“Anyone can build an LBO model. The spreadsheet doesn’t care who’s typing. But 90% of the models I’ve reviewed get thrown out in the first 60 seconds.”
That’s what a senior PE analyst told me two weeks ago.
I asked him why.
“Because they test the wrong things. The math is always fine. Excel doesn’t make arithmetic errors. But the assumptions? The debt sizing? The sensitivity variables That’s where you see who actually understands the deal and who just followed a template.”
That conversation is the reason this week’s workflow exists.
But let me back up.
I’m Shubham. I run Alpha with AI, a weekly newsletter where I build AI-powered workflows that replicate what institutional research teams do, and release them for free.
Every week, one workflow. Every workflow challenges an expensive industry standard.
I’ve built tools for earnings analysis, peer comparisons, insider trading detection. But this week, I tried something I’ve never done before.
I built an LBO modeling prompt.
The problem? I don’t build LBO models for a living. I’ve never worked in PE. Never sat across the table defending an IRR to someone with ₹500 Cr on the line.
So I did what any honest builder would do, I went to someone who has.
And what he taught me wasn’t the math.
It was the judgment.
That distinction<math vs. judgment> is the entire point of today’s newsletter.
Why most AI prompts for finance are useless
Here’s what most people do when they want AI to build a financial model:
They open ChatGPT. They type “Build me an LBO model. bla bla bla instructions in next few lines”
They get a clean-looking spreadsheet and they think it worked.
But here’s what actually happened, they got a template.
A structure. Rows and columns that look right. Numbers that don’t embarrass you at first glance. But try stress-testing it. Try changing one assumption and watching what breaks. Try showing it to someone who’s actually closed a leveraged deal.
It falls apart. Not because the math is wrong, but because nobody told the AI what to check. That’s the gap nobody talks about.
The AI can build a model in seconds. But it doesn’t know which assumptions to question. It doesn’t know that a 7x debt/EBITDA on a mid-cap industrial company is insane. It doesn’t know that your sensitivity table is testing variables that don’t actually move the deal.
The senior analyst I spoke to put it simply:
“A good model isn’t the one that runs. It’s the one that tells you when something doesn’t make sense.”
That one line rewired how I built this prompt. Because most AI finance prompts are instructions.
Do this. Calculate that. Format it like this.
This prompt is different. It’s not a set of instructions.
It’s a set of questions.
The 5 things the prompt checks that you wouldn't
Let me show you what this looks like in practice.
You open Excel. Three sheets of financial data, income statement, balance sheet, cash flow. Plus market cap and enterprise value.
You open Claude’s integration. It sits right inside Excel now. No browser tab. No copy-pasting. Just a chat window inside your spreadsheet.
You paste one prompt and then something happens that doesn’t happen with generic AI prompts.
It starts asking the right questions. Not “what font do you want for the header.”
The real questions. The ones that separate a model from a template.
Here’s what I mean:
1. It doesn’t guess your assumptions, it derives them.
Most AI prompts ask you to input assumptions manually.
Or worse, they make them up.
This prompt pulls Capex, D&A, and Net Working Capital ratios directly from your historical data. Three-year averages. Not vibes. Not industry benchmarks from a textbook. YOUR company’s actual numbers.
You can override them. But the starting point is real.
2. It checks if your deal structure makes sense.
Here’s where the analyst’s thinking shows up.
After sizing the debt, the prompt calculates implied Debt/EBITDA and surfaces it right next to your assumptions. Not buried in a formula somewhere.
Right there. Staring at you.
If you’re trying to lever a mid-cap company at 8x EBITDA, the model doesn’t stop you, but it makes sure you see what you’re doing.
That’s the difference between a tool and a teacher.
3. It stress-tests what actually matters.
Most sensitivity tables I’ve seen test variables that look impressive but don’t move the deal.
This prompt builds a 5×5 sensitivity grid around two things that actually determine whether a PE deal works: exit multiple and entry premium.
25 scenarios. Each one recalculates dynamically. Each one tells you something about the deal that a single IRR number never could.
4. It doesn’t hide the math.
Everything is formula-driven. Every output cell references an assumption cell. Nothing is hardcoded.
Change one assumption and watch the entire model ripple. That’s not just a feature, that’s how you learn what drives an LBO.
5. It runs on one tab. Inside Excel. In minutes.
No switching between tools. No exporting CSVs. No debugging Python scripts.
One tab called “LBO Analysis.” Summary box at the top.
Entry Equity, Exit Equity, MoM, IRR, all visible before you scroll.
The model that used to take days now takes a conversation.
But the prompt isn't the most important part.
The Prompt Isn’t the Alpha. This Is.
Here’s what nobody tells you about using AI for financial modeling.
The prompt matters. But it’s not the difference-maker.
The context is.
Before I run this prompt, I add a sheet to the workbook. First sheet. Plain text. No formulas. Just context.
What sector the company operates in. What the competitive landscape looks like. Any thesis I have about revenue growth or margin expansion. What a PE buyer might care about for this specific business.
Why? Because Claude reads every sheet in the workbook before it responds.
So when it suggests a revenue CAGR or an exit multiple, it’s not pulling from generic defaults. It’s reasoning from YOUR context about THIS company. That’s the difference between a model that looks right and a model that thinks right.
The prompt gives Claude structure. The context sheet gives Claude judgment.
Add both. That’s the real workflow.
Watch. Then Judge.
Don’t take my word for it.
Watch.
That’s it. One prompt. One conversation inside Excel.
A full LBO model with institutional logic.
No editing. No manual adjustments. No switching between tools.
Just the raw output from a single prompt.
Now here’s what I want you to sit with for a moment.
I don’t have a PE background. I’ve never built LBO models professionally. I spent a few hours learning from someone who has and turned that conversation into a prompt.
And the prompt works.
Not because I’m special. Not because AI is magic. Because the real skill in finance was never the spreadsheet.
It was knowing what to look for inside the spreadsheet.
The assumptions that don’t make sense. The leverage ratio that’s too aggressive. The sensitivity variables that actually move the deal.
That knowledge used to live in one place, the heads of people who’d done it for 10, 15, 20 years.
Now it lives in a prompt. That’s not a threat to experienced analysts.
It’s a shift in where the value sits. The analyst who taught me didn’t feel threatened.
He was fascinated. Because he realized something:
His 15 years of judgment, the pattern recognition, the instinct for what looks wrong, the questions he asks before anyone else thinks to ask them, that can now be encoded. Shared. Scaled.
The mechanical work? AI handles that.
The judgment? That’s still human. But it’s no longer locked inside one person’s head.
That’s what Alpha with AI is about.
Not replacing analysts. Democratizing the judgment that used to take a decade to develop.
One workflow at a time.
Here’s the full prompt: