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Episode 6 -Become a better Modeler by developing a decision-making mindset: Hedieh Kianyfard

Paul Barnhurst
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Show Notes

Welcome to Financial Modeler's Corner (FMC) where we discuss the art and science of financial modeling with your host Paul Barnhurst. Financial Modeler's Corner is sponsored by Financial Modeling Institute (FMI)  the most respected accreditations in Financial Modeling globally.

In this episode, Paul Barnhurst is joined by Hedieh Kianyfard, who is the founder of Finexmod. This is the website where Hedieh shares her views on financial modeling and shows that it’s possible to have fun with finance.

Hedieh is passionate about economic development and aims to make financial modeling easy and fun for everyone.

 

Listen to this episode as Hedieh shares:

  • Her journey and background in financial modeling

  • Her experience and learning from the worst models that she came across

  • How Hedieh considers Modeling as a great career and more than a stepping stone.

  • Responsibility as a modeler to reject bad projects and help ensure good projects are accepted.

  • Everything about her book- Financial Modeling Detective

  • 10 Financial Modeling Commandments

  • Why people should avoid circular references – hint they are the devil 😊

  • The importance of having a decision-making mindset

  • Her position on controversial modeling issues, including circular references, dynamic arrays, modeling standards, and more

 

Sign up for the Advanced Financial Modeler Accreditation or FMI Fundamentals Today and receive 15% off by using the special show code ‘Podcast’.

Visit www.fminstitute.com/podcast and use code Podcast to save 15% when you register.

Go to https://earmarkcpe.com, download the app, take the quiz and you can receive CPE credit.

Quotes:

“A Financial Modeler is like a Fortune Teller.”

“Modeling is a great career and more than a stepping stone.”

“It’s important to put yourself in the end users shoes to understand their needs better.”

“As modelers we have a responsibility to reject bad projects and help ensure good projects are accepted.”

Follow Hedieh:  

The Interpolate-Lookup function as explained by Professor Edward Bodmer- https://edbodmer.com/interpolate-lookup-function/

Financial Model Detective Book: Financial Model Detective: Hints and tricks for review of financial models: Kianyfard, Hedieh: 9781074174606: Amazon.com: Books

Follow Paul:

 

Follow Financial Modeler's Corner

In today’s episode:

(00:22) Intro;

(00:45) Welcoming Hedieh;

(01:06) The worst financial model Hedieh has ever seen;

(03:26) Hedieh’s key learning experience from the worst financial model;

(06:23) Hedieh’s background;

(09:35) About Hedieh’s website - Finexmod

(10:23) About Hedieh’s book - Financial Modeling Detective

(12:25) Why is it important to have someone audit Financial Models

(16:12) Financial Model Ten Commandments

(17:31) Rule 9 - Why people should avoid circular references

(19:21) Rule 10 - The Modeler shouldn’t be selfish

(21:15 - 22:02) Validate your Financial Modeling Skills with FMI’s Accreditation Program (ad);

(22:03) The decision makers mindset;

(26:31) How to develop that decision making mindset;

(28:30) What is the process of infrastructure project;

(30:58) Rapid Fire;

(35:31) When did Hedieh realize Financial Modeling as a career

(37:31) Connect with Hedieh;

(38:32) Paul’s best picks:

(40:50) CPE Credit with this episode;

(41:20) Outro

Episode Transcript

Host: Paul Barnhurst

Welcome to Financial Modelers Corner, where we discuss the art and science of financial modeling with your host, Paul Barnhurst. Financial Modelers Corner is sponsored by Financial Modeling Institute.

Welcome to Financial Modelers Corner. I am your host, Paul Barnhurst. This is a brand new podcast where we will talk all about the art and science of financial modeling with distinguished financial modelers from around the globe. The Financial Modelers Corner podcast is brought to you by Financial Modeling Institute.

FMI offers the most respected accreditations in financial modeling. I am excited to welcome our guest on the show today, Hedieh Kianyfard.

Welcome to Financial Modeler's Corner.

Guest: Hedieh Kianyfard

Thanks for having me! Very happy to be here. And I am a huge fan of you, you know that.

Host: Paul Barnhurst

Thank you, I appreciate that Hedieh! We're really excited to chat with you here for a few minutes. So we want to start off with, this is one of my favorite questions. Tell me about the worst financial model you've seen in your career.

