Harnessing FP&A For Enhanced Business Growth & Success with Julian Castelli

Great. FP&A looks like the windshield and the dashboard of your car. I find that FP&A is a great springboard for lots of roles within the company. I define a strategic finance group with three components. One is the accounting and the control of closing the books. The second group is the operations, day to day, collecting money, paying people, doing payroll. And then the third is what we talked about with fpa. The investor relations, the strategic analysis, the shaping of the P and L. What.

Are some of the other signs maybe you see that says this company could really benefit from having that strategic finance or an FPA profession?

The single biggest sign, and the most repeatable one, is.

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Hello everyone. Welcome to FP&A tomorrow where we delve into the world of FP&A, examining its current state and future prospects. I'm your host, Paul Barnhurst. Each week we are joined by thought leaders, industry experts and practitioners who share their insights and experiences, helping us navigate today's complexities and tomorrow's uncertainties. Whether you're a seasoned professional or just starting your journey in FP&A, I'm thrilled to welcome our guest this week, Julian. Julian, welcome to the show.

Thanks Paul. I'm glad to be here.

Really excited to have you. So let me give a little bit of background about Julian. He comes to us from Park City, Utah, so he's another Utahn like me. He currently is serving as a board director and board chair as well as working as an executive coach for Growth Stage SAS companies. He earned his BA in Political science from Amherst College and his MBA from Harvard. So one thing we like to do before I give you a minute to tell us a little bit more about your background, we always like to start with this question from your experience, what does great FP&A look like?

Great FP&A looks like the windshield and the dashboard of your car. It's what is out in front of you and if you don't have a windshield and headlights, you can't see. So without fpa, you can't see what's ahead of you and you don't have the dials on the car to tell you whether you're going to run out of gas or how fast you're going and whether your oil levels pressure is too high or low. So it's the dashboard and the windscreen of the car. And I'm always amazed at how many people don't really understand that.

I used to be. I don't know that I am anymore. It is surprising though. I will agree. We'll talk more about that here shortly. Before we get into the rest of the interview, could you tell us a little bit about yourself and your background, what you're doing today and how you ended up where you're at?

Sure. I'm happy to. As. As we talked about, I started my career as an investment banker at Goldman Sachs where I was doing effectively what investor relations is inside the company and helping companies with investor relations and matching them up with investors for financings or potential acquirers for M and A. After that I moved into the consulting world. I was a consultant at McKinsey & Co. And I used a lot of the same skills and financial analysis, data analysis, discovery work, and I use that to help solve problems and drive strategy. So both those things were, were very related to FP&A. I moved into the corporate world. My first role was as a VP of Finance at a company called PageNet and that was where I was. I had the first chance to kind of run an FP and a department and group. I was in charge of FP and a Treasury and investor Relations and eventually became the CFO there. At PageNet I've had several CFO roles including Pagenet was a billion dollar public company. I've been a CFO at Primedia, which was a $300 million private equity backed company. And I've been CFO and CEO of several smaller stage companies. What brought me to Utah, I moved out here to start a business and so I became a founder CEO of a company called Vacation Rooster which helped commercialize vacation rentals and E commerce in the vacation rental category. And it was a marketplace and eventually we also built a SaaS business called Leisure Link. So I moved out here to do that and that was my first CEO role. And I've had several additional CEO and COO roles in the past and now I'm trying to give back and share what I've learned through all those experiences. And I'm serving as a board director, a board chair, executive coach, operating partner, lots of different titles. But effectively I'm working with leadership teams of growth stage tech companies helping them plot their path for the next stage of their journey and helping them be successful along that path.

Great. Sounds like you have a lot of great experience to offer those companies with, you know, the different companies you worked at and the different roles. So yeah, I want to start by just asking a question that Goes back a little bit to the beginning. You mentioned you started as an investment banker, a little bit of that investor relations type role, and then you were a consultant at McKinsey. How did those experiences prepare you for, you know, FP and as you were the VP and then also being a.

