I’m excited to introduce The FP&A Hub - formerly known as Plan Buddies - now free and open to all FP&A professionals.

The Marginally Beneficial newsletter was my way of sharing interesting FP&A content, insights, and commentary. That made sense when the community required a paid membership. But now that The FP&A Hub is free, I believe the best place for these discussions is within the community itself - where we can have conversations and benefit from each other’s unique experiences.

Prefer email? No problem. You can set up email notifications to receive posts in your inbox just like before. And if you’re on the go, the Circle.so mobile app makes it easy to stay connected to the community.

I’d love to see you in the FP&A Hub!

Join the FP&A Hub

Thank you for your support,

Derek Baker

One Big Insight

My favorite quote with some added commentary from yours truly.

Wassia Kamon

From her podcast, Diary of a CFO (emphasis added).

I didn't start learning about the business when I got to the CFO role. I got to the CFO role because I made it a habit early on in my career to learn about the business and not just the numbers and not just the financials.

Something that will help you when you step into a new role is for you to be able to trace how the company makes money all the way to how it ends on the audited financial statements. You should understand how we make money. And when we make this type of money, how does it show on our financial statements?

It's almost like a puzzle. You know the end results. You know what it's supposed to look like. And now your initial goal should be to understand how the pieces fit together and understand why they fit together a certain way.

All of a sudden, it clicked.

For the last few months, we had been missing targets, and it was unclear what the business constraint was. I decided to go through the customer journey myself - beginning with product discovery and ending with checkout.

Throughout this process, I learned that our growth model wasn’t only driven by how much we were spending on ads or the efficiency of the channels where we were allocating that spend.

Rather, there are numerous customer paths and product touchpoints that influence a prospect to buy. And the marketing channels we allocate to acquire different types of customers that require different messaging and buyer journeys than others.

What used to be a two-dimensional problem of spend and ROI became a multi-dimensional problem of customer journeys and conversion rates through multiple steps of the funnel.

Getting a deep understanding of the business and your customers is vital for FP&A for several reasons:

1. You have more understanding and empathy for your business partners and what they do.

2. You understand different ways to segment the business and measure performance.

3. You stop approaching business challenges through spreadsheet math and start looking at them from an operational point of view. The latter is far more impactful for the business.

At the end of the day, we still have to measure the business on financial performance, but having a deep understanding of every step prior to the numbers ending up in the GL is critical for high value FP&A.

Sound Bites

Great quotes with links to the original source.

Secret CFO

From his newsletter article, Investor Relations II: Are you happy now, shareholders? (emphasis original)

There are a few principles for good shareholder management that hold regardless of the capital structure:

Be precise:

Talk in facts. Don’t guess. Once you’ve said it, you can’t unsay it. And never make it up. You should answer questions with “I don’t know, but I’ll find out” before you answer them with “I think the answer is …”

Build trust:

Especially with the key power brokers in your capital structure

Check your work:

Review before you publish. Then review it again. Then give it to someone else to check.

Nothing undermines a CFO faster than a CFO who got their numbers wrong. Beware late changes.

No surprises:

If an investor is surprised by something, the questions they will ask are:

Did that CFO know this was going to happen? If not, why not? If so, why didn’t they tell me?

Tell a story:

Build a story that fits the numbers.

And I don’t mean story = fiction. I mean story = engaging way of sharing the facts.

Keep it simple:

Any investor will take no more than 3 big things away from an IR interaction. Make sure you are clear on what those 3 things are. And repeat them. Just because you are bored of them, doesn’t mean they are.

Paul Barnhurst

From his LinkedIn Post (emphasis added).

“All models are wrong, some are useful”

If you want your model to be useful do the following

➡️ Deeply listen to the customer
➡️ Define the problem
➡️ Protoype
➡️ Validate logic behind the assumptions
➡️ Consult Subject Matter Experts
➡️ Use good design principles
➡️ Consider the risks
➡️ Utilize scenarios
➡️ Test the model

Modeling is not about being right it is about helping decision makers make better decisions. In fact very few if any models outside of modeling competitions have a right answer.

Jason Hershman

From his LinkedIn Post (emphasis added).

Most CFO’s are just so prepared to be confrontational. Sales says up, CFO says down.

Marketing says right, CFO says left. Product says black, CFO says white. HR says checkers, CFO says chess.