Guest: Hedieh Kianyfard

Paul, I mean, you know when I started building models, you know, in the early nineties and reviewing financial models, you know, I saw a lot of like bad models at that time because there were no structures, you know, the standards were not there, and it was like, I always say it was like the sixties hippie time of financial models when everybody was doing whatever they wanted to do and all that.

So at that time, you know, of course, I saw many bad models but I always say, you know, when I opened a financial model for the first time, I had this sensation I had when I was opening, do you remember those kinder surprise, you know, the chocolate egg?

Host: Paul Barnhurst

Yeah. I know what you're talking about. My daughter loves them.

Guest: Hedieh Kianyfard

Yeah, I used to love them as well when I was a kid. So when you open them, you know, sometimes you have these, you know, simple figurines that, you know, it's just like too simple, and sometimes they're so complicated that you need some engineering background to put it all together. And sometimes, you know, it's a nice one, there is a balance between simplicity and complexity, so that's the right balance. And I see financial models, the same thing.

There are some models that are overly simplified and those are easy to deal with. You say, okay, it's oversimplified, we have to rebuild it from scratch, but you know, when you deal with a very complex financial model that people, they have spent a lot of time. and money into it, and you come and you want to tell them that this model, we cannot work with it going forward because it's too complex and all that, and we need to rebuild it from scratch because it's too complex basically.

And that is very difficult to kind of tell people that whatever you spend in terms of time and money was sunk cost and we have to rebuild it from scratch. So for me, these were, these complex black box models are the examples of bad models. 

Host: Paul Barnhurst

I would agree with you. The black box ones are the most difficult, one, getting people sometimes to change them because they put so much time into them,  two, I’m tangling them.

We've all inherited that model where you're like, where do I start? And usually, you want to start by putting it in the waste basket and just starting fresh, but you have to figure out what it does first. So I can relate to that.

You know, dealing with those black box models, what would you say is kind of the key learning experience from that? What has it taught you?

 Guest: Hedieh Kianyfard

I mean, first of all, Paul, I think when we talk about complexity, I mean, it's a kind of like a very delicate subject because complexity also depends. Like I have built models that people, they accuse me of being overly complex, you know, and the reason why, because the project was complex, you know, the transaction was complex.

But sometimes, you're dealing with a project that should not be, you know, the financial model should not be that complex. Like, I have a good friend and a mentor, Professor Edward Bodmer, and he was telling me one day that the most complicated thing about the solar project is the financial model. He's right, you know, sometimes we, you know, it's all a project of technology. It’s easy, but sometimes we see models that are overly complicated and so I think these models, as I told you, sometimes we can justify, you know, to the level that you can justify them. You can, but as soon as you can tell that this financial model cannot be used going forward, the sooner, the better, because I have dealt with the projects, which they came up to financial close, honestly, up to financial close, it was even audited, and then everybody around the table said, we cannot work with this one. So lenders, you know, at one point they said, we're going to build our own version of the financial model sponsors, so two auditors involved.

So it made everything so complex. If somebody had the courage, in the beginning, to say, ”Guys, this is too complex, or this does not match the criteria”, it would have saved so much time for everyone. And the project closed, there was delay in financial close because of that, you know, and that cost a lot of money to the project as well.

Host: Paul Barnhurst

Yeah, nobody wins in that situation. It's because somebody didn't speak up and say, “Look, this is too complicated, we got to step back and rethink what we're doing here”.

Guest: Hedieh Kianyfard:

Correct, yes, exactly. And this requires what I call a long-term view. You know, when you're building a financial model, that's why, you know, having, it's very important for organizations to think about how they want to handle their financial modeling services, because if you hire a financial modeler to build a model for you for two weeks, and then, you know, then you're going to work with that model, then that consultant may not have this long-term view on what's going to happen to this financial model because you have a model during feasibility stage and then you have another model, hopefully, you know, a kind of restructured version of that same model that can take you through construction and then one through operation.

So if you have the financial model throughout these, you know, process with you, it can just, have this long-term view and have a model that can transition easily between these different phases.

Host: Paul Barnhurst

That makes sense to me. Can you give us just a little bit about your background and yourself? We've talked a little bit about the horror story. Now let's learn a little bit about you and how you got into modeling, and what you're doing today.

Guest: Hedieh Kianyfard

It depends on how far you want to go. Yeah, I mean you know, I studied economics, so I was really interested in like development, you know, economic development, because I was born in Iran and I was raised between Iran and France. so I kind of witnessed, you know, these differences between developing and developed countries, and  I couldn't see any differences in humans, you know, humans are the same. So what was different between them was the infrastructure.

