multiplicity of areas.

I love it. And I know you're a passionate learner. I know you and I have talked. I know you've taken some of my courses. I know you've taken other courses from people on LinkedIn in the Finance space. Is there any course or anything that you've been like? I love that, and I'd recommend that to others or maybe somebody you love to follow on LinkedIn that you've learned a lot from.

I'm gonna give three names, Paul, and of course, you're one of them. I love following you. Your courses are great. I love chatting on the phone with you. And, you know, I've called you and said, hey, how do I do this and everything. You've been fantastic. Second name will be Chris Riley. Phenomenal. And I know you've had him on the podcast a couple of times. Chris and I have chatted many times to actually sent him an email. He did respond, by the way.

Good deal. Yeah. Everyone knows we had a conversation about something Patrick was struggling with. He's like, I emailed Chris to get the answer. Am I right?

Yep, you did. And Chris is phenomenal. He and I have had great conversations, too. And Carl Seidman, he's phenomenal too. Carl and I, we've never talked in person, but on LinkedIn, we have messaged back and forth. He's phenomenal. So those, oh, And I'll leave a name of fourth. I don't know how to pronounce his name. Sekora. I'm sorry. Boyan. Bojan. Oh my gosh, I'll have to look him up. Bojan something.

Rod. Starts with an R if I remember right. Yes. Rod Mvic or something like that. I know who you're talking about.

Are my four favorites to follow and to talk. And I've talked with all four of you guys, you know, and. And many different ways too. Sometimes on the phone, emails, chats, text, LinkedIn, whatever. But I've learned a ton from you guys and so highly encourage people to go take your guys courses, follow you guys, reach out because all four of you will talk and answer too.

Yeah, great list. I've had many conversation with Chris. Chris is fabulous. I love his material. Carl is one of the best people I know. Incredible presenter, very thought provoking.

He really.

He'll make you think so. I agree with you. He's a great one. Oh yeah, his videos on LinkedIn are great too. Yeah. And I've had the opportunity to meet him in person and we've chatted a number of times.

And you've had him on the podcast as well?

Yes, I had him on FP&A today, FP A tomorrow, and next month I'm going to have him on Financial Modelers Corner.

Oh, good. Okay.

All right. So I'm curious. We've talked a lot about kind of, I would say, technical side of Q of E. Right. You got to write the report. You're doing modeling pro forma, a lot of accounting adjustments. You have accounting background, but what role do the soft skills, communication, storytelling, what role do those play in doing a Q of E?

More important than the technical skills, in fact.

Why'd you say that?

I can go through, I can do an analysis, I can do trends, I can make adjustments. But if I can't communicate about those, the why behind those numbers, there's absolutely no reason for me to do them. Because I have to be able to say, for example, if I'm adjusting. I got an email that said, hey, one of our companies had an audit. It was essentially as an insurance audit for all intents and purposes. And they had, it was a $2.3 million adjustment to the insurance. They negotiated it down 700,000. And so we have to be able to communicate that adjustment to be able to say, hey, here's what happened, here's why. So that the receiver of that can understand what the impact is. Vendor concentrations, customer concentrations on another one that I was doing it was a sell side and it was a high, like 73% customer concentration. And when I saw that, I was like, there's no way this is going to go, you know, go well. But after learning that that is actually very typical in that specific industry for this very specific reason, and how they're going to mitigate that risk, which is very important. Okay. Because everything's risky. It's how you mitigate the risk. Then that's how we're able on the sell side, be able to, to present that and communicate that in a way to where a buyer, whether it's a strategic, which is very likely for this one, can really take that company and roll it up into their companies and reduce that risk. And so the communications, that soft skill is utterly, utterly important and I would even say most important.

So what is the most important soft skill is ability to communicate. Storytelling. What do you think it is?

Communication is the component of storytelling. I have to be able to tell the stories. Tell the story from a number standpoint. Why did this business do what it's doing, how it's doing it, but really, truly communicate that to the receiver? When I do like a qv, I have to understand who the consumer is going to be. Is it going to be a bank, you know, that's loaning money because it's an eta, an entrepreneur through acquisition, you know, a self funded searcher that's buying a company or, or is it going to be a sell side and there's potentially a private equity company. Or is it going to be a strategic, you know, an existing customer vendor that's going to buy the company? Because those are different ways to really communicate that story. It's not spinning the story, it's not trying to put things only in certain light. It's to communicate in a way to where you know your audience, right? You got to understand what the audience is used to and then communicate it in the words and, and way that they truly understand it.

So true. You have to speak in other people's language. If you use nothing but finance terms, their eyes will glaze over and they'll look at you like, why am I listening?

Right, Exactly.