CFO, I think they prepared me really well. I didn't know it at the time. You know, obviously, like all of us, we kind of discover what FP&A is. And I can't even remember if we had an FPA department at PageNet. But, you know, I, I knew it was very critical that we as a public company had to communicate with investors. And that's what I learned at Goldman Sachs. Quite often the role that the investment banker plays is the guide to the investor or the guide to the public markets. And quite often there's a role that the guide plays with language or metrics and terms. And what you use to run a business internally may not be what investors or the or the public markets use to evaluate externally. So a lot of what we did as a banker was to help prepare the companies to make sure they're speaking the language of the investor, to speak the metrics of the investor. Sometimes the metrics were not being used internally. So we had to kind of help them derive those metrics and, you know, and determine where they were from an overall attractiveness standpoint for that stage in that financing or that transaction they're trying to complete. So that's a lot what what FP&A does. And I didn't know at the time, but as I moved into the CFO role and the VP finance role, I realized that those skills were very valuable. However, they weren't very widespread internally. And I guess that's why you have investment bankers and why you have FPA groups. And I had to build one there. It was within the investor relations group in consulting. I really was excited about moving there because I found that I was using a lot of the same skills, so data analysis, discovery analytics, benchmarking, and other analytical skills. But I was applying it to not the finance side or the investor relations side, but to the strategy side. So, you know, where can we save some money in our business? Where are the better growth opportunities coming up? Which opportunity is how do we evaluate three different opportunities and decide which one we invest in? Those are the metrics of strategy and decision making, which I was really excited about. But I found that we used a lot of the same tools that we did. And the way I look at best practice, FP&A is, is, yes, you have to be doing the forecasting and the investor relations reporting, but also you're doing problem solving. And I think that's what makes FP and A pretty exciting because you're the nerve center of the business. You have all the critical information. Your job is to take all the critical information that's coming from the business, turn it into actual actionable reporting that allows management to make decisions, but also use some of that data to provide analysis to support the decisions. And so the analysis part and the problem solving part is just like the strategy consulting. So when I hire FP and A individuals, I talk to them, I say, look, you're going to be working with the finance and accounting team to get the reporting done. And then we're going to be talking about a different level of reporting that's going to be more investor relations. And then once we have that in hand, you're going to be part of our internal consulting group. Because our job is not just to report or not just a forecast, but to actually steer the ship and help us make decisions. And so I find that FPA is a great springboard for lots of roles within the company. And I start out by saying we're going to be kind of our own internal consultants, use our tools of the trade, which is analysis, spreadsheets, data capture, you know, benchmarking and other things so we could solve problems.

I really appreciate that answer. And as you were saying all that and you talked about how they need to help guide the business, I still remember I had a managing director who one day he said to me, he goes, you know, Paul, you do more than just report the P and L, you help shape the P and L. And to me, that's what FP&A should help do, is help guide and shape where the company's going to, through that financial lens to make sure we're investing money wisely and that we're making smart decisions. Because sometimes, you know, great people that don't, don't have that financial lens to realize, oh, that's going to cost so much that we're not going to get a proper return on that. Or here's why that doesn't make sense. So being able to combine the strategy thinking and the financials is so critical.

For FP and A. Yeah, I couldn't agree more. And I like the way you said that. Helping to define the financials going forward. Yeah, that's, that's, that's what I call strategy or strategic finance. And, and it's the, the core output of F of an FP and a group.

I think I, I agree. I think more and more you're seeing, you know, FPA being viewed as strategic. And sometimes these people call it strategic finance, sometimes they're separate, but there's just a lot of overlap in there. And to me, good. FP&A understands operations, understands strategy in addition to the financials. It's not enough to just know the numbers. Which leads to my next question I want to ask you. You know, you've worked with a lot of small companies, right, Series A, B, C, where they're really trying to grow and scale. How do you help those companies see the value of fpa, Right, Going beyond just a controller or just the bookkeeping pretty much every company needs.

Yeah, I think that's a great question. It's one I see quite often, and a lot of the time the strategic work I help with, particularly around finance, wrestles with this specific question, right? Because at the very early stages, FPA is a bit of a luxury, right? So the finance department is not a luxury. It's broadly defined. Money is the currency and the fuel of business. You know, our business is designed to bring money in and it is organized to pay money out to its employees and its people. So the mechanics of handling the money, you know, that, that, that is part of a broadly defined finance remit. However, the things that are most crucial when you're just starting up are just the basics. Hey, can we pay people? You know, can we collect money when we sell a product? You know, that is AR and ap. Those are accounting functions, right? And what most companies grow up with through the startup journey is the minimum, the minimum spend that they can to handle those requirements. Now, when they start raising capital and they, you know, if they bootstrap, maybe they can get along further with just basically the operational elements of finance. But when they start raising capital and they start raising it with institutional investors. Institutional investors expect people to speak the language of finance and investors. And that is not the language of accounting. The language of accounting is designed for tax returns and for payments and operations. And so what I find very consistently is companies that are at that point where they want to expand into the growth stage, I'd call it between 5 and 10 million of revenue. And they want to go to, you know, 30 to 50 million of revenue. That's the. Those are the kind of companies I work with. Quite often they are in that transition where they've got a good accounting group. They might call the accounting leader the cfo, but they really don't have A full strategic finance group. And I define a strategic finance group with three, three components. One is the accounting and the control of closing the books. The second group is the operations, day to day, collecting money, paying people, doing payroll, you know, managing the operations of the business. And then the third is what we talked about with fpa and that's the forward looking, the investor relations, the strategic analysis, the shaping of the P and L. And most companies, for logical reasons, the early stages, don't either know about it, think about it, or think they can afford the third leg of the stool. So I spend a lot of time preparing companies for, hey, we're to go raise a series B. And I introduced them to the fact that, hey, maybe your business is ready, but your finance group may not be ready because you basically have only the first two boxes covered. You don't have the third box, which is FP and A. And that's what's going to become really important when you're raising a series A or a series B or you're dealing with institutional investors on your board, you want to do M and A, et cetera.