I was also, you know, because I have my interest in development and development economics, I kind of got interested into this field of project appraisal, you know, which is basically how to filter projects, how to appraise projects, and basically, one big part of it is financial modeling. So that really interested me, and I really believe that development is just, you know, and there was a professor that I worked with for years and it was my Ph.D. supervisor as well, Professor Glenn Jenkins, who said that, development is nothing but a series of good projects to be implemented and preventing bad projects from happening. And to me, that's such a big thing, you know, that's basically what the job of a financial modeler is. If the person is involved in the selection process, which is another kind of work is when you filter projects, you know, the process of filtering projects requires a different set of financial modeling skills. And then, you know, if you're working as a financial model for also one transaction, you can design the project in a way, or help the project to be designed and planned in a way that doesn't cause, you know, cost overruns.

So all these kinds of things, it has this kind of development impacts, you know, because we are dealing with project and infrastructure and eventually it's an asset that will be helping with the development of a project. So that was the whole thing that brought me to financial modeling. I started actually as a trainer, I was teaching investment appraisal, then my first assignment as a financial modeler was with the African Development Bank. That's where I spent, you know, a couple of years as a consultant working for the private sector department of the African Development Bank, and that was a great experience. You know, I've got exposed to a number of infrastructure projects in Africa, mega projects, and I had the privilege to work on those projects.

Host: Paul Barnhurst

Great. Thank you for sharing the background. And I really, there's one thing in there that I really liked that you said is that idea that, you know, the difference between developing and developed nations is those projects and making sure you do ones that are good projects to have a positive ROI to society, to the country, to everybody versus the bad projects, and as finance people, it's our job to help make sure that the good projects get approved. I really liked the way you explained that, so thank you.

So you run the website Finexmod. Can you talk a little bit about the website and what kind of information it contains to our audience, a little bit about it?

Guest: Hedieh Kianyfard

So it's basically, my blog posts, because I kind of from time to time release blog posts, you know, about the topics that I come across in my day-to-day job. Like, if I am working on a project and we are kind of discussing the major maintenance of a reserve account and I see some challenges there that I want to share, so I just, you know, put it in a blog post and sometimes I also share templates. It's just to create, you know, discussions around these subjects that interest me. So that's how I put together Finexmod and I'm also providing trainings in financial modeling.

Host: Paul Barnhurst

Got it!

Next question I want to ask you, you've written a book, Financial Modeling Detective Book. Talk a little bit about that and, you know, kind of the goals of the book. What is the purpose of the book?

Guest: Hedieh Kianyfard

When I was working at the African Development Bank, my job was really to review financial models, right? So, we were receiving financial models and we had to decide whether we want to work with those models or we want to rebuild them from scratch.

So after, reviewing models, you know, after a while, I came up with a checklist for myself, the things that I was checking all the time across all models. So I kind of expanded that checklist and made it into a book,  which I called Financial Model Detective, and it's just, to give you some clues about what are the key points that you need to look at when you're reviewing someone else's financial model. And the idea behind the Financial Model Detective is, I believe in the role of a financial modeler as really a detective. But I always clarify what I mean by detective.

The type of detective that I mean is like Hercule Poirot, you know, the character from Agatha Christie? That's kind of gentlemen, curious, attentive, you're not accusing, because I sometimes see, you know, in the questions and answers regarding financial models, people, they just kind of without accusing, you know, without even asking why did you do it this way? You know, there might be an explanation behind it. So that's kind of mentality that I talk about, that you have to be open-minded and you have to be curious. So yeah, that's my definition of a financial model detective.

Host: Paul Barnhurst

I like that. And, you know, the Agatha Christie, my wife loves that show, so I can relate to that. That's a good one to mention.

You know, other things around that, so I know the book is to help people audit models. Tell our audience why is it so important to have somebody that can audit a financial model? Why is that critical to the process?

Guest: Hedieh Kianyfard

All financial models will be eventually audited, right? You know, in like transactions through, it will be audited by auditing firms. I mean, I always say that you should not treat a financial model as just another document in the checklist. Some organizations, they just have a financial model just to get the loan document. And that's not the attitude, you know, the attitude that should be there is that you need to, whoever you represent, whether you represent the lenders or the sponsors or any government entities, the mentality should be that you should use this tool for your own decision makings, right? So first thing that you want to do is not to just pass some of the checklists and some of the metrics that are required, so you have to just see that, okay, so I have this tool which contains all these inputs and it can basically give me an idea about, you know, what my future is going to look like, you know?