And we've all been there, we've all been in those meetings or done it where you're just like, oh, wow, that was painful. In a minute here, I'm going to get to some personal questions, but before I do that, I have two more for you. What's your favorite Excel shortcut, Control, open bracket and.

And then F5, enter Control Open bracket will basically jump to what the formula is pulling from and then F5 Enter brings you back to that original point.

I think you are the third or fourth person who said that one. I think that's now number one on this show. As far as Excel shortcuts, it's either one or two. I love it. That's a pretty common.

When I tell people about that, it completely changes their life. It changed mine.

It's a great one.

I'll even combine it with something. And I was doing this yesterday. Control, open bracket. And then if you're using Wall street macros, was it as a control shift Y which highlights the cells. And so if I'm going through and I'm making sure everything's covered, then I'll continuously do that of it.

So Wall street macros. Yeah. I'm taking it. You use them.

I love Wall street color coding.

Nice. So what's the number one lesson you've learned during your career that's benefited you the most?

Communications. It goes back to that. I have been a poor communicator in the past. I still am in a lot of ways and I'm still learning a lot of ways. And along with that, communicating, it's asking questions to understand what their standpoint is. For example, a lot of times I'm a blue. When you look at the color code, I'm a blue. It's my favorite color, by the way, too.

Yeah, BYU I know. I get it.

Relationships are so important. And so when someone says something or does something, a lot of times I'm like, did I offend them? And so if I ask them, hey, I think this is what you're trying to communicate, then I can understand that in a certain way and then be able to communicate back to them in a way that we could really learn and move forward in a great progressive way.

Love it. All right, so we're going to do the rapid fire questions, I think, next, and then I'm going to come back to the personal question. I think we'll end there. So you've listened to this a few times. I know you're familiar with the show. No, it depends. You have to pick a side and then at the end you can elaborate on one or two. So you get no more than 15 seconds for each of these. I don't even think you'll need that. Circular or no circular references in your model?

No.

VBA or no vba?

No.

Horizontal or vertical model?

Vertical.

All right. Excel Dynamic arrays. Yes or no?

Yes.

All right. External workbook links. Yes or no?

No.

You thought about that one for a second. Named ranges yes or no.

Typically no.

Okay. Do you follow a formal standards when building your model? Like fast or smart or any of those others?

My own.

All right, I get it. Will Excel ever die?

No.

All right. That was quick. Authority. I like it. Will AI build the models for us in the future?

Oh, it will not build it for. Okay. Do you want me to elaborate on that one later?

You can elaborate. We'll say no. You're going to come back to that one. I'll let you talk to it at the end. She sell protection in your models? Yes or no?

Typically no.

Fair enough. Do you believe financial models are the number one corporate decision making tool?

Yes. And if they're not, they should be.

I like it. I had one person tell me politics. So you know, what's your favorite lookup function?

Choose Lookup. Which one? Xlookup.

Love it. I like it. We're on the same page there. All right. I think you wanted to elaborate on AI building the models for it.

Yeah, elaborating on AI. So I use AI occasionally to help me actually. I use it often know for a lot of things. Usually to make sure I'm clarifying myself in emails and stuff. Like I said, communications. Right. But I'll use it as well to help me look up, you know, different ways to do different formulas and things. I think AI will really help us to build models in certain ways. Whether it be to start or get in the middle or end. But I don't really feel like, at least not in the near future. I don't feel like AI will build an entire model. I think it will enhance, actually. I know it will because I've used it to enhance my stuff. But to do it just AI, I don't see that happening. I could be wrong, but that's my feeling.

Yeah, it'll be interesting. We have a lot of different opinions. I think most people have said yes. I do think we'll build the full model. It won't, but we'll still have to put in the assumptions. There's still going to be a lot of human judgment. And so there's part of. How do you define build the whole model too. Right. But the. I definitely. I think we'll be able to do all the tactical stuff. For us that's just a matter of time. But there's still always going to be some level of human judgment needed. So I get it. Like one person told me, I think was in Bennett. He's like, I don't like that question. That's not really the question you should ask. And I'm like, I know, but no matter how I ask it, there's a lot of nuance to it.

And you can say that for a lot of the questions too. For example, protected cells. Most of the time I don't. I love simplicity. I love being able to send the model to someone who can take it over and use it. And I can be completely hands off and hands out, but at the same time, there's times when I got to lock cells to make sure for whatever reason, they don't get messed with.

Sure, I get it. All right, so that's our rapid fire question. Now we're going to get to know a little bit more about you because I know you're an avid outdoorsman. So what brought you to Utah? I'm curious. I'm sure you love the mountain biking here. Was it the outdoors or how did you end up here in Utah?