Makes a lot of sense. So you know, with that, what are the typical signs you see that tell you, hey, they really need FP and A beyond, obviously the fundraising, help with that is often a thing, you know, kind of managing investors. But what are some of the other signs maybe you see that says this company could really benefit from having that strategic finance or an FPA profession?

The single biggest sign, and the most repeatable one, is if you see a QuickBooks printout or if you see a QuickBooks P&L or any, any natural P and L. And by natural, I mean we are accounting and reporting the progress of the business through natural accounts. Here's salary, here's rent, here's consultants, here's taxes. That's important, it's critical. And it's the way ERP systems have built since they've existed. And they also the way that the IRS calculates taxable deductions. So for all those reasons, you have to start there. But if you present a P and L like that to an investor, you might end the meeting right there. And so many companies, just what do you mean? Isn't this what financials are? And you know, I say, well, take a look at a public company filing, go pull an annual report or 10k. Do they report their financials that way? Do investors make decisions on investment, on which companies to invest that way? No, there's a big, big difference. And so the first sign is just Non investor grade financial reporting. And unfortunately I'm kind of shocked that the ERPs out there make it so difficult to actually produce financial reporting the way the investors want expect to see it. And they make a judgment. If you're getting a printout or some 8 point massive spreadsheet of all the financials and the balance sheets that are just kind of like, here's what we have. They're going to make a judgment on the sophistication of the company. And typically it's because they basically just have an accounting team that's doing, I'm sure, a great job, but they're not speaking the language of the investors.

Yeah, no, definitely, I understand what you're talking about. You know, there are many times where what we presented to the business versus what came out of the ERP was different. Right. Like I'm not going to give them this natural account line. I'm going to group this together because they don't need that level of detail or it's not going to help them make smart decisions.

Yeah, I think, I think that's a key point. Well, I wonder if you see it the same way what I see. And again, I go back from being a public company cfo, for better or for worse, I started there. And so that's my view and you know, the, the investors view of business. And as an executive CEO board chair, I view a business based on functional pnl. I want to see, you know, how our revenue is doing. I want to understand our gross margin. And the only way I can look at gross margin is by having a function or a P and L that talks about cost of goods sold and gross margin. Right. Which is not in a natural P and L. And I want to see how much are we spending on sales and marketing? How much are we spending on our research and development? What are we spending on GNA and I typically, I and I think the investing world, the venture, the growth equity, the PE world, tend to measure profitability and progress of a business down through the EBITDA line.

Yep.

And through departmental allocation of resources. And we can benchmark and say this company's spending a little bit more in sales and marketing than other ones. Wow. Their cogs are really high. Okay. That tells us the nature of the business that we want to evaluate. This is going to be a low gross margin business. Why? Let's dive into the cost of goods sold. Oh, they have a really big fixed cost. They have to get to a certain level of scale before this business is going to start being profitable. Those are the conversations you have when you're raising money, when you're being valued, when you're talking to investors. But remarkably to me, when you look at any ERP system, they don't print them out that way. They print them out in the natural accounts. And so I think that if you don't have an FPA group that has an investor relations lens, you're never going to even see that problem. Until an investor decides not to, not to invest in you or you raise money, the next sign is the board of directors start saying, hey, whatever you were reporting in the past, that's not good enough anymore. We need a different set of reports. We want you to be looking at, you know, not only reporting with a, with a functional P and L, that's what I'll call what we just described. But we also want you to be looking forward and forecasting and doing a variance versus actual plan and a revised forecast. And some people call it a six plus six or a three plus nine. And they really want to see real time forward looking measurements of the business. And that's why I call that the windshield. If you're just printing out the QuickBooks, you basically are just, you know, showing the engine or the trunk but you're not, you're not looking at the front of the car.

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Yeah, you really need to be able to be forward looking and like you said, the 3, 9, the 6 6, the 111, whatever it might be. However often you reforecast having that ability to say things have changed, here's where we think we're going to be now so the board can contract that and understand, okay, this company's on target or there's an issue I need to dig in more here. Right. Having that ability to quickly see functionally, oh, why did R and D go up 10% as a percentage of revenue this year? That's an issue. I need to understand that versus oh, salaries went up and then you spend 20 minutes digging. Well, give me the list of people. Well, they're not by department. Well, what's their job title? Oh, so you hired these three people all in this. Okay. That's why salaries are out. Right. That's a much longer trying to figure that out.

