Never share an Excel model
Decision-makers need to make decisions today based on tomorrow’s reality. And since tomorrow’s reality is not known yet, we need to form some convictions on it. These convictions come from our knowledge of the past and our understanding of what can influence the future. These convictions need to be shared inside and outside the organization with a common language. And numbers is the common language.
Enter Excel models.
What is an Excel model? An Excel model is essentially a representation of reality under a specific set of conditions and hypotheses.
If you share the Excel model alone, everyone will have their own relationship with Excel. There are those who love it and will immediately start manipulating formulas or varying all the parameters. There are those who hate it and will feel overwhelmed. Some will find your Excel model too complicated and will make simple calculations in adjacent columns, while others will find it too simplistic and will want to redo everything. So never share an Excel model.
You might say, "Okay, if I can’t send it, then I’ll present it to maintain control and provide guidance." Good idea, but presenting an Excel model is an extremely tedious exercise. And what people do on their own, they will do in the middle of the meeting. They will question the numbers (cf. dataphagy), ask you to vary parameters until it matches the reality they have in mind, want to understand all the formulas, and ask you to change formulas live. This is the best way to create frustration for these stakeholders and for yourself. So never present an Excel model.
So if you share or present an Excel model, there’s one certainty in this world of uncertainty: you will lose sight of the initial goal, which was to start forming a data-driven conviction about the future to make informed decisions. And it is your role to channel these discussions; it is not the role of Excel.
You need to go beyond the spreadsheet. You need slides or written documents to convey your insights effectively and debunk all these behaviors described above.
What should be in the accompanying slides / docs of an Excel model?
Best answer - theoretical
Have a preliminary meeting with these stakeholders and only share the Excel model. Observe all their questions and reactions, write them down. Go back to your office, have a sip of coffee, and then start answering each of these questions and concerns.
Chances are you won’t have access to these people twice, and if you already did that, they won’t want to allocate another meeting because they left the first one frustrated and without any clear answers to their concerns and questions.
Second best answer - realistic
Here’s an outline to your document
Executive Summary: Start with a high-level overview that highlights the key insights and takeaways. This section should capture the attention of your audience and provide a snapshot of the model's purpose and findings
Hypotheses and Assumptions: Detail the main hypotheses and assumptions underpinning your model. Explain why these were chosen and how they impact the results. For example, if your model predicts market growth based on a specific rate, discuss why that rate was selected
Sensitivity Analysis: Include a sensitivity analysis to show how changes in key parameters affect the outcomes. This can help decision-makers understand the robustness of your model and identify which variables have the most significant impact
Influences on Growth Rate or Market Size: Dive deeper into specific factors that influence critical metrics such as growth rate or market size. For instance, explain how market trends, economic conditions, or competitive actions can affect these inputs and, consequently, the outputs
Detailed Outputs and Scenarios: Present the detailed outputs of your model along with different scenarios. Use charts and graphs to illustrate how various inputs lead to different outcomes. This visual representation can make complex data more accessible and engaging
Conclusion and Recommendations: Conclude with actionable recommendations based on your model's findings. Highlight the strategic decisions that can be made and the potential risks and opportunities identified through your analysis