So I always say that the financial modeler is like a fortune teller, especially in project finance transactions. Because the only thing you have is projections, right? So you can even have a fortune teller and you tell the fortune teller “don't tell me any bad news. I just want to hear good news.” The financial modeler would just, you know, crunch numbers and give you what you want, right? But if you have a financial modeler who can tell you that, “Okay, see, this is the reality of the base case that we have come up with together with the technical advisor, fiscal advisor, legal advisor and all the documents, this is your reality, however, if things go sideways, this is gonna be your reality. Are you ready to take the risk?”.

You see? So that's the person that you need to have next to you as a financial modeler.

Host: Paul Barnhurst

I like that. I like to talk about having that person that can tell it like it is, so to speak, and help you understand that risk because right, you mentioned we're fortune tellers, and as I always like to say, no modeler is right. I think it was George Bach who said “all models are wrong, some are useful”.

Guest: Hedieh Kianyfard

Correct.

Host: Paul Barnhurst

Yeah. And that's really the goal, right? We want the model to be useful to hopefully, be a reasonable approximation of what will happen because none of us know, and there will always be surprises, but making good assumptions and working with the right people can reduce the risk, as you said, and that's really the goal, is we're trying to reduce the risk on a project and also select the good projects.

Guest: Hedieh Kianyfard

Exactly. Because remember, I mean, most of the parties involved in the project, you know, sponsors, lenders, all of them, these are people who want to get to the finish line, right? That's their aim, that's their goal, and we need these people. I mean, without these people, you know, the projects can not move forward.

However, these people like financial modelers, technical advisors, all of them are there to kind of slow down the process, just say, guys, let's look at this, let's slow down, let's look at things very carefully, do some sensitivity analysis, and then put the measures together in case things go wrong, right? And we have seen in the past that most of the time things go wrong. So putting the right facilities, contingent facilities and all that, and putting it in a financial model and make things ready for this difficult phase, which is construction.

Host: Paul Barnhurst

Yeah, at the end of the day, they want to get the asset into operation and start generating the cashflow from the project as soon as possible. But, you know, like you said, we do slow them down because we're helping to bring that balance and making sure that the risk profile and the project makes sense. It's a give and take for sure.

So one thing I noticed that, and I'd seen this on LinkedIn I think for the first time a couple of years ago, if I remember right, but you created a list of what you call the financial modeling 10 commandments.You shared that on LinkedIn.

Can you talk a little bit about how you came up with those? How did that come about?

Guest: Hedieh Kianyfard

When I started with building models, you know, there were no standards and little by little standards were introduced, and I was so happy and glad, you know, I was just enjoying those times a lot, smart standards, fast standards, and I was just very glad that, you know, these were kind of established in the market. But then I saw that people are kind of becoming a little bit too much into them and becoming like, you know, a religion and all that. So I was just like, I said to myself, let me just come up with what I think is my religion because there are so many religions now, you know, so let me come up with my religion and my set of rules. So that was just the fun thing that I wanted to put together.

Host: Paul Barnhurst

I like it. And a religion is a good example. People they're so set on “you have to do it this specific way”, and “this is right. you guys are all wrong”, or, you know, you see that versus some, they're like, look, there's some general principles, follow them. Let me give you some guidance and you don't have to religiously follow every single little item. And so I like that.

From the rules as I was looking at them, there's two in particular that kind of stuck out to me that I'd like to ask you a little bit more about.

So the first one was number nine: “Thou shalt avoid circular references”. What's the reasoning behind that? Why do you say people should avoid that?

Guest: Hedieh Kianyfard

Well, that was my fight, you know, all these years I have, a war against circular references, I call the movement “The war against circular references”.

Host: Paul Barnhurst

I'll join your movement for what it's worth!

Guest: Hedieh Kianyfard

I mean, if Excel tells you that something is wrong when you have circular references in your financial model, you know, in your Excel spreadsheet and your Excel tells you that something is wrong, check for the circular reference. And yes, so I mean, it makes the model unstable and if you're just using the spreadsheet for yourself and you're the only one using it, maybe. Honestly, I mean, it's a cancer that needs to be a remedy for it. And there are remedies out there and we need to not think about the problem because circular reference to me is the problem. So we need to think about the solutions. So we have some solutions for it. Now we need to come up with a better solution for it, and that's what I'm working on together with Professor Edward Butler, I mean, we are specifically working on secular reference in project finance models. He has done a lot of work, years of work on it, and I had the privilege to work alongside with him for a couple of years now, and so, yeah, I'm more interested in the solutions to circular reference rather than the problem. I recognize it as a problem and I want to focus on the solutions.

