Building Financial Models from Scratch

I feel like we forget this a lot...

Despite how much everyone is in love with AI these days, it can’t actually learn for you.

Sure, AI can speed things up or automate tedious tasks (and even slap together some structured spreadsheets).

But there’s still no substitute for just rolling up your sleeves and building a company’s financial model from scratch.

In my opinion, it still remains the most impactful way to learn accounting, finance, and business drivers.

Why Building from Scratch Works

Think about how we learn anything valuable...

• You don't become a scratch golfer by watching The Masters -- you play golf 🏌️‍♂️.
• You don’t become a great chef by heating up frozen meals -- you cook 🍲.

Financial modeling is no different.

When you build a model from scratch, you’re forced to understand the business:

• What does it sell?
• How does it make money?
• What are its major costs?
• Is it capital intensive?

It also requires you to think deeply about financial statements:

• How revenue impacts AR, which impacts cash flow
• How capital expenditures flow through the model
• Why clean inputs, logical calculations, and structured data flow truly matter

These are the real skills that help you become a strategic partner to the business (like a CFO), and not just an "Excel jockey."

Too often, people argue over XLOOKUP and VLOOKUP, and forget about the core business drivers that the CEO actually cares about.

The Actual Role of Templates (and Their Limitations)

Now, that doesn’t mean templates have no place.

Pre-built templates can actually be incredibly useful -- but -- only if you already know financial modeling structure.

Advanced users often leverage templates to accelerate repetitive tasks, streamline formatting, and ensure consistency.

Every business has unique revenue drivers, cost structures, and operational complexities.

A pre-built template -- no matter how good -- simply can’t capture 100% of these nuances.

That’s why, while a structured template can save you time (like the SaaS Model Template I recently launched), you still need to deeply customize your revenue forecasts and expense schedules.

The Right Way to Start (and Level Up)

If building from scratch seems overwhelming, here’s the approach I recommend:

• Start by building a simple three-statement model (get the "plumbing" right)
• Then, layer in key schedules like custom revenue builds, working capital, or debt structures
• Lastly, introduce complexity by adding detailed assumptions, error checks, and scenario analyses

The best part?

Once you’ve built one company’s model from scratch, you can confidently build any model.

(That's the beauty of understanding three statement modeling)

Want to Actually Get Good at Financial Modeling?

The fastest way to get good at financial modeling is simply to do it -- actually build real models from a blank spreadsheet.

This lesson has been reinforced throughout my career, despite all the advances in technology.

(and every time I do a "new build," I always learn something new, even after all this time)

That’s exactly why, in my Financial Modeling Mastery Program, you don’t just watch me model -- you build your own, from scratch, step-by-step.

And if you already know the basics and want a jump-start, I’ve also created a detailed SaaS Model Template designed for experienced modelers, giving you a strong foundation while leaving room to fully customize revenue and expense details.

Technology is amazing, but there's still no substitute for traditional "learning by doing."

That's it for today. See you next time.
—Chris

p.s., if you enjoyed this post, then please consider checking out my Financial Modeling Courses.  As featured by Wharton Online, Wall Street Prep, and LinkedIn Learning, you'll learn to build the exact models I use with Investment Banks, FP&A Teams, and Private Equity Firms 👉 Click here to learn more.