# Modeling (in Excel)

By [Continuations](https://continuations.com) · 2010-11-11

models, mistakes, excel

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I am going to spend the better part of today building some models in Excel.  Much as I love Google Docs, for any serious model I still go back to Excel without regrets.  It is fast and versatile and I know it extremely well.

I see a fair number of business budgets and financial models built in Excel.  Many suffer from the same set of problems:

*   Artificial precision: often there is an attempt to capture every line item down to office supplies – but those generally won’t make or break a business (unless you are in the office supplies business that is).
    

*   Key assumptions not easily visible: the cells which contain the key assumptions (e.g. about drivers of revenue growth) should be clearly highlighted and/or gathered up in one place.
    

*   Circular references: sometimes you can’t avoid having to do a “goal seek” but many models contain gratuitous circular references.  For instance, if you want to target a particular post investment option pool size, you can do that with a simple formula.  No circular reference required.  
      
    
*   Lack of sensitivities: no attempt to analyze how a small change in one of the key assumptions will impact outcomes.
    

*   Deterministic: this is my biggest pet peeve.  It’s OK for something like a cap table for a specific round of financing.  But for any kind of projection you really want to look at a [distribution of outcomes](http://continuations.com/post/29090587/welcome-to-monte-carlo-excel).
    

Now off to actually putting my models together!

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*Originally published on [Continuations](https://continuations.com/modeling-in-excel)*