In the same way you wouldn’t tell a mother that her new born baby is not as cute as she would like to think, it can sometimes be challenging to communicate the quality of a financial model to the author.
In the case of a baby the reasons for not saying out loud that it is not all that cute are obvious and include
- The parents will stop regarding you as a friend
- There is nothing to be gained by it – you can’t do anything about it anyway
- The responsibility lies with the parents (it’s hardly the baby’s fault!)
Ugly financial models
If we translate this concept into our space of financial modelling things are not always as clear. Sometimes it is actually in everyone’s best interest to openly discuss the ‘ugliness’ of the financial model so that it can be improved and people’s lives become less frustrating.
Considerations before saying that ‘your financial model is ugly’
- The model may have multiple ‘parents’ – and they all share parts of the responsibility. The more ‘parents’ the more people may be offended. If however there are enough ‘parents’ they may stop even remotely caring about their baby and just accept the facts.
- Your contact may only be the ‘weekend dad’ and not be committed enough to actually improve the financial model and rather let it stay in ugliness for the rest of its life – or at least until it is back with its weekday parents.
- Is there enough time to make it more beautiful before it is used for an investment decision? If not then you may cause more frustration by having this discussion than by ‘just getting on with it’.
I always try to have an open discussion about the quality of our clients’ financial models. Using the concept of the ‘financial model city’ can sometimes help to kick start this conversation, but it is never an easy task.