I don’t get it. My guess. It’s something within the finance culture. Growing your career at a bank, Big 4, consulting, etc.

But you can literally be a top 1% CFO by simply being – agreeable when people are right - respectful when you think they are wrong - helpful when neither of you know exactly.

You’re hired to be part of the team. Not against it.

Jim Caltabiano

From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).

One of the most important things that we need to do in FP&A is don't just take the report. Because there's a real desire broadly, across business, you want the report to tell you the answer. It generally does not.

And taking that next step to get the insights, what I try to do is always encourage my teams to do is dig a little deeper. And what I mean by that is try to maybe triangulate. I love triangulating data.

I like saying, ‘Okay, I see the conclusion you're drawing from this, which is good. That's good analysis. Now, take a look and are there a couple other data points? Are there a couple other situations, a couple of analyses that can maybe confirm or deny?’ Triangulation is really important because that right answer doesn't just spit out of a machine.

But the insights are going to be more and more and more important. And I think you need to look at multiple datasets to try to triangulate information.

I'm also really a range guy. I love ranges… Your point estimate is probably going to be wrong. Highly likely.

Zane Row

From Jack Alexander’s podcast, CFO Thought Leader (emphasis added).

[The FP&A Team] is obviously one that I'm very close to and always have been throughout my career, being engaged with their partners…

A great FP&A department is engaged with the [people in the business]…

Having great people is still the key fundamental driver of having a good FP&A team…People who question different inputs and look around the corner.

Memes

Just for fun.

One Big Insight

My favorite quote with some added commentary from yours truly.

CJ Gustafson

From his podcast, Run the Numbers (emphasis added).

The career advice I would give is to be very aware of what you're good at and what you're drawn to.

It was very obvious in college that my strength was writing and telling stories, and I didn't lean into that. I did write for the school newspaper. I did do some stupid blogging stuff online, but I didn't make that the main thing. I didn't think it was a real road to take.

Now I'm looking at it like why did it take me over 10 years after college to realize that I had this ability to stack my skills on. Maybe you're a B+ in one area, but you love to write and you're pretty good at that. Maybe you're an A- there. And you also have somewhat of a sense of humor. If you stack all those three things together, you're creating a category of one.

“Maddie, I just blew my chances of ever getting an interview at [bulge bracket investment bank].” This is what I told my wife after hanging up with a VP at a bank I was trying to network into. He asked me why I wanted to do investment banking, and I gave a generic answer. He pressed harder and asked, “Do you really want to do this?”

About a week before this call, I’d started to have some doubts about my desire to work in investment banking, but I knew to get the interview, I had to convince people that I ate, slept, and breathed DCF models and pitch decks. But for some reason when this VP asked me if I really wanted this, I said, “No. I don’t want to do this. I’m so sorry for wasting your time.” And then hung up.

For me, that was a wake-up call (pun intended). I was pursuing investment banking because I believed it was the best path to becoming a CFO of a tech company. And from a general perspective, it might be. I ultimately decided that there were multiple paths to becoming a CFO, and the FP&A track was more exciting and fulfilling for me personally.

My brother is graduating high school next year, and he asked me for advice on what to study and pursue as a career. Like many people, he could see himself enjoying a career in many different professions.

I sent him a picture of this graph:

When it comes to career success, there’s intercept and slope. The blue and orange line represent 2 different career paths.

The blue line starts out ahead of the orange line. In a career, this is determined by how much experience and skill you can prove you have when you enter the workforce. People who know what they want to do early on start out further than those who don’t know exactly what they want to do.

But, the orange line eventually catches up and surpasses the blue line. This is due to a higher career trajectory. Trajectory is determined by how hard you work, how good you are at what you do, and the passion you have for what you’re working on. Anyone - regardless of where they start - can have a super successful career just by having a steep slope.

Obviously, you would ideally have a steep slope and a high starting point, but if you had to choose just one, I would choose slope.

I probably would have been a pretty good investment banker. I have a lot of the analytical skills required to succeed in that field. But I don’t think I would have been a great banker.

I get a lot of fulfillment out of building companies, uncovering insights, and recommending and implementing changes that improve the trajectory of the business. My skills combined with that passion for building is what I believe makes me great at FP&A.