Host: Paul Barnhurst

I love that you're not just beating the drum of “Hey, we have a problem”, you're working on those solutions. And for what it's worth, I'll join your war just so you know, I'll be part of that. I think, as a general rule, circular references should be avoided. I think everybody I've talked to so far that's been on the show would agree with you on that one. So that's a pretty common opinion.

 Number 10. I like this one. So I was going to ask you to elaborate on this one: “Thou shalt not be selfish”.

What do you mean by that? When you say the modeler, you know, one of the rules of modeling is you shouldn't be selfish.

Guest: Hedieh Kianyfard

You know, I always say these financial modeling standards that we talk about, flexibility, transparency, simplicity, and all that, I always say, if you want a financial model to be transparent, you need to first understand transparency yourself. If you want your financial model to be structured, you need to have some level of structure yourself. So it's, you know, I really believe in that. And I believe, as a financial modeler, you should not be selfish because you need to put yourself or you know, instead of the user of the financial model. Who are the users? So identify who are the users of this tool that you are building and what will be their needs going forward. So it requires a lot of thinking and a lot of like putting yourself instead of others, kind of coming up with future scenarios of what's going to happen, what is the level of flexibility that I need to build into this model and, you know, look forward for the needs to make the process easier for all these stakeholders that are involved in the process and make the decision making easier by providing this flexible and simple tool, which is the financial model.

Host: Paul Barnhurst

Thank you. I appreciate that. And that makes sense to me. I can see what you mean there. I particularly liked the part where you said, put yourself, in the end, user's shoes, think about what they need because it's easy sometimes for us to write a complex formula that maybe is not needed or somebody isn't going to understand, but it's easy for us.

When you are thinking about that end user, you're more likely to do what's going to benefit the whole group than maybe what's easiest for you, so that's a good point. I really like that.

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Host: Paul Barnhurst

So next question, as I was looking at your website, there was a blog article that caught my eye that I'd like to ask you about. It was titled, “The Decision Maker's Mindset- Reporting Insights from a Financial Modeler”.

Can you talk a little bit about, you know, what was the impetus for writing that article? What made you decide to write that?

Guest: Hedieh Kianyfard

The last couple of years, I wrote a lot of materials on my blog post about the role of a financial modeler in a transaction. When I started my career as a financial modeler, everybody told me that, you know, this is going to be a stepping stone into a higher position. And when I started working in deals as a financial modeler, I saw the importance of this tool, which is the financial model and the financial modeler's role in a transaction. I really saw, you know, I was working on a transaction, which was the bridge in Cote d'Ivoire, Abidjan, and the person that was running the negotiation, I was, you know, representing the African development bank and from the sponsor side, the person that was running the negotiation was actually the person who has built the financial model. So he had session with me on the financial model in the morning, and then later in the evening, we had like negotiation among all the lenders.

So I saw the power of that. I saw this person could negotiate. He had, of course, communication skills, you know, coupling the communication skills and negotiation skills together with financial modeling skills, this was a winner. When I went to transactions and negotiations, I saw that sometimes financial modelers are regarded as like a junior position. So the person is like a number cruncher or something like these labels, or sometimes spreadsheet engineers or financial, I call them, financial model mechanic. So I want to break that by, because I saw the problem. I saw the issue. And so many people were calling me and complaining about, “Oh, this is how I'm being treated, you know, in the workplace as a financial modeler”, and I always say, the problem also comes from us, financial modelers, because we have to assume the role that you cannot be what I call a problem solver. If you want to be a financial modeler who can negotiate contracts, who can be involved in the decision-making process, you cannot just have problem-solving skills. You should be a solution provider. You know what I mean? And there's a difference between the two, because when you come with the problem to someone and you ask for a solution, most probably you already have a solution. So you go to the financial modeler, you say, this is my problem, and most probably this is the solution.

So if you take the problem and just provide that solution, you are a problem solver. If you take the problem and also analyze the solution that was suggested and come up with multiple solutions for that same problem, then you are a financial modeler who can negotiate contracts, who can be taken seriously for decision-making.

So that was also what I wanted to promote in that blog post by saying that you need to understand the decision-maker mindset so that you can provide the right, you know, tool to them for the decision-making.

Host: Paul Barnhurst

It allows you as the modeler to be much more involved and to provide advice that if you're just building the model and don't have that mindset, you're not able to do, if I'm hearing it right. So it really opens up the opportunity to be more involved and play a more critical role than, as you said, just being the model mechanic or the spreadsheet junkie or whatever term you want to use.

