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What does a financial modeler do?

Financial modelers play a key role in financial planning.

Financial modelers use a company’s records to conduct financial analysis in the form of an Excel model. Typically these are used in situations similar to mergers and acquisitions (M&A), funding, or forecasting the company’s financial performance based on historical data.

These quantitative models are then used as decision-making tools to estimate project costs or propose new projects and are important for everything from small businesses and startups to large corporations and Wall Street.

Financial models can also be used to estimate the valuation of a business compared to others in the industry.

How does a financial modeler differ from a financial analyst?

A financial modeler uses a quantitative methodology to create models based on real-world scenarios. These scenarios illustrate hypothetical financial risks companies might face in the event of business decisions such as mergers, leveraged buyouts (LBO), and more.

On the other hand, a financial analyst guides companies in business decisions centered around expending money and attaining profit by assessing the performance of stocks, bonds, and other types of investments.

What skills do I need to become a financial modeler?

To become a financial modeler you’ll need financial modeling skills. In order to develop these skills, you’ll want to familiarize yourself with some of the tools and techniques that you’ll be using as part of your financial modeling toolkit. These tools include Excel VBA, Powerpoint, and data visualization software.

Common skills a financial modeling professional should possess include:

• Data analysis: An experienced financial modeler should have advanced excel spreadsheet skills and be able to handle complex data analysis. It also helps to have VBA skills as well.
• Data visualization: Financial modelers need to be able to communicate what’s happening in their models. This is where graphs and Powerpoint presentations come into play.
• Logical framework: A financial modeler position is a strategic position. You’ll be working with variables and so having a scientific background will help with this kind of quantitative model.
• Equity Research: This skill is something finance professionals use to evaluate companies with the goal of making investment recommendations.

What are the core financial modeler job responsibilities?

Working as a financial modeler requires you to work with financial statements and metrics such as income statements, budgets, and balance sheets. These inputs are necessary to create an accurate financial analysis.

Here are some types of financial model types you may work with:

• Discounted cash flow analysis: This type of financial analysis determines the valuation of a business based on its future cash flows.
• 3-Statement Model: This model focuses on income, cash flow statements, and balance sheets. Using this historical data helps to predict the financial outcome of the company. It’s a commonly used model and can help predict business valuation in a variety of scenarios.
• Comparable Company Analysis: This type of financial analysis is a relative analysis that compares the share prices of a peer group of companies.
• Precedent Transactions Analysis: These are sometimes called transaction comps and are based on the offer prices paid in recent mergers and acquisitions transactions for comparable companies.

Should I get a financial modeling degree or certification?

If you’re looking to get started on the career path to becoming a freelance financial modeler it will help to get a certificate or valuation to help your Upwork profile stand out. Some examples of popular financial modeling degrees or financial modeling courses include:

• Bachelor’s degree, master’s degree, or doctorate in accounting, financial engineering, or related field.
• Corporate Finance Institute (CFI’s) Professional Training Program including Financial Modeling and Valuation Analyst certificate (FMVA)
• Online courses and other free resources such as the DCF Model Training Guide template from CFI