As CJ Gustafson said, finding your unique combination of skills and interests will put you in a category of one, and I believe that will accelerate career growth.

Sound Bites

Great quotes with links to the original source.

Secret CFO

From his newsletter post, Strategic Finance Part I (emphasis added).

A good strategy MUST have two things: where you are going to win, and how you are going to win. Mission, purpose, and values are important too. But only as a means of getting to where and how you will win….

One area where [Finance] is uniquely placed to influence the strategy is on the numbers themselves….

But it’s not the model or output itself that is useful. It’s the modeling process. You will learn things about sensitivities, tensions and pain-points in the strategic plan that otherwise might have been missed….

By coordinating through a central methodology, finance is uniquely placed (normally through the FP&A function) to independently evaluate the impact of strategic options or decisions….

Whenever I see a business that can’t convert its strategy into execution, there is oftentimes a major FP&A failure responsible….

[Finance] needs to have the insight, voice, and influence to flag one of two strategic failings:

The business is failing to deliver the strategy

The business is delivering the strategy, but it is not having the desired effect.

Zach Rial

From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).

Usually you see [athletes] in football. And they are just good at sports. Specifically, they're good at football. But they don't have one set position that's their position, they're not a cornerback or a linebacker; they're just an athlete. And they can fill whatever role is needed for the team.

So a finance athlete, isn’t somebody who does AP or AR or X, Y, Z. It’s somebody who says, ‘I do finance.’ It means [having a mindset of] how can I help the business, how can I make sure that we're doing things that are most important — whether that's traditional FP&A or strategic finance or accounting.

Larry Roseman

From CJ Gustafson’s podcast, Run the Numbers (emphasis added).

People often ask, ‘Are you focused on short term growth or long term growth?’

And really, what you ought to be focused on is value creation.

And how do we how do we create the most the most value?

Theoretically the NPV decision takes into account and discounts medium term and long term investments. So as long as you're investing in the right value creation opportunities, you should be okay.

Now, at the end of the day, we're not sitting there and doing DCF analysis every project. So there is inherent judgment around risk and time to pay back in every decision. But the sort of mindset is not short term growth or long term growth. It's balancing both in order to sort of get the things that are going to create the most value.

Liran Edelist

From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).

I always see the finance as a starting point….I always think about FP&A as secondary to the CEO of the company, helping navigate between different processes and inefficiencies in the organization.

Finance is a starting point, because you need to have budget, you need to have your finance reports in place. But then, if you really want to understand and make an impact, you need to understand what's behind numbers.

Carl Seidman

From his LinkedIn Post (emphasis added).

The best financial leaders aren’t those with the best technical skills. They’re the ones who communicate most effectively. How can you learn how to do that too?

1) Intelligence (IQ)…

Some intelligence is learned while some is innate. When it comes to finance, it’s nearly impossible to elevate in the profession without technical skill.

Once a certain threshold of skill is reached, work focus becomes much about problem-solving, people, and collaboration within groups. We usually call those companies.

2) Emotion (EQ)

Emotional intelligence represents awareness of surrounding environments and personal existence and being able to engage thoughtfully.

Some people have a remarkable ability to stay calm in crisis situations. Others have a unique compassion, understanding verbal tone, body language, and facial expressions. It’s a subtle art….

While IQ alone doesn’t make someone an effective financial communicator, the combination of IQ and EQ can.

But it often needs to go further.

3) Adaptability (AQ)

The best communicators aren’t just smart, likable, and trustworthy. They’re highly adaptable. They can identify risks. They can sense resistance. And they can perceive new opportunities that others may not see.

They’re able to exert influence and bring others around to their positions. They don’t do it through coercion. They do it with executive presence and rapport-building.

4) AQ > EQ > IQ

Jim Cook

From his newsletter post, Leadership Influence and Communications (emphasis added).

My definition of  “Financial Influence” = The Ability to Communicate Data into Insights/Wisdom in order to Create, Challenge, and Course Correct Decisions.

Paul Barnhurst

From his LinkedIn Post (emphasis added).

Boss, I have bad news. It's month one, and we have virtually no chance of hitting the plan this year, and it is my fault. 👇

I still vividly remember my first year forecasting revenue for a SaaS business.

I was thrown into the role with virtually no training or guidance, and I messed up the churn forecast. Churn was more than double what we anticipated in month 1, and sales were lower; we never recovered. That was a tough message to deliver to the business, but it taught me a lot.

