Financial modeling careers aren’t a single job; they span across the broad spectrum of jobs in the finance sector. Keep reading if you’re wondering just what a financial model is and how it relates to different career paths. We’ve broken down how financial modeling works, what careers rely on it, and the skills you need to land a job in this field.
What is Financial Modeling?
Financial modeling is an umbrella term because there’s no one single “financial model” all businesses use. In the abstract, financial modeling is a method of presenting some numbers that relate to a company’s operations and how it relates to future forecasts.
As a tool, financial models can be used as evidence for why it’s time to take decisive actions that relate to the allocation of money or resources. They help paint a detailed picture showing estimates, costs, profits, losses, and other critical variables for current and potential projects.
For public-facing companies or businesses looking to list an IPO, financial models can help determine the valuation and market share compared to competitors.
Standard financial models include discounted cash flow (DCF) analysis, appraisals, company valuations, historical analysis, and sensitivity analysis.
What Skills Do I Need to Land a Financial Modeling Job?
First, right off the bat, if you don’t know how to use Excel, you cannot work in financial modeling. So many reports and analyses are built through Excel that it’s almost impossible to land a job in this industry without being an expert at Excel.
There is no standard when it comes to education or experience requirements since the field is so vast. That said, here are a few things that can be of use:
- An accounting degree if you’re planning to go for a CPA certification.
- If you’re not looking to become an accountant, it’s still worth having some accounting skills as they’ll be helpful in most roles.
- An ability to think about high-level strategies in the long term.
- Serious attention to detail. A typo or missed number could make a world of difference, so you’ll need to be above average when it comes to staying focused on the small things.
- Experience creating forecasts
What Careers Use Financial Modeling?
Since financial modeling is such a broad spectrum, it touches on a variety of career paths. This list will give you an idea of just how versatile a background in financial modeling can be:
- Financial planners – Financial planners use modeling to ensure the viability of a business and help forecast a business’ performance in the marketplace.
- Investment bankers – Based on their need to assess the value of companies involved in mergers and acquisitions, financial models, are critical to this role.
- Private equity professionals – For analysts who work in the private equity industry, financial modeling is used to understand capital structure models that help decide whether a company’s leveraged buyout is worth the effort.
- Venture capitalists – If you’re going to invest in an early-stage company, you need to have a way to calculate the value of the business. Venture capitalists will often build complex models that look into revenue models, burn rates, and market opportunities.
- Corporate development professionals – These professionals are in charge of mergers, acquisitions, and raising capital for their employer. Consequently, they’ll utilize complex financial models to help assess the long-term viability of a potential deal and forecast how quickly a profit will be made.
- Equity researchers – Equity analysts build financial models that help banking clients understand whether or not to invest in a public security. Not only will they create models that report the overall stability of a company, but they will also do extensive research into an industry so that their clients have the most well-rounded analysis available.
- Commercial bankers – While commercial bankers don’t utilize modeling as much as others on this list, they focus on understanding a company’s debt structure and credit metrics.
- Real estate developers – Real estate developers need financial models to build forecasts that show the potential profitability of a development deal before moving forward.
- Entrepreneurs – To become a successful entrepreneur, you’ll need to forecast company revenue models, expenses, and cash flows. Entrepreneurs will also heavily rely on financial models to help them understand their solvency, especially during the hectic startup years.
Ready to Become a Certified Financial Modeling Professional?
Since financial modeling careers are so competitive, we recommend getting certified to help our resume stand out from competitors. Our Financial Modeling Professional Certificate can be the certification that sets you apart. Given both online and in-person, this course gives a deep dive into complex financial models so you can become a successful finance professional.
January 2018, Financial Modeling Professional Certificate
“The experience here was great! Any help that I wanted, I got. The people, the team here were very generous.”
About The New York Institute of Finance
The New York Institute of Finance (NYIF) is a global leader in professional training for financial services and related industries. NYIF courses cover everything from investment banking, asset pricing, insurance and market structure to financial modeling, treasury operations, and accounting. The New York Institute of Finance has a faculty of industry leaders and offers a range of program delivery options, including self-study, online courses, and in-person classes. Founded by the New York Stock Exchange in 1922, NYIF has trained over 250,000 professionals online and in-class, in over 120 countries.
See all of NYIF’s training and qualifications here.