Out in the discussion at a board meeting. It's over, you're done.

Agree. Yeah. That's what I mean. Right. That should all be done in the back end. That's the problem with the natural line is that's what you have to do to figure it out. And that doesn't work when you're in front of an investor. It's like, okay, obviously they don't know their financials, if that's what's happening.

Right. So, yeah, so I totally agree that that change right there. And you know, you're the expert on systems. I don't. I would love to hear from you why the ERPs haven't evolved, but I'm always amazed. And almost every single company I work with, we have to go through this big exercise of restating the general ledger and tagging, or putting, you know, putting, you know, creating way too long account numbers and using some sort of, you know, modified Dewey Decimal systems to get them to move to departmental or creating tags. And I'm like, why is this a project? Why are we doing this on spreadsheets? This. This is a basic function. I'm always surprised.

Yeah. And I'll give some thoughts on that. I don't know the full answer, but I think, you know. Right. 90% of companies, as they're just starting, are going to use QuickBooks or Zero. Right. Those are probably what you see. Maybe Zoho, there could be a few others, but most of the time it's one of those two. And I think the people who are doing those are almost all bookkeepers that are using them. And, you know, they're really designed for small businesses. So I don't think they've matured as much as some of the bigger ERPs. And, and generally the other thing is, I think a lot of times these companies think, okay, there's planning tools, and the planning tools will take that and kind of modify it to do those different looks. I think we're starting to see some change. I know there's a new tool out there and I haven't seen how they've handled this, but they're using a lot of AI and really trying to kind of go to that next level is one called Puzzle. It's raised quite a bit of money. And so I think we'll start seeing a little bit more of that. But I agree with you. I think it's a missed opportunity to provide more of that, to make it easier to see it that way. We're definitely seeing tools fill that gap. I'm seeing more and more tools that try to take those data and make it easy to look at them different ways. Right. But I agree they could do a better job. I also think some of it is how it's set up because you can set up departments, you can do some things, but I think a lot of times it's set up by that bookkeeper that's thinking about from a tax lens.

That's right.

So I do think the tools have, they do have the functionality, even if it's not great. Unfortunately, I don't think by default it gets set up that way almost never.

Yeah. And that's when in the stage I'm Talking about that 5 to 50 million Series A through Series CD, I often, you know, you ask for signs. The sign is that they haven't changed the pnl. And then the next stage is, you know, whether they have an FP and a department and without an FP and a lot of people that really help drive that, that transformation into investor relations reporting. And so maybe there's an opportunity with some tools. I think that from. In my experience, I'm curious what you think, but a lot of times the planning tools are, you know, for a later stage growth company. I'm not sure what the entry point is now, but most of the companies I talked to in that early stage, A, B, C, aren't quite considering planning tools probably because of expense. You know, have they gotten less expensive and are they approachable now for earlier stage companies or what size? What's the size when you think a planning tool is appropriate?

Yeah. And you know, it's going to vary a lot on complexity, but I think as soon as you start getting a lot of departments, a lot of people collaborating in the process, you should at least start exploring a tool. Right. Because that's when it becomes difficult when integrating data. When you start using external links and you're stuck in Excel hell, which we've all been there during a plan where you're just like, oh, we didn't refresh that file, so the numbers are wrong that we gave to the board, it's like, oh, crap, what do we do now? Well, we got to revise them. And so I definitely think there's more and more tools that are coming out designed at the early stage and they're getting cheaper. You know, I've seen ones from a few hundred dollars, you know, up to that, I'd say in the small range, anywhere from probably 10 to 20,000. And many of them are price saying kind of Series B because typically tool, most the tools want you to see that first FP and A higher. Right?

Well, that's that, that's why I wanted to compare notes with you. That's, that's my view. I, I am typically advocating for that first FP and A hire somewhere around the series B in the 8 to 10 million dollars of revenue is kind of where I recommend it. And you know, what we just talked about is when you don't have that here before and the, the sequence I see is, you know, there's a discussion around why is this necessary. And sometimes it comes from the board, sometimes you have to prove it to the board. You get the FP and a higher, you unpack the gl, you redo it. It takes months sometimes to present a professional investor relations P and L. And then you start actually having presentations that investors can respond to. And then that alchemy, hopefully the company's going to do well because you're now sharing information with everybody and people can make better decisions. So that starts working. And then I've always wondered, typically for me it's been, I've seen those planning tools in the kind of 30 to 50 range and that's more. Sometimes the smaller companies are paying for the erp. So typically I would have guessed Series B, Series c at the 20 million plus before you start looking at those tools.

