=IF( Business Acumen < Excel Skills...
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After seeing yet another "XLOOKUP vs VLOOKUP" battle on LinkedIn, posts about LET, LAMBDA, Dynamic Arrays, and AI, I think it's important to reiterate a core concept:
Your boss doesn't care what Excel function you use.
Your boss wants to know:
- Do we have enough cash to get through our slow season?
- What happens if gross margin loses two points?
- Are we in covenant compliance next quarter?
- Is our EBITDA defensible?
Today, let's re-align on what matters most...
The Actual Big 4 (remember these?)
Early on in these posts (remember those days?), I talked about the "Actual Big 4," which means:
- Revenue
- Gross Margin
- EBITDA
- Cash
Despite all the advancements in technology, I find that stakeholders still predominantly care about those four things the most.
And this should be a relief.
Because technology will come and go, but business acumen will always be required.
Financial Modeling: the Purpose
 Been in this situation before...? |
We've all been there. We want the model to be perfect:
- Amazing formatting
- Efficient formulas
- Auto-updates
A beautiful ecosystem of numbers.
But... our job isn't to create a "finance masterpiece."
The purpose of the model is to tell the Operations Team what to do next.
The model is purely an abstract representation of what might happen.
But, real people have to actually get the work done to realize the projections.
The model helps provide instructions and gives us insight into what can happen if things don't go as planned.
That's the purpose. Outside the spreadsheet.
A Bad Model I Use Weekly
As someone who teaches financial modeling, I hold myself to a pretty high standard when it comes to creating client models.
But, the one I use every week for a client "isn't that great." It's got:
- Several things I update manually
- Hardcodes here and there
- 30+ mins of prep
- Basic lookups
But you know what it's really good at?
Telling the Ops team who to call for collections and which vendors to push, so the team can survive a cash crunch during the slow season.
Do you think they care that I used SUMPRODUCT to build the summary?
Hasn't come up once.
They care about:
- The list of customers
- The list of vendors
- Making payroll
The "bad model" works just fine for its intended purpose, and that's all that matters.
(even if the Excel nerd in me wants to rebuild it)
What You Can Do Today
Remember, business acumen will always be valued higher than Excel skills.
It's why a million CFOs "aren't really good with Excel anymore," but are still sitting in the Board room.
Their insight helps set the direction of the business.
So, what can you do?
Start with the financial model you're working on right now.
Who is the intended audience?
What are the things they truly care about?
Does your model provide information so your team can build a strategy and take action?
Don't worry about the formulas so much. Direct link if you have to, or (gasp) hardcode a few things.
Excel skills will always be a valuable and essential part of a modeler's toolkit, but don't go so far down the rabbit hole that you lose sight of the big picture: keeping the business going.
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.