Guest: Hedieh Kianyfard

I mean, it's just like, you know, if you are building a financial model, you need to be involved in each and every phase of the project. You cannot sit in an office and get an email and say, add another debt term in the model. You need to have the background story. Why do I need to add this additional tranche? Who is the lender? What are the terms of the debt? What have you negotiated already? What are the points that are under discussion right now?

So having all this information requires you to be involved in all the phases of the project. So, yeah, I think that you cannot isolate the financial model from transactions. You need to have the next view in all negotiations, in all discussions. Technical, legal, you know, all of them.

Host: Paul Barnhurst

Makes sense. So if somebody is out there listening to this podcast and they're asking themselves, how do I develop that decision-making mindset? Like I'm a good modeler, I know how to build models, what advice would you offer them? What's the best way to kind of develop that mindset and become more focused on being a decision-making financial modeler instead of just a modeler, so to speak?

Guest: Hedieh Kianyfard

I think this will, of course, come with experience, but, I mean, just to, you know, be creative, first of all. So many times we think that, you know, there is only one solution to a problem, and especially we believe, because managers, directors, there are people who have certain kind of charisma and certain kind of a position that, you know, you want to listen to them and you want to believe them, of course, their view and their vision. So as a financial modeler, as an advisor, you should always consider their position and understand their position and come and test it.

So you need to have this understanding and knowledge of what is happening so that you can tell them “No”, because sometimes you have to have, you cannot, I always say that you cannot be a people pleaser if you want to be a financial modeler, you have to have the courage to say “No, listen, what you're doing here it's not working, so maybe we need to go back to the negotiation table and, you know, do something about it”. So you have to have this confidence to help these people to make better decisions and you have to equip yourself with soft skills, communication skills, you know, self-confidence and all that, which are needed in all kinds of roles, of course, but also for financial modelers as well.

Host: Paul Barnhurst

It's amazing how often it comes back to those soft skills and going beyond the technical skills. And definitely with all the change we're seeing in the world, I think the soft skills are going to become even more important in the future, you know, how are you bringing that strategic value? I appreciate that answer.

So next question, I know you've worked on a number of large infrastructure projects. So can you talk to our audience about what the typical process is for an infrastructure project? What is that like?

Guest: Hedieh Kianyfard

I mainly work on project finance transactions. I have done, you know, a couple of corporate transactions as well, but it was mainly project finance and renewable, so that's something that interests me. It depends on, at which stage of the project you are getting into this transaction. I mean, if you are at the feasibility stage, it's just, you know, the honeymoon stage. Everything is working, champagnes and all that, celebrations of closing the deal and all these things. So that feasibility stage is, when you are at that stage, you know, you have the world open. You define a base case and a worst case and everything. When you are in the construction phase, then that's when you suffer a little bit, right? Everybody is suffering, you know, things are coming, delay cost overruns and liquidated damages and all that.

So as a financial modeler, this stage is very difficult, especially if you're dealing with a bad model. So that's just, you know, restructuring a deal, applying this restructuring in the financial model as well, so this makes everything complicated, and then if you're entering into operation, then most of the time you need to completely restructure the model, come up with a new model as well, which can answer the questions that are required post-operation.

So yeah, it's, it's a whole journey.

Host: Paul Barnhurst

It sure is. I haven't done much in the way of project finance. I've worked on a couple of M&A deals and yeah, rarely does the model you use for the deal work for operations. You know, you usually have to rebuild it or make substantial changes to make it work because they're just designed for different purposes.

Guest: Hedieh Kianyfard

Right. That was my aim, you know, to kind of make this transition much smoother. Pre-feasibility, you know, a feasibility model, when you take it to construction, at least with the minimum effort of adding one or two sheets and, you know a couple of links, you can just make the transition much smoother. So hopefully we can come up with something also for operations so that we don't have to rebuild it from scratch.

Host: Paul Barnhurst

Yeah, I definitely think it's getting better, and I'm sure you'll figure something out there. It can be a little bit of a challenge, but yeah, anytime we can keep from having to rebuild from scratch, it definitely makes it easier.

So this next section, this is one of my favorite sections we do. It's called rapid fire questions. So what I got is I got about eight questions here. You get no more than 15 seconds for each question, and you can't give me an “It depends”, because on almost all of them, you could say it depends. You have to give me a “Yes” or “No”, and then when we're done, I'll let you pick one that you want to elaborate on, why you gave the answer you did.