Historically, yeah, they've definitely come down. There's more and more coming after the small market. There's a number designed for fractional CFOs now and you're seeing that price point changing. Historically, I would definitely say that 30 to 50 range was very common. And you probably wanted to be late Series B, Series C before you seriously considered something. I definitely say there are tools out there that you could consider earlier. Some of them, you know, are nothing more than building around a spreadsheet. Some are a full web app. But we're definitely seeing more and more tools saying, hey, we need to make the process easier from an earlier stage than it is today. And you know, there's a balance. Some people have that belief of, hey, if I'm still small enough that I can do it in spreadsheets, why would I switch? And others are like, no, I want to get something going as soon as I can. Right? All kinds of different opinions, but there's definitely more options out there today. You know, one of those, like, you know, they're, they're mid market but they, they go down. Probably Series B is like Avocum, which is sponsor here. They're, you know, they're one of them that's out there. But yeah, I want to switch gears here a little bit. One more question I want to ask around kind of FPA and then I'm going to go in a few different directions here is obviously you were a cfo, you've also been a CEO. I'm curious, as you became a CEO, did your expectations or how you look at FP and A change and if so, how.

It's interesting. I would say because I was a CFO and because I knew the difference between kind of a control and bookkeeping and FP&A, I probably invested more in my finance department than the average.

Sure.

I hired a CFO who helped, you know, very early, actually helped me co found the business. And when we, when we launched the business, you know, we made sure he had a controller and a group that could actually close the books, manage the ar, the ap, all the operations of the business. And his job was to help help me drive the business forward. So he was the FPA strategic cfo. And that was a luxury at that time. And what I'm learning is that a lot of companies don't do that. And you know, it's, it's, it's, it's. There's not a rule as to when it's appropriate to do that. But that's what I help people, you know, figure out what's best for them and their investors and their unique situation. But when I was a CEO, I saw that and I needed forward guidance and I knew I couldn't be the person driving that anymore. So I wanted to have a partner who could always be showing me forward forecasts, who could be showing me, you know, you know, downside, expected case ups, upside cases, who could help with preparing for financing and could really be a partner to drive the business. And so I recognize the value in that and like I said, it's the compass or the dashboard to help you drive the business.

Sure. And that makes sense. So it sounds like more than anything as a CEO, you invested there more than most others because you took your lens of coming up through finance and said, I see how important this is.

I think that's a good way to summarize it. Yes.

Okay. And so I'm curious, you've spent a lot of your career? Media, SaaS, you know, kind of platforms, that type of thing. What's drawn you to those industries? What do you find interesting about, you know, SaaS and media and the different things?

Yeah, I started my career in media and marketplaces. So prime. No, that's at the middle part of my career and certainly my entrepreneurial career. I was at a marketplace business at Prime Media. And then when I moved out here to become an entrepreneur, we started Vacation Roost, which was a marketplace for vacation rentals. And we had lots of success and lots of challenges. And one of the things that, you know, to shorten that story, we were trying to compete with some of the largest companies in the world. We were right that the vacation rental space was a tremendous opportunity. And the, you know, the Walmart for that category hadn't been built yet. And so we were super excited. We're gonna dive in and try to do that now. You know, in the, in the benefit of hindsight, the Walmart became Airbnb and HomeAway. And, and we were trying to compete with them. And what we, what I learned was, you know, there was gonna become come an Airbnb and a HomeAway, but marketplaces are winner take most businesses. So instead of like an environment where the top 10 players in that space all would do pretty well, really, only the top couple, couple players survived. And so I was part of an industry that was evolving and I was involved in helping to commercialize the industry. But I learned that marketplaces are winner take most businesses. And after investing six, seven years building a, I don't know, maybe we're the 10th or the 15th marketplace in the space, that the economics were really, really hard. That was our business, Vacation Roost. So we built what I thought was a great business and we did some great innovation, but we weren't a winner. And, you know, in retrospect, you know, why would we expect to be a winner? I think we had $20 million of capital against, you know, numbers in the billions for those winners. Right. So, so that was a real lesson for me. And, but, you know, we didn't just stop. We said, all right, what are we going to do? You know, how are we going to make this business better? And because we were in this space and we knew the technology, the dynamics, the economics and the players of the business of vacation rentals, we could look at the marketplace and do a market map and say, okay, what assets do we have that could be helpful in what's happening? And so we went from being a Marketplace, competing with HomeAway and Airbnb and Expedia to actually saying, what if we actually, instead of competed, we joined them and we became a facilitating piece of technology to help the people on the other side of the marketplace who we had really good relationships with. So that where we shined, where we understood the needs and the technical capabilities of the vacation rental suppliers, that's the property manager. And we, about six, seven years into our journey, we said, why don't we start helping them? Of course we'll put them on our site, but our site's number 12 or whatever. But let's make sure we get them onto the number one, two and three sites because that's where 80% of the traffic is going to. And that became the business we called Leisure Link. And that was a channel management platform and that was a SaaS business. And I was just blown away between the difference. So we were running two businesses at that point. We had the marketplace business and we had the SaaS business. And I'll try to, I'll just estimate because I can't remember the details, but the dynamic with the marketplace business was we had to get up to, I'm going to just say $150 million of annual revenue through the system to make it work because it was such a low margin business. And at the end of the day, only a few businesses got that big. We were, you know, we got, we got to be pretty big. I think we got to 80 million, which we thought was pretty good, but it wasn't big enough. Right. And so in the marketplace, it's winner take all. It's all about scale. It's very low margin and you better be capitalized with an unfair advantage to win. But then we started up the SaaS business and we were making money even at low margins, not low margins, at low volumes. And we had a fixed margin. And that became a very attractive business because we were creating value for that individual customer that had a very good ROI for them and that allowed us to keep that customer. And it was recurring, of course. And so I fall in love with the SaaS model because of the incremental economics. You build a product, you help one customer and you should be able to build a revenue stream that's creating value for them. And you know, at least from a, from a gross margin standpoint, should be creating a nice gross margin stream for the provider. And so Leisure link was a SaaS business and that was probably the best business of the experience. That was the one that created the most value and was the most profitable and most exciting FP And a guy here.

