Whatever type of model you have in front of you – for Corporate Finance, Project Finance, LBO modelling, M&A, start-up or scale-up businesses; they’re all based on the same principles.
Make those principles work for you when you’re trying to figure out if the model is “materially correct”.
This tutorial covers three areas that will give you the biggest bang for your buck; in the least amount of time. It focuses on doing a commercial review of the model, essentially “is this model behaving correctly”?
Various studies have been done, concluding that a high percentage (e.g. 90%) of models contain a material error and almost all (or all) contain an error. There’s certainly no guarantee with this method that you’ll pick up every error – that’s what professional model auditors do.
However, if you do these three steps methodically (and you will see how), you will pick-up the significant errors, and get a lot more comfortable with the model in the process. And I almost guarantee, once you learn these steps, you won’t make another decision on a model without doing them!