How to Build Fit-for-Purpose Excel Models
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The document outlines a systematic approach to developing Excel models, emphasizing the importance of understanding the model's purpose and intended user. It categorizes models into three maturity levels based on user complexity: Level 1 for personal use, Level 2 for internal clients, and Level 3 for external clients, with each level having distinct requirements for usability and protection. The author, Moritz Dressel, offers insights for creating efficient models tailored to the needs of different users.
How to Build Fit-for-Purpose Excel Models
- 1. Excel Models: 3 Essential Types A Systematic Approach to Developing Fit-for-Purpose Excel Models
- 2. How much time do you spend on creating Excel models?
- 3. Most people spend too much time on perfecting their work.
- 4. Start EVERY Model by answering 2 key questions.
- 5. What is the purpose of the model? Oftentimes, the model will be simple and used only for some quick analysis. A core data set, simple formulae (e.g., VLOOKUP), and pivot tables might suffice. Photo Credit: Greg Rakozy
- 6. Who is your client? Consider both formatting and usability of the model depending on your client. If it is for your own use (i.e., other people will not see it) or you are asked to “come up with a number,” then nothing fancy is required. If the output is to be formally handed over to an external client, then a top-notch model is what you will want to go for. Photo Credit: Anders Jildén
- 7. Then you will know where to go next.
- 8. It really is: horses for courses. Photo Credit: Bethany Legg
- 10. Build your Excel models based on… Intended User
- 11. Build your Excel models based on… Intended User Complexity Needed +
- 12. Build your Excel models based on… Intended User Complexity Needed Required Protection + +
- 13. Build your Excel models based on… Intended User The Ultimate Objective Complexity Needed Required Protection + +
- 14. Level 1 …is intended for your own use. Nobody else will work with the model. The focus is on getting the analysis right. No bells and whistles. But you might need to update the model in the future, so apply modeling standards wherever possible.
- 15. Level 1 Intended User: Objective: Complexity: Workbook Protection: You, or peer-level colleagues Accurate data Low/Medium Low
- 16. Level 2 …is to be used by an internal client. Most consultants know how to deal with Excel. Accordingly, the focus here is not so much on ease of use, but on being able to review and validate the accuracy of the analysis.
- 17. Level 2 Intended User: Objective: Complexity: Workbook Protection: Internal clients (e.g. manager) Easy to review Medium Low/Medium
- 18. Level 3 …is to be used by an external client who might not be particularly experienced using Excel. Accordingly, make the model as easy to navigate as possible by using consistent formatting, color-coding, and annotations, and ensure that it is impossible to break the model itself.
- 19. Level 3 Intended User: Objective: Complexity: Workbook Protection: External clients Easy to use High Medium/High
- 20. Do you want to learn more about how to get things done in a fast-paced work environment like consulting? Get started with…
- 21. The Aspiring Advisor Strategies and Tools for a Successful Consulting Career YES, I WANT THIS BOOK! Click it! Click it!
- 22. CONSULTANT & AUTHOR MORITZ DRESSEL Moritz Dressel is the author of The Aspiring Advisor - Strategies and Tools for a Successful Consulting Career. He can be reached via Twitter @MoritzDressel or at his blog www.MoritzDressel.com He is also a management consultant specializing in post-merger integration, joint ventures and strategic alliances.