Regarding forecasting revenue, I have learned two things that are key to building a robust forecast for almost all businesses.

➡Data - You need the right data, and you need clean data, or at least clean enough to guide your thinking and forecasting.

➡ Business Knowledge - Understanding the business allows you to build a model that incorporates the key drivers that impact it. Without business knowledge, it is very hard to get the drivers right.

Brett Knowles

From Jack Sweeney’s podcast, CFO Thought Leader (emphasis added).

The Socratic model of a good debate helps you get a good answer. When we can have diversity of thought around the room and people feel risk-free to communicate their feelings and their observations, naturally better answers come to the surface….

AI is just another voice at the table. And if we don't feel comfortable debating with AI, as we do anyone else around the room, we have a problem. AI is going to present a bunch of ideas no different than each individual presents ideas based on their experience, their perspectives, and so forth. But we need to weigh that against a bunch of other factors, and even more so with AI because it doesn't have that common cultural or business background that is bringing into the conversation.

Memes

Just for fun.

One Big Insight

My favorite quote with some added commentary from yours truly.

Bonnie Tomei

From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).

What [finance] are trying to do is move the company forward. Being the CFO is really helping to get allocation and prioritization of the resources we have, and helping everybody move the company along.

So that alignment has to be done through proper communication and education. Then, of course we seem like the guy and gal who put in internal control — education will probably help with that. The skill set of somebody in FP&A who wants to become a CFO includes, first and foremost, acumen of the business — helping provide intelligence.

Second, great people skills in moving the business along….What's most effective is education, alignment of priorities, making sure the entire team is understanding why we do this not that, why money gets spent here but not there.

And then lastly, putting together KPIs will help tremendously. So the skill set of somebody in FP&A is understand what makes this company successful and measure against it, delivering that with a great teamwork, great communication, and great education.

One of my mentors taught me two principles that guide the way I approach FP&A:

1. FP&A is about steering the ship where we want to go. We may not have our hands on the wheel, but we’re charting and forecasting our course to ensure the business ends up where it’s trying to go.

2. True leaders influence and drive change through people that don’t report to them.

I’ve always felt like I have a good handle on the first principle, but the second one is much harder for me. What I loved about Bonnie’s quote is that she simplified the way I think about driving influence and change — just educate your business partners.

I’d love to hear from you:

How do you influence your organization through education?

I’ll post my favorite responses in next month’s newsletter!

Sound Bites

Great quotes with links to the original source.

Jim Cook

From his newsletter post, Structuring the Decision (emphasis added).

Perfection is Paralysis. 80% Data is enough: the 20% of unknown space helps the team stay agile and to turn any opinions or innovative decisions into data once the 80% decision goes live. Don’t get caught in the fear trap or the perfection trap where not making a decision is the decision while the importance and urgency surrounding the decision festers like a sore wound….

Never challenge the person making the assumptions. This is how listening stops and heels dig in. Only challenge assumptions. Never make it personal….

Everyone needs to be willing to hear a “better idea” or a “better assumption” and be willing to change their position. If you see your team or the decision makers straying from this critical operating value of “best ideas” win, it’s time to remind them of these rules and to “chalk the field” with a leadership speech that principles always trump positions….

Second-level thinking is about understanding the complexities and nuances of a situation, challenging the initial assumptions, and looking for deeper insights that might give one an edge in decision-making. It’s about trying to see things that others don’t, predicting how situations might play out based on a multitude of factors, and making decisions that account for these deeper insights.

Taylor Otstot

From the Plan Buddies event, The FP&A Cycle in Ever-Evolving Businesses (emphasis added).

What I always like to say with my teams is that the budget's going to be wrong on day one…We're going to have a lot of things that were wrong — some things will be in our favor, some things will not be.

The key to all of it is ‘How can we get to the ultimate end result that we're trying to get to even if we're getting there through a different path?’

And so when you're running through the scenarios on your startup…be sensitive to how far does this get us off track…You can miss the top line or you can miss the bottom line. You cannot miss both.

If you identify a scenario where you feel like you’re going to miss top line, identify everything you can do to get your bottom line [back on plan]. [Identify] things [in advance] that we can do to counterbalance, so that we get to our EBITDA number or our cash flow number.