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Interesting. And that, that makes a lot of sense. I like how you unpack that. The difference between SaaS and a marketplace and generally how there's only a few winners in a marketplace. Right. You see it whether it's Zillow and homes, there's a couple of them. Whether it's rentals, like you mentioned mentioned, like it's whether it's the distribution systems for travel Sabre and some of the others. I work for American Express on the business travel side, so I understand that even so many different areas of marketplaces, you know, fiverr and upwork. Right. You almost hear of nobody else if you want contract work.

That's right. I mean, there are probably 20 players. But ultimately it consolidated to be fiverr and upwork and. And what they call that in the VC world, where I am now is the winner take most markets. So, you know, you can invest in those, but you better get the winner.

Yeah. You better believe you picked the right horse, otherwise you're not going to get a return on that investment.

Right.

Yeah. That's a tough one to invest in. When it's a winner take most. Right. Or winner take all.

Yeah. You have to identify a clear competitive advantage. And as the investor, you know, that might be your capital. Like it might be like we, you know, we can't play for fourth place. We have to play for first or second. And that might take dramatic amounts of capital well before the profitability. I mean, look at Amazon. The best example of this is Amazon. I don't know if you read Bezos's letters in the early days when he was being crucified by The Street. He was there with a vision saying that what matters are two things. It matters our price competitiveness and our depth of inventory and volume and variety of shoppers for the customer. We have to win those two things. Profits will come later. And he went public and the street was killing him. Say, this is crazy, you're flushing all this money down the toilet. And all those smart analysts, investor relations people now are looking at one of the most valuable companies that the world's ever seen. But it couldn't have been easy for him to keep driving there and driving those losses by saying, I'm going to invest in our technology, I'm going to invest in these warehouses, I'm going to invest in all these things that will get. Let us be that winner take most, which of course Amazon is. And now everyone's like, oh, this is a great business. I'm sure I would have seen it really early. Well, there was a lot of controversy in that stock and in the analyst coverage of it early days. But if you read his letters, he was talking about this, he's like, this is the competitive advantage we have to have. We have to turn it into an unfair advantage. And who could compete with Amazon right now? It's totally unfair.

Yeah, well said. I mean, I think that is the poster boy example right there. But as you were saying that, I couldn't help but think of Carta and how they've kind of got most of that cap table business. But I don't know if you know Jaron Paul, he's in the tech scene here locally, started a company called Spiff. So he started Cap share. Yeah, and he tells, he bootstrapped it all the way through. And he tells the lesson he learned from that, the less sometimes you need to raise capital to be competitive. He wishes he would have invested more because it was kind of one of those where, yeah, he ended up selling and he did fine, but Carter did much bigger because they had the capital to scale much faster and they're the dominant player now in the market. So when he started Spiff, he said, I'm going to raise capital and grow because he realized the benefit of that when you need to really be established and not just be an also run, so to speak.