Guest: Hedieh Kianyfard

Okay, let's go.

Host: Paul Barnhurst

If you're ready here, we'll go with the first one. And this one, we already know the answer because we talked a little bit about it earlier.

Circular or no circular references?

Guest: Hedieh Kianyfard

No.

Host: Paul Barnhurst

Yeah, I figured as much. VBA or no VBA?

Guest: Hedieh Kianyfard

Definitely VBA.

Host: Paul Barnhurst

Horizontal or vertical model?

Guest: Hedieh Kianyfard

I want to say it depends.

Host: Paul Barnhurst: You have to pick.

Guest: Hedieh Kianyfard

Okay, I would say vertical.

Host: Paul Barnhurst

Alright!

Dynamic arrays. Yes or no?

Guest: Hedieh Kianyfard

I would say no.

Host: Paul Barnhurst

Okay.

Named ranges versus no named ranges.

Guest: Hedieh Kianyfard

Can I say with moderation?

Host: Paul Barnhurst

I like it, we'll give you that one. That's not an “It depends”. You at least took a position.

Should we follow formal standards for modeling like board standards, you know, fast and smart and all those, yes or no?

Guest: Hedieh Kianyfard

Yes.

Host: Paul Barnhurst

And what is your lookup function of choice? VLOOKUP, INDEXMATCH, XLOOKUP, CHOOSE?

Guest: Hedieh Kianyfard

Can I come with another ONE?

Host: Paul Barnhurst

You can. You wouldn't be the first. I wasn't going to list all of them, I'd be there a while.

Guest: Hedieh Kianyfard

Well, you know, there is one that I use, which is an user defined function by Professor Edward Bodmer. It's an Interpolate-LOOKUP. So, you know, when you have a couple of data points, like a couple of years, 20, you know, five data points, and you want to come up with a time series based on that, you just use this Interpolate-LOOKUP function, which is going to take those five data points and interpolate a linear line for you, for your time series. I really like that one.

Host: Paul Barnhurst

I could see why you really liked that one. Yeah. When I asked, uh, my last guest, this question, he goes, ”Well, I would question if there's only four, right?” So when you get these experts, they always have a different idea. I like it. It's good. I learned. So we'll have to put that in the show notes. That's an interesting one. Let people know about that. So I'd love to learn a little more on that.

From the rapid-fire, is there one you'd like to elaborate on? Any of those that you answered that you would like to say why you answered the way you did? Is there a particular one that you'd like to elaborate on?

Guest: Hedieh Kianyfard

VBA. I was, yeah, I was even kind of puzzled why this is a question.

Host: Paul Barnhurst

I've had a few people that have said no VBA in models. And I think the reasoning tends to be like one said no VBA outside of formatting. I think their concern is, downstream people understanding it, the complexity, sometimes maintaining it, if somebody is doing a lot of coding or programming. I know for me, let's take corporate finance, which is my background, FP&A, you know, I've seen a lot of models with VBA and often what happens is the next person gets them and they don't know any VBA and it breaks and then you have to start over. So I think that, from my perspective, that's where the concern comes from and I've had, you know, a lot of people have different opinions, yeah, I use VBA and others like just don't use it, because of the fact that not everybody understands it. It's a great tool and if everybody knows it and knows what they're doing, there's definitely a lot of areas you can use it, but that's my thinking. So, that's how I think about it.

Guest: Hedieh Kianyfard

Yes, because you know in the area of project finance, I mean you cannot do without VBA, I mean there is this problem of circular reference and you have to come up with a solution and the only solution is VBA. So that's the, and it's another language, you know, it's another tool, it's another engine that can add a lot of flexibility to your model. Like, you know, a tool like Interpolate-LOOKUP function, which is a very simple, user-defined function that you added To your VBA and honestly, you don't need to know VBA in order to…We are all users of, I am a user of VBA, I don't understand VBA a lot, you know, I can read, I can just, but I cannot write a code from A to Z myself, but I take codes from here and there and I just modify it if needed.

Host: Paul Barnhurst

That's kind of where I'm at with VBA. I can modify a few things, but I'm not by any means a coder. It's more, I see something, I can go find something on the internet if I really need to use it. I've always kind of steered away from VBA because it just doesn't come natural to me. But I mean, I've seen amazing things done with it. So that's a little bit of the thinking there.