Dan Fletcher

From Sasha Orloff’s podcast, Turpentine Finance (emphasis added).

You should not choose between growth and profitability. You should do both. And your company will be worth more….

I get a little exhausted by the growth versus profitability conversation. But it's true. There is a trade-off. You can't always have both. And sometimes you need to lean in more on one than the other. I think those conversations need to be based on why it matters.

For the vast majority of software businesses, you're valued on revenue, hopefully recurring revenue. And so start with where you're valued. But in other industries, in chemical and energy, you're going to be valued on profitability.

And so, if you are identifying your metric of value, what you're valued on, it is very likely that any type of statistical regression you'll run on public comps over time — whether you get paid more for growth, paid more for profit, is going to map to that simple truth.

If you are valued on profit, you should increase earnings. If you are valued on revenue, then it's going to be revenue growth and revenue predictability, and you should lean in there.

Secret CFO

From his newsletter post, Costs Behaving Badly (emphasis added).

Unit economic analysis is useless without good bookkeeping….

It’s not just about the analysis, you have to bring it back to the ‘corner shop.’ What does it mean in practice? Most FP&A teams are bad at this from my experience….

Good finance teams have an intimate understanding of the business’s unit economics. But GREAT finance teams find ways to share that understanding with the business….

When you look hard enough, all costs are mixed costs.

Very few costs remain the same (either on a $ or per unit basis) for the same business at 10 units and 1,000,000 units….

And suppliers have their own unit economics, so it’s reasonable to believe they can serve you more efficiently as you help them grow their business….

So costs will only behave in a linear way inside certain relevant ranges of volumes….

The crucial point is that unit economics is a science, yes. But it’s an imperfect one. It only works alongside a robust understanding of the business.

Alex Song

From CJ Gustafson’s podcast, Run the Numbers (emphasis added).

And there's almost no function within an organization whose job is to reduce risk to zero. I think that would be wrong….

I think it's more assuming you don't want risk to exceed a certain amount, right? What is the best possible way to deliver shareholder returns?…

Given the confines of the type of business we want to run, we want to make sure our risk doesn't exceed a certain amount. And then what's the profit maximizing thing to do, given some of those guardrails.

[CJ Gustafson’s Response]

Sometimes I do think that we get too fluffy about it. And it's like at the end of the day, dude, [the business] is here to print some money, and in order to do that, you have to sign up for some risks.

Brett Knowles

From Jack Alexander’s podcast, CFO Thought Leader (emphasis added).

Know what good looks like two to three years out….

I often think of Amazon. When Amazon first popped out, it was just a bookstore…Look at it now. What will good look like in three to five years? Well, probably good looked like more than selling just books. Step one, build that retail engine. Step two, move to other products.

So what does good look like?

Memes

Just for fun.

One Big Insight

My favorite quote with some added commentary from yours truly.

Jim Cook

From Sasha Orloff’s podcast, Turpentine Finance (emphasis added).

The reason I love being in finance, and I think a lot of people love being in finance, is we sit in the only seat that has the unique intersection of all the activities in the company. It's all captured in this thing called the general ledger or accounts payable. Like it's all in a database. We're the only ones that capture all that information. It's gold. So we have the ability to produce amazing insights from the only unique intersection of data in the whole company.

…How do you influence? How do you pull out just the nuggets and the kernels of all the insights and not get too detailed?

…Google's taught us keywords. Well, if that's true, start speaking in keyword language, start answering [stakeholders’] questions upfront and detail later.

…So speak their language, answer the questions that [they have], sit in their seat, not yours, and understand who your audience is and tailor your insights to them. If it's a board, there's a set of insights. If it's a CEO, it's a different set of questions that person usually has. And if it's your exec team, have a whole different set of information they want from you as a finance person.

“We have no idea what it costs to service a customer. We don’t even know if our products are priced accurately.”

This is what I was told day one at a new job. The business was performing exceptionally well and growing quickly. How could they not know if they were making money on their customers?

The answer is, no one ever looked at it. Engineering understood the technical cost to service a customer, but only looked through a lens of performance optimization and cost reduction. Sales and Marketing were laser focused on CAC and New ARR.

The fact is, only Finance is equipped to view the business holistically. We have the revenue data, the cost data, and the mandate to measure overall business performance.