Yeah, that's a great example. Right. So Carda became the leader, but there were other players out there. Right, but that is a bit of a marketplace business and it has network effects and once you're in there, it's really hard to break in. And so, yeah, I think that the point we're Circling around is that you have to have an unfair competitive advantage. And quite often it's the amount of funding you have. Right. And so that's, you know, there's probably not a lot of bootstrapped marketplace winners, at least in technology, but you could find plenty of bootstrapped SaaS winners because of the dynamic I described. Right. If you build a good product, you're capital efficient, you deliver strong ROI in the value prop, you should create a gross margin stream that's attractive from every customer. If you keep your customers and grow your customers, you know, doesn't mean that there's not advantages in growing faster in SaaS. There certainly are. And when I spent my time out on the west coast with Bessemer Venture Partners, I saw that they were investing in the absolute best SaaS, companies with unfair competitive advantages. And then they would come over the top and say, we're going to adequately capitalize this business in a way that's going to give us another competitive advantage because we're going to win. And so there's absolutely that similar dynamic in every SaaS specific market. And capital can play a very critical part in being one of those unfair advantages. But it's not the business model. The business model allows for bootstrap companies to make it in SaaS, and we've seen some great examples, as you described, and there also room for multiple players in SaaS businesses. Because if you're providing a product or an application and it's working fine, people aren't going to just say, well, I need to go to the. The other marketplace because there's more choices. Like, you know, most people want to buy SaaS and set it and forget it and get the return.

Yeah. I mean, all you have to look at is the FP and a tool space. My spreadsheet is over 150 tools. Those are all pretty much SaaS now.

Yeah. They're providing value if they're surviving and, you know, doing, you know, some are doing better than others, but it's not like there's a winner take most, right?

Yep. So I want to ask you one more question before we move into what I'll call our rapid fire section, where we have a couple fun questions that we ask Everybody. So in 2008, right, you were the CEO of Vacation Roost. I know travel. That was a brutal time.

Yes.

Because I joined American Express Business Travel at the end of 2008. I graduated. It took me six months to find a job from grad school. And amazingly enough, I got into business travel in December of 2008, which I consider myself very fortunate to get that job. And, you know, I know it turned turned upside down the economics. And in 2020, you wrote an article on Medium titled Leading Through Challenging Times, where you walk through that experience and how you really changed the way you thought about a lot of things and how you led the company and some of the learnings that came out of that. Can you talk about that experience, maybe share some of the key learnings of going through such a turbulent time in an industry that was really turned on its head?

Yeah, that was a very challenging time. That was around the time that Lehman failed. Right. And I remember we were at a board meeting.

Yes.

And all of a sudden, everyone's phone started buzzing. And I don't know if they had anyone at a beeper, but it was like a movie where everyone's beeper went off. Right. This is like, oh, what happened? Right. And our business, which was a, you know, an early stage marketplace business in travel, a luxury good, and we were below minimum efficient scale. So we were racing, saying, okay, we just got to grow this high and we can, you know, we didn't know it was going to be 150 benchmark at that point. We thought 50 million to get to profitability. Economics were better. So there may have been truth to that. Anyway, instead of growing, our business got cut in half overnight. And it was brutal. I mean, we had to do significant layoffs. I mean, we were. We were at an existential moment. We really didn't know if we were even. Even going to survive. But, you know, and this wasn't too long after I had, you know, moved, moved from Atlanta with a young family, jump, taken the entrepreneurial plunge. My CFO had done the same. We attracted capital. We'd brought a bunch of people in for this vision, and it was almost like, ah, it's over. Right?

Sure.

