Financial Modeling Workflow
This skill provides a structured workflow for building financial models using the financial-modeler agent.
Workflow Overview
The financial modeling workflow follows 6 phases:
| Phase | Name | Description |
|---|---|---|
| 1 | Scoping | Define model purpose and requirements |
| 2 | Architecture | Design model structure |
| 3 | Assumptions | Document all model inputs |
| 4 | Build | Construct model with formulas |
| 5 | Validation | Test and verify model |
| 6 | Documentation | Prepare user guide and audit trail |
Phase 1: Scoping
MANDATORY: Define model purpose before building
Questions to Answer
| Question | Purpose |
|---|---|
| What decision does this model support? | Ensures relevance |
| What type of model is needed? | Sets approach |
| What level of detail is required? | Scopes complexity |
| Who will use the model? | Tailors design |
| What scenarios are needed? | Plans flexibility |
Model Type Selection
| Type | Use Case | Key Outputs |
|---|---|---|
| DCF | Intrinsic valuation | Enterprise Value, Equity Value |
| Trading Comps | Relative valuation | Implied multiples |
| LBO | PE acquisition | IRR, MOIC, sources/uses |
| M&A | Strategic acquisition | Accretion/dilution, synergies |
| Three-Statement | Operating projections | IS, BS, CF integrated |
Blocker Check
If ANY of these are unclear, STOP and ask:
- Model purpose
- Model type
- Key assumptions (WACC, growth, multiples)
- Scenario requirements
Phase 2: Architecture
MANDATORY: Design structure before building
Architecture Principles
| Principle | Description |
|---|---|
| Input separation | All inputs in dedicated section |
| No hardcoding | No numbers in formulas |
| Consistent formulas | Same formula across row |
| Error checks | Validation on each sheet |
| Clear flow | Logical left-to-right, top-to-bottom |
Standard Model Structure
| Section | Contents |
|---|---|
| Cover | Model name, version, date, author |
| Inputs | All assumptions in one place |
| Historical | Historical financial data |
| Projections | Projected financials |
| Valuation | DCF, comps, or transaction calcs |
| Sensitivity | Sensitivity tables |
| Output | Summary and key metrics |
| Checks | Error checking |
Phase 3: Assumptions
MANDATORY: Document ALL assumptions with sources
Required Assumption Categories
| Category | Examples |
|---|---|
| Operating | Revenue growth, margins, CapEx |
| Valuation | WACC, terminal growth, multiples |
| Transaction | Entry price, financing, fees |
| Timing | Projection period, exit year |
Assumption Documentation Standard
| Element | Requirement |
|---|---|
| Assumption name | Clear description |
| Value | Base case value |
| Source | Where value came from |
| Sensitivity | Range for testing |
Blocker: WACC Components
MUST get user input on:
- Risk-free rate source
- Equity risk premium source
- Beta source and adjustment
- Capital structure assumption
Phase 4: Build
Dispatch to specialist with full context
Agent Dispatch
Task tool:
subagent_type: "ring:financial-modeler"
prompt: |
Build financial model per these specifications:
**Purpose**: [decision supported]
**Model Type**: [DCF/LBO/M&A/Operating]
**Architecture**:
[From Phase 2]
**Assumptions**:
[From Phase 3]
**Historical Data**:
[Attach historical financials]
**Required Output**:
- Model structure per architecture
- All assumptions in input section
- Sensitivity analysis
- Scenario analysis (base/upside/downside)
- Error checks
Required Output Elements
| Element | Requirement |
|---|---|
| Model Summary | Key outputs and conclusions |
| Assumptions | Complete input section |
| Model Structure | Per architecture design |
| Key Outputs | Valuation, metrics, returns |
| Sensitivity | 2x2 tables for key drivers |
| Validation | Error checks passing |
Phase 5: Validation
MANDATORY: Test model before delivery
Validation Tests
| Test | Description |
|---|---|
| Balance Sheet | Assets = Liabilities + Equity |
| Cash Flow | CF reconciles to B/S cash |
| Circular Control | Circulars iterate and converge |
| Formula Audit | No hardcoded values in calcs |
| Reasonableness | Results within expected range |
Sensitivity Testing
| Test | Purpose |
|---|---|
| WACC sensitivity | Valuation impact of discount rate |
| Growth sensitivity | Valuation impact of growth |
| Margin sensitivity | Valuation impact of profitability |
| Exit multiple sensitivity | LBO return sensitivity |
Anti-Rationalization
| Rationalization | Why It's WRONG | Required Action |
|---|---|---|
| "Model foots, it's correct" | Footing ≠ correct logic | VALIDATE methodology |
| "Sensitivity shows expected range" | Range needs to be appropriate | VERIFY ranges sensible |
| "Used industry WACC" | WACC must be calculated | CALCULATE and document |
Phase 6: Documentation
MANDATORY: Document for future users
Documentation Checklist
| Element | Status |
|---|---|
| Model summary | Required |
| Assumption register | Required |
| Methodology description | Required |
| User instructions | Required |
| Error check explanations | Required |
| Version history | Required |
Output Format
See shared-patterns/execution-report.md for base metrics.
Modeling-Specific Metrics:
- model_tabs: N
- assumptions_documented: N
- scenarios: N
- sensitivity_tests: N
- validation_tests: N passed
Pressure Resistance
See shared-patterns/pressure-resistance.md for universal pressures.
Modeling-Specific Pressures
| Pressure Type | Request | Agent Response |
|---|---|---|
| "Just give me a valuation" | "Valuations require documented methodology. I'll build proper model." | |
| "Use 10% WACC" | "WACC must be calculated from components. I'll show the build-up." | |
| "Skip sensitivity" | "Sensitivity is required for decision support. I'll include key drivers." | |
| "Copy last model" | "Each model needs fresh design. Prior models are reference, not template." |
Anti-Rationalization Table
See shared-patterns/anti-rationalization.md for universal anti-rationalizations.
Modeling-Specific Anti-Rationalizations
| Rationalization | Why It's WRONG | Required Action |
|---|---|---|
| "Quick model doesn't need structure" | ALL models need structure | DESIGN architecture |
| "Terminal value is just a plug" | TV often 60%+ of value | CALCULATE properly |
| "Industry multiple is obvious" | Multiples need source | CITE and date source |
| "Circular doesn't matter" | Circulars affect results | HANDLE explicitly |
Execution Report
Upon completion, report:
| Metric | Value |
|---|---|
| Duration | Xm Ys |
| Model Tabs | N |
| Assumptions | N documented |
| Scenarios | N |
| Sensitivity Tests | N |
| Validation Tests | N/N passed |
| Result | COMPLETE/PARTIAL |
Quality Indicators
| Indicator | Status |
|---|---|
| All inputs in input section | YES/NO |
| No hardcoded values | YES/NO |
| Error checks pass | YES/NO |
| Sensitivity included | YES/NO |
| Methodology documented | YES/NO |
Converted and distributed by TomeVault — claim your Tome and manage your conversions.