It turned out, 2.5% of our customers were massively unprofitable. We could improve profitability by almost 5% by simply firing those customers — even better, these customers loved our product and were willing to pay more. A huge growth opportunity was uncovered by looking at profitability more granularly.

Sounds like a slam dunk for finance, right? Initially it wasn’t. When presenting my findings for the first time, I got way too detailed in the analysis. The analysis itself was simple (revenue - cost), but it required a deep understanding of every cost — many of which were technical in nature.

I learned that executives responded positively when I:

• Invoked expert witnesses: “Engineering signed off on this methodology” or “Data QA’ed this query”

• Quantified impact: “We’re losing $XM per month” instead of “2.5% of customers have a profit margin of -X%”)

• Provided actionable recommendations: “If we limit this feature, we can drive upgrades from this subset of customers”

In my experience, Finance professionals spend 95% of their time on analysis and 5% on storytelling. But the numbers alone don’t drive change in an organization. When you make communication and storytelling as important as the analysis, the numbers inspire people to act.

Sound Bites

Great quotes with links to the original source.

Secret CFO

From his newsletter post, How to Fund Growth (and When Not To).

If there is one thing I’ve learned in my career above anything else, it’s this:

No one knows anything for sure. Everyone is winging it. The great executors aren't great because they know what’s going to happen.

They are great because they understand risk, monitor relentlessly, and react at the speed of light.

Philip Watson

From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).

Great FP&A looks like the ability to communicate with multiple stakeholders in all aspects of the business, and I think it looks like being very operational in both one's practicing and in one's outlook.

Kevin Kraus

From CJ Gustafson’s podcast, Run the Numbers (emphasis added).

[When a business partner comes to you with a problem]…you don't say if it's problem A, you go to that guy, if it's problem B, you go to that person over there…you got to keep things simple if you can.

And it does a couple things. It makes doing business internally easier…Most importantly, it helps develop a trusting and productive relationship between the functional leader and that finance person. And you can't underestimate the value of that.

…Ultimately what ends up happening in many, many cases it does, that finance person becomes an extended member of the functional team. They get invited to the staff meetings, they participate, and this can happen anywhere.

Scott Henderson

From Jack Sweeney’s podcast, CFO Thought Leader.

When sales knows rules, they can perform better. You get the right results.

Liran Edelist

Answering a question on using AI in forecasting from the Plan Buddies Event, Rolling Forecast Roundtable (emphasis added).

The first piece when we're talking about AI is the biggest question: what type of AI?

…There are many organizations that are using and have been using [predictive analytics for forecasting]

…Not as a full [forecasting exercise] but mostly for [recurring revenue], [estimating drivers such as] oil prices, or whatever. I worked with [a company] that used AI to predict their churn or renewal rates that was giving excellent results.

When I tested AI a couple of times it was fairly quick to get into 98 percent accuracy month over month, so [maybe not as useful] for a 12 month prediction, but with simple tools you can get nice accuracy for the next couple of quarters.

Thomas Ream

From CJ Gustafson’s podcast, Run the Numbers (emphasis added).

AI is really only valuable if it is a component of workflow. Otherwise, it's just an interesting thing.

Jason Hershman

From his LinkedIn post (emphasis added).

If you want to be a CFO but you’re not there yet – Here is what you should do.

Go find an FP&A role at startup, reporting directly to the CFO.

Why do I suggest this?

You’ll be the CFO’s right-hand person. You’ll be asked to figure out past results [and why they met expectations or didn’t]. You’ll be asked to explain the accounting [which will deepen your expertise]. You’ll be asked to manage board, and go fundraise [a critical part of the CFO’s job]. You’ll be asked to work with every department [on budgets, reviews, expectations]. You’ll need to setup systems and processes [within finance and within other departments].

There is just so much that will be asked of you. And doing it at a startup means you’ll have an impact.

And doing it as an FP&A person means you’ll see what a CFO needs.

Erica Gussert

From Jack Sweeney’s podcast, CFO Thought Leader.

Just trust your instincts….There's a reason that you that you've gotten where you have.

We're always wanting to be data driven, and we always want to make sure that we're using the best possible data set…that's in our blood.

But I think we also should realize that there are times when you have to use a combination of data and your gut. You have to use both in business. You have to move quickly.

