By Dylan Parkes | August 1, 2025
Are We There Yet? – The time it takes to build a (good) financial model
This is the second of a series of three blogs “Are We There Yet?”. The first blog The time it takes to become a financial modeler. Keep an eye out for the third installment soon!
Start to finish. Soup to nuts. Dashboard to definitions to core ratios. Just how long does it take to build a financial model?
The answer is a bit more complicated than you think, it depends on three questions:
Who is my audience?
A financial model can be a quick sanity check for your manager on some early-stage numbers, or it can be the centerpiece of multi-party negotiations for hundreds of millions of dollars. It matters who your audience is as that will determine the level of complexity needed to answer their questions. It will often determine how far into the weeds you need to go on concepts like depreciation or tax.
Most models evolve and iterate from simple three-statement models with a few generic assumptions into the many-tabbed hydras that you might see in a port or road project. Along the way, the target audience is likely to change as well. Ideally, the model you build is flexible and adaptable enough that tailoring it to new stakeholders is just a few keystrokes away.
What inputs do I have (or what inputs do I need)?
Models rely on inputs—raw data transformed into clean graphs, tables, and ratios. So, the quantity and quality of available inputs are critical.
This question often (but not exclusively) correlates with the question above. If this is a simple model for a sanity check, we only need a few key inputs such as presumed revenue and costs and a generic discount rate. However, if you need to build out a substantial model to support a round of capital raises for a large infra transaction, limited inputs can only get you so far. The model can be built but will lack reasonable outputs.
Beyond availability, data credibility matters. Yes, all inputs are estimates—projections, probabilities, and best guesses—but that is exactly why it should be as sound and grounded as possible. The more generic an input, the more generic the output. However, since humans are historically quite bad at predicting the future, we also need to bear in mind that we have limitations. So, we select reasonable methodologies and trusted experts and move forward with all the best intentions. We can’t lose sight of the lovely forest for those very tall trees.
What is my goal?
A financial model is the life blood of any Project Finance transaction. It might begin with a sketch on the back of an envelope or from months and years of developer work, multiple studies, consultant reports, legal contracts, etc.
To determine what a “good” outcome is for your model, you need to have a target. In connection with the questions above, this target helps to set an appropriate level of effort to accomplish your modeling task. It will allow you to set priorities for your financial model so that you don’t get overwhelmed with the minutia of the project and find yourself lost in the weeds. Setting your target goal can help to answer the other questions as well. It may indicate what inputs you need beyond what you currently have. It might also indicate who else will need to use this model.
Finally! Are we there yet?
So, finally, we know for whom we are building this model, what inputs we have or need, and we know what our target goal is. But how long does it take to build a (good) financial model?
It takes as much time as you can give it. The more time you invest, the better and more refined the model becomes. But don’t fall into the trap of perfectionism. There is no such thing as a perfect model—and chasing one can derail a project for no actual benefit.
Perfect is very often the enemy of good here.
A (good) model is reasonable, flexible, and gives outputs that are defendable. If you need it for a small task, give it a small amount of time. If you need it for a large and complex task, give it more time. The extra effort is always worth it.
Pivotal180 Services
Training
Want to learn to build a best practice financial model to help you and your business understand, evaluate and optimize your projects, no matter which way the economic or legislative winds are blowing?
Enroll in a Pivotal180 course! We offer a range of training programs for modelers of different backgrounds and experience levels:
Renewable Energy Project Finance Modeling
Introduction to Project Finance Modeling
Financial Modeling Fundamentals
Tax Equity & Hybrid Financial Modeling
Advisory Services
Do you
- need a new model?
- have one that doesn’t meet your business needs?
- do you want to see if your model is running on the current best practice?
- require a model audit or a simple model review
Contact us! We offer a range of advisory and audit services to help you get your model where your business needs it.
