A financial model is the summary of a company’s expenses and profits in the form of a spreadsheet, and it’s often used to help calculate the effect a future decision will have on the finances. It may also be used to estimate a business’s valuation, or compare it to its industry competitors.
As you can see, it’s a given that a company’s financial officers or analysts would have such a model on hand to help with important decisions regarding finances. However, there are several financial model types, and each may produce different results. So before you can get a financial model, you’ll need to find and work with a financial modelling agency that fits your company best.
Given all that, here are the best questions you can ask to help you make the right decision.
What Financial Model type are you most Familiar With?
As hinted at earlier, there are different model types that can be used. Each may produce different results, and some may not be the best choice for evaluating your business. Depending on what model type the financial modellers at your candidate agency are familiar with, you may or may not get what you’re looking for.
On that note, before the interview, you’ll want to be familiar with the different model types and when they’re typically used, so you can get a sense of whether or not that type is a good fit for your purposes.
Can you Walk me Through the Process of that Model Type?
No one wants to work with a financial modeller who isn’t 100% sure about what they’re doing. That’s why this question is crucial. With or without a PC, the financial modeller should be able to break down the process of building a particular model type and explain it to you.
Pay attention to the words they use, too. Someone who really knows their craft will be able to simplify where needed, compared to someone who doesn’t or can’t do so because they’re not as knowledgeable but want to appear that way.
What if the modeller representing your candidate agency comes to the interview with a fully-built model to use as an example, even if you didn’t ask them to? That just means the agency and its employees are well prepared, and that’s something you should consider, too.
How Would You go about Finding the Data you Need?
It’s not unusual for financial modellers to be expected to produce results even when they’re not given all the information needed at the start. What you’re looking for here is the candidate’s familiarity with data and their resourcefulness. They need to be able to pinpoint what information they’re missing, and figure out a plan to gather that information.
That said, a candidate who says they have a plan of action but doesn’t elaborate much on it may not be your best bet. They’re either uncertain about what information they need, or they don’t know how or where to find it.
On the other hand, if that candidate can break down a general plan into logical steps, explain what data they need, and how they’re going to get it, then that’s more proof you’re dealing with a very strong candidate.