Brett Hampson

From his newsletter article, 4 steps to level up in FP&A (emphasis added).

Often in finance we'll get an email like "I need a report to explain xyz". But what they really need is an email with a clear storyline that they can tell their boss about what's going on with xyz.

Ashley Johnson

From Jack Sweeney’s podcast, CFO Thought Leader (emphasis added).

I noticed a weird dynamic where [stakeholders] would go to the FP&A team and ask the question that I absolutely forbid now, which is: ‘What is my budget?’ or ‘Is this in my budget?’

That is not a question the FP&A team is allowed to answer. The FP&A team can say: ‘What do you want to spend on? And let's look at all the things that you're spending on and whether there's an opportunity for you to make trade-offs, to enable you to make this decision if it's a priority decision.’ But we do not answer the question: ‘Is it in my budget?’.

And we empower leaders across the organization to own their budget. We give them the tools, we give them check-ins once a month of how they are doing versus plan. Because I want them to be able to use the numbers and use the team to make decisions - not as a yes/no function.

I think too often, FP&A acts as the budget team.

Memes

One More Thing

I’d love your feedback on this newsletter. Send me a reply with your thoughts or answer this poll!

Read this post and join the discussion in Plan Buddies - the #1 community for FP&A professionals.

One Big Insight

Secret CFO

From his newsletter post: Killer Finance Teams Do These 7 Things (emphasis added).

A finance team that doesn't influence business behavior is a waste of time. A great finance team will be relentless in its challenge of the business.

A continuous enemy of complacency.

Whether that is through the way targets are set, performance is reported, or business reviews are conducted.

But it's also about support. Doing what is needed to support the business to deliver the right answer.

It's easy to be relentlessly dissatisfied. Always looking for more. It's also easy to be unwaveringly helpful.

Doing both at once, in the right balance, is hard. But good finance teams find a way.

Personal anecdote:

It was late in Q3, and I had accepted the business’ fate of missing the board plan. I had just presented our final forecast to the leadership team for the rest of the fiscal year, and it showed a material miss against the budget.

The CEO said to the room, “This isn’t acceptable. We have to hit the board plan. How are we going to make up the difference?”

I responded, “I don’t think it’s possible to hit plan. There isn’t any scenario I can reasonably come up with that closes the gap to plan.”

The CEO looked at me and said:

With that fire lit beneath me, I dove back into the model and found the most realistic path back to plan. It required a significant increase in sales over what I originally believed to be possible. I translated that to a single number of incremental new customers we had to acquire outside of what we were currently doing. I came up with five ideas for how this could be done and went back to leadership. This gave the leadership team the challenge and the support needed to go execute and close the gap to plan.

As finance professionals, we’re often challenging either overly-optimistic or overly-conservative assumptions in the business. This tension is necessary to steering the business on the right path. But, the real value we bring is the strategic support to maximize what’s possible. Anyone can shoot down bad assumptions, but being the type of person that supports the business in finding the right answers and executing to them is much more rare.

Working for startups, I’m used to bringing expectations back to earth, but I still get surprised by how much can be done by chronically optimistic, hard-charging startup founders. We didn’t hit plan that year, but we got a whole lot closer than I originally thought we would.

Sound Bites

Brett Hampson

From his newsletter post: The Secret to Driving Action (emphasis original).

After analyzing the results and understanding the direction you want to go, form a strong opinion. This conviction will serve as the backbone of your storyline, ensuring it has a clear and compelling message.

Remember, you already walked in with an idea of which direction you want to go. But now it’s time to double-down and become the champion for the action you want.

This has to be one of the top 3 secret weapons to my finance career: being the one who cares the most.

If you truly care and people sense it, they will believe and follow even when they are unsure.

Be convinced and be confident.

Tucker Marshall

From Jack Sweeney’s podcast, CFO Thought Leader (emphasis added).

I believe that the finance organization has two key responsibilities. One is to be a steward of financial compliance…

[Second], we also have to bring strategic advice and insight in support of our business partners…At the Smucker company, we have direct finance leads to each business…I often refer to them as the navigators within those teams. We also have a corporate FP&A group that partner with [finance leads] to deliver annual financial planning, monthly forecasting, or assessing strategic projects…[Success] all comes down to how those teams partner with the businesses and bring insights together to get a positive return on our investment.