Yeah. So I'm from Northeast Tennessee. Dry cities, the Appalachian Mountains. Let's make sure we pronounce it right or I will throw an apple at you.

Apple.

How you remember. Oh, my gosh, you're killing me, Smalls. While I don't have the accent, don't know how or why. I'm the youngest of seven kids. Never did get the accent. But anyway, so my ex wife was married before and she's from out here. So we met in Tennessee after my LDS mission and then moved out here to be closer to her family after we got divorced. I said, you know what, I love it out here. I'm gonna stay. I love the outdoors, I love the economy, I love the people. And it's just, it's actually a lot more involved, you know, than, I mean, Tri Cities is great. It's still a little small. It's small town, you know, and so being out here was. It was fun. So I've been out here since I think, 04, so about 20 years.

I love it. And I know you, like I said, love the outdoors. You love mountain biking. Any favorite stories or experiences you can share with us? Mountain biking. I've heard rumors that you had a little incident about a year ago or so.

So for those who listen every single phone call Paul and I have, he loves giving me crap about this. So about a year ago, background. I've never broken a bone in my body. I have. I've been wild and crazy, you know, and hiking, backpacking, mountain biking, all kinds, you know, playing soccer, all kinds of stuff. Somehow never broke a bone in my body until Last year, mountain biking out here in Utah, a little place called Corner Canyon in Draper. Great spot. Check it out. Two buddies and I were mountain biking. We were going down a trail called Rush. So those who are from here in Utah know the spot I'm talking about. As I mentioned it, I'm leading, I'm feeling pretty good, and I'm not usually a big jumper. I've tried a little bit, but I'm feeling pretty good this day. So I'm jumping some. But at the very end of rush, there's one more small short, maybe a hundred yards if that. And there's a little spot where you can veer off to the left or to the right. I usually go right. Well, this time I decided to go left. And I took what I thought was a jump. It wasn't. It was a rock. It was actually two rocks. I. What I thought jumped the first rock and landed on what I know was the second rock smashed into my handlebars, completely, completely flipped over. And the. My buddy who was behind me saw the whole thing happen. And I can't breathe. My chest hurts. Well, long story short, I broke four ribs. It was hard. Now here's the fun rest of the story, too. We slowly walk my bike back to my truck, and we're waiting on our other buddy, who is behind us. Or so we thought. Long story short, way farther up the trail, long before we even knew. He also crashed into a tree and lost consciousness.

And.

And punctured the lung. It was just bruised a few. I was just. Oh, man. So both of us are at the hospital, you know, in separate rooms. They're cleaning us up. This guy comes and cleans me up. Hey, what happened? I'm at Corner Canyon. No, I broke, you know, my ribs. He's like, oh, my gosh, must be in the water. I just treated another guy. Like, yeah, that's my body. We were up there, too.

It makes you feel any better. I've ended up in the. The hospital for people I've been, you know, that have gone mountain biking. We had one in California where he ended up getting. He hit a tree with his face. And, yeah, it was not. He. He was quite sore. He ended up being fine, but he. He. Basically, it was the redwoods in Santa Cruz. He jumped over because a road. A tree had fallen, and he got up and over it. He bunny hopped over it, but he lost his balance a little bit and ended up running into a tree. I think he probably would have been better just crashing over the log, but, you know, Hindsight is always 2020. All right, so total side note. Who's ever still listening at this point? Thank you. That was a little. Total tangent. But if you ever come out to Utah, you like outdoors, mountain biking, come out and have some fun. Just don't jump off big rocks would be my advice.

Jump off them. Just make sure you know how to land on.

Public service announcement. Be safe. We'll leave that be safe.

Here we go.

All right, let's go back to the financial modeling, the exciting stuff. So if you could offer our audience one piece of advice to be a better financial modeler today, something they should start doing, what would it be?

You know, I'm going to copy Chris Riley, and I think you've said this, and I've known others to say this too. Model your own personal finances. That right there. I do it. I actually do it every single month. I close out my own books and it's incredible. It's super eye opening. It's a way to really do something that's at least a lot simpler than what a company would be. And it's very helpful to really learn how to. How to do a financial model. So highly recommend that.

Yeah, Chris has recommended that a number of times. It's a great approach. All right, if our audience wants to learn more about the Q of E guy, how can they get in touch with you?

Definitely LinkedIn. It's the biggest, easiest, fastest way. I try to make sure I respond, you know, within a day or two. So right there. Also, I think you'll have a link to our show notes to his website as well.

Yeah, we will. All righty. Well, thank you for joining me today, Patrick. I've enjoyed chatting and you enjoy the rest of your week. Thanks a lot for coming on the show.

Thanks, Paul. Appreciate it. Pleasure.

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 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.