When did you realize, that you could make a career out of modeling, that it wasn't just a stepping stone like everybody had taught you? When was that moment that you said, ”Oh, I can turn financial modeling into my career” versus it being a stepping stone, so to speak?

Guest: Hedieh Kianyfard

Because as I told you, I started my career as a trainer in investment appraisal and risk analysis, and then I started working as a consultant for the African Development Bank, so that's how I started my career. So that was when I saw that there is a carrier because we were a group of consultants, and at the time I was at the African Development Bank, the person that was running the private sector was a Canadian gentleman by the name of Tim Turner, and he really understood, you know, the importance of appraisal. So he had this team of consultants, on the ninth floor of the headquarters, it was his office, and next to him was this group of consultants, and I was one of them. When we were the ones doing the appraisal, And he was really, you know, very much into understanding projects, it was not for him just to get the board approval, he really wanted to understand things. So when I saw that, you know, I started with that mentality of this work is important, that's why when I saw that some people are not putting that much importance, I was surprised, you see.

So that's why I wanted to make it, you know, like with my blog post and the content that I publish, I always talk about that if you have this passion for financial modeling, you can really make a career out of it.

Host: Paul Barnhurst

That's great that you share that with others and help others realize that, look, it can be a career, it can be a very rewarding career. I'm sure there have been parts of projects you're really proud of, you know, especially working in infrastructure and renewables, and those are important things, they're things that we all need and those projects can make a big difference for those communities. So, appreciate you sharing that.

As we close out here, the interview today, if our audience wants to learn more about you or get in touch with you, what is the best way for them to do that?

Guest: Hedieh Kianyfard

They can learn more about me from my website Finexmod.com and of course, they can connect with me through LinkedIn as well and I’d be happy to connect with anyone or help in any way that I can.

Host: Paul Barnhurst

So LinkedIn and your website Finexmod.com is the best way to connect with you.

Guest: Hedieh Kianyfard

Exactly!

Host: Paul Barnhurst

Hedieh, thanks for taking the time today. I've really enjoyed getting to chat with you, and I know our audience will enjoy hearing this as well. So thank you for carving out some time on an evening to chat with me. I appreciate it.

Guest: Hedieh Kianyfard: Oh, thank you so much, Paul. I really enjoyed the conversation and honestly, congratulations for this podcast and looking forward to following the next episodes of other interesting people that you will invite to your podcast.

Host: Paul Barnhurst

What a great interview, I really enjoyed talking to Hedieh and I liked we had our first project finance person, you know, first female on the show and just a rock star in the field. So that was great to have her, and there are a couple of things that really stuck out to me that I just want to briefly talk about as we wrap up this section.

First, the idea that modeling is a great career. It's more than a stepping stone. I think it's really important for people to realize that when they go into modeling, that, you know, they can build a whole career out of it.

The second thing I liked, she said, as modelers, we have a responsibility to reject bad projects and help ensure good projects are accepted. And I love that idea, cause that goes beyond just, hey, building the model. We need to help, be decision-makers, and help improve the process. As she said, when she talked about growing up and her experience in studying economics, you know, she grew up in France and Iran and noticed what the difference was between developing and developed countries, and what she said is, “Look, humans are the same. Humans aren't really very different from one country to another, but the infrastructure is different. And if we can help make sure good projects are accepted, we can help with that infrastructure”.

So those are the first two things. It can be a career and the responsibility we have to ensure good projects are approved.

The last one that I really enjoyed from her in the interview that I want to talk about, there were more than three, but the last one was, I love her reason for developing the Ten Commandments, right? She did it because people were treating standards as a religion. So she was like, I want to come up with my own religion”. It was just, everybody's kind of arguing over what should it be, so she's like, what's important to me and how can I make it simple? And that reminds me of Oz who talked about, you know, Excel isn't a religion, anyone who saw Oz du Soleil on LinkedIn, he talks about that a lot when people start arguing about X LOOKUP and V LOOKUP and Index Match. You know, same idea here, People argue circular references, no circular references, VBA, no VBA. At the end of the day, there are design principles and general standards we should follow, and I love that she did the “Ten Commandments” and said, “Hey, here's my rules. Here's what I've learned. Here are the important things. Outside of that, go ahead and build the model and do what you need to.”

So I hope you enjoyed that interview, and I know I really enjoyed having her on the show.

As we wrap up here, I just want to give you a reminder that you can earn CPE credit for this podcast by going to earmarkcpe.com, downloading the app, and answering a few simple questions.

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So thanks again for joining us for this episode, and we look forward to you on many more episodes, so thank you.

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