CJ Gustafson

From his newsletter post: Is Your Revenue Durable? (emphasis in original).

Durability revolves around a technology's sustained usage and necessity over an extended period, often despite changes or advancements in the field. It isn't just about subscription models or being a software as a service; it's about technologies becoming so essential and ingrained in operations that they are less likely to be replaced than other parts of an organization.

“Durability is a function of these other qualitative concepts. The dominance, the stickiness, the absolute necessity, and the amount of competition - is there a lot of gravity - system of record to what you are selling”

-Tony Kim, Head of Technology Investments at Blackrock, RTN Pod: Spotify / Apple / Youtube

Here are some technologies and solutions that exemplify durability:

1. Microsoft Office: Since its inception in the late 1980s, Microsoft Office has become the cornerstone of business operations worldwide. Try as they might, FP&A planning tools are learning to work with it, not around it. Microsoft Office illustrates workflow gravity.

2. Bloomberg Terminals: Used primarily by finance professionals, Bloomberg terminals offer financial data and analytics tools that are essential for real-time decision-making in markets. Wall Street’s mascot is not the Bull; it’s a Bloomberg terminal. Bloomberg Terminals illustrate account gravity.

3. Oracle Databases: Oracle's database solutions are known for their robustness, scalability, and security features. Many large enterprises rely on Oracle databases for critical data storage and operations. It’s also a pain in the ass to move your data after it’s been in one place for so long and connected to so many other things. Oracle Databases illustrate data gravity.

These technologies share common traits that contribute to their durability:

• Dominance in their fields: They are the de facto standard.

• Stickiness: Once implemented, these technologies become embedded into the workflows and systems of an organization, making them hard to replace.

• Necessity: They fulfill essential functions that organizations depend on daily.

• Limited competition: While there are alternatives, the entrenched nature and comprehensive features of these technologies make switching costly and complex.

The concept of durability in technology is characterized by a product or service becoming almost indispensable due to its utility, integration, and the significant role it plays within its user base.

Tyler Cyphers

From Paul Barnhurst’s podcast, FP&A Tomorrow.

The people that I've seen be very successful [in FP&A]...have a genuine curiosity about the business...Ultimately, it comes down to being able to talk the talk. So you have to be able to communicate on their level and understand that your reports, your analysis, whatever in the context of the business and why it's important to them.

Liran Edelist

From a question in the Plan Buddies community on how to forecast enterprise deals (emphasis in original).

1. Depending on your company size, it combines science (data) and art (knowing your team and processes). THE CRM MUST have all the indications of the sales process to help you predict the timeline. These indicators should include how many sales cycles have passed (POC, Legal, IT approval, etc.) and the probability of winning based on qualifications and competitors. The final timeline and amount can be calculated in a spreadsheet (for small businesses) or in the BI/SPM/EPM tool (happy to provide more details)

2. If you build business logic, remember that some stages (Variable to the timeline) in enterprise deals will always take longer. The "typical suspects" here are IT and Legal, which usually take at least a few weeks (each) with large enterprises.

3. Continuous Improvement: It's important to have the CRO get involved and take responsibility for forecast accuracy (it’s part of his commitment to the board). Some companies offer incentives to sales teams for their forecast accuracy.

4. For multiple enterprise deals, you can make estimations (i.e. probability x amount) to get a high-level number. I suggest not forecasting deals with less than a 20% chance of closing within the coming quarter. With enterprise deals, only at least 80%-90% should be counted in the current quarter (2-3 months).

Chris Reilly

From his LinkedIn post on “7 Lessons Learned Building Financial Models.”

You can't take 4 days to update the model.

Sorry, but the thing has to built well enough that you can get it updated in at most a half-day.

Some of the best models I've worked on take less than 20 minutes.

I get that sometimes you're constrained by data and that's fine.

What I'm really saying here is make sure the file is designed well enough that your update process is fairly automated.

Carl Seidman

From his LinkedIn post on how young FP&A professionals can stand out.

Young FP&As lack the experience of their senior peers. But what they lack in experience they can make up for in:

Preparation, anticipation, communication, and improvisation.

Memes

Carveouts

Upcoming Plan Buddies Events

• June 26 - Startup FP&A: The FP&A Cycle in Ever-Evolving Businesses; Hosted by Derek Baker. Link to register.

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