And so that was a pretty dark moment. And I remember, you know, all the things that you would, you would try to grab for, like, oh, we're going to grow this way. We're going to just make this little pivot here or there. Like, the market was just dead. It was really tough. And I remember saying, you know, okay, if we're going to do this, we have to unite around something. And fortunately, right now it's not the success of the business. And so we united around a set of core values that we decided we could really build around and take pride in. And in the article, I talk about the imposter syndrome of being a CEO and saying, okay, are people going to really buy this. I mean, people are worried about their jobs, and you're here. You're going to come talk about values, right? And I was really anxious about it, but I said, well, at least it's something that we can control, something we can own and take pride in. And so I got up there and talked about the values, and I talked about, you know, how we're going to stick tight to the values and take care of our customers and. And continue to build great relationships with. With our suppliers and our customers. And, you know, the values that we had that we took, we. We were proud of them. But, you know, those are kind of. Sometimes I feel like that's nice to have when you're. You're. You're not even sure you're gonna be able to survive, right? So, anyway, I went through three, six, nine months. I don't remember, but I started every meeting, every executive meeting, going through the values and going through our vision, strategy, and values as a pyramid. And, you know, at first it was. It was. It was well received. But then I remember thinking, the imposter syndrome's like, okay, you know, give this thing a rest. People are. People are tired. They want to. I'm going to figure out how to actually grow the business and how we're going to work our way out of this challenge. And so sometime several months afterwards, I was busy, and I started the meeting, and I said, okay, you guys know the drill about the values. Let's just get into the numbers, right? I remember a hand went up in the back of the room because we had expanded our meetings to a broader leadership team, and a guy in our customer success group said, hey, aren't we going to talk about the values today? And I said. I was, like, shocked. I was like, I thought people were rolling their eyes and really don't want to hear business school guy talk about values. I said, well, do you have something to share? He goes, well, yeah, I wanted to share because sometimes you ask us to talk about the values and where it comes up in our business. And I had this experience where one of our customers couldn't get WI fi at the house, and it was a real problem. And, you know, because of the values, I just authorized our guys to go over there with a hotspot and put it in for them and kind of save the day. And I was really proud of them, and I was really proud that I could make that decision because it was aligned with our, you know, customer, customer service value. And I was sitting here listening to him, and I almost cried. I was like, wow, there's something here. And it's not just corporate speak, you know. And he was telling me about his pride in one of his team members taking that action. I realized the power of what we were doing. And so, you know, that allowed us to have more confidence that what we were doing mattered. And actually it mattered for people doing their jobs. They took pride in their jobs and they did a better job for our customers. And guess what? Our people stayed with us and our customers stayed with us and they saw the reflection of the values. And I remember later on we did a partnership with a company from Mexico and they came up to visit us and the CEO of this company came into my office after being with us for a couple days. He goes, man, what are you guys doing up here? And he said like something. He said, you guys wear the shirt. Everyone here really, really has pride in the company and the values. And I shared that story with him and it was really, we built the company back up from, you know, a real low point through culture. And what is culture is a culture is a group of people committing to a certain set of values and practices and behavior that support each other. And it was around that those values. So our business lived to see another day and we eventually launched Leisure Link as we discussed earlier, and had lots of success and growth from that point. But it came from just almost being stripped of nothing and just saying, okay, let's. Let's almost start from scratch with our values and just build from there. Because that's a bedrock rock that we can always rely on. And it was building from a foundation of rock, not sand.

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Thank you for sharing that story. I. I appreciate particularly you sharing the personal moment right where you're almost crying like, oh wow, this is working. Where at first you're kind of like, is anyone buying this? I'm just sharing this organizational behavior, MBA values matter crap as a lot of people call it.

Right.

And realizing it's a lot more than that when it's done in the right way.

100%. That was the real lesson.

That's great. Thank you for sharing that. So here's the ground rules for rapid fire. You get no more than 10 to 15 seconds kind of for each of these questions. And then at the end, if you want to elaborate on one, you can. And I'm going to start here with this first one. What is the number one technical skill that you believe FP&A professionals should master?

Spreadsheet Ninja.

I like it. What is the number one soft or human skill that they should master?

Telling stories through charts.

Telling stories. Like, yeah, visually telling stories.

Visuals and charts. Not. Not spread. Not this nine point spreadsheet we talked about earlier.

Yes. Not a ton of numbers, but actually visually being able to tell it. Agree. Are you currently using generative AI?

I am. I'd love to use it more. But in my coaching and board roles where I'm working with companies, I've got an AI note taker and then I consult with the note taker afterwards and review the notes and she does a great job of compiling them and organizing them. And I aspire to maybe consolidate those notes into maybe a model that could help me do my job trying to advise the companies and help guide them as best as I can.

Great. Thank you for sharing that next one you mentioned. Spreadsheet Ninja. What's your least favorite thing about spreadsheets?

I like clean, organized spreadsheets. I don't mind how large they are. When a spreadsheet starts looking like the scratch paper, that kind of shows the evolution of a problem solving and it hasn't been cleaned up and hasn't been put back in a hidden sheet, then you know, I can't help. But I actually, I make judgments about the author and say, guys, this isn't what we need. You know, you can have thousands of pages of scrap paper, but don't, don't show it to me.

Yeah. As I heard one person put it, even if you're right throughout the entire model, as soon as you start doing this all over the place and moving around and go to this sheet, you lose somebody. Nobody wants to see the engine to know a car works. They just want to press the button and get where they're going. Spreadsheets should be a lot like that. They want to understand the key assumptions, the outputs. They don't need to know about the sausage making. They want to have confidence that you did the sausage making.

Right, Exactly. That's well put.

So, yeah, I picked that up from somebody who shared. Shared that example, and it's always stuck with me. So this next section is our get to know you section. So we have a couple questions here for you. They're a little more on the personal front. Okay, tell me about a favorite hobby or passion.

Well, I'm a football coach. I'm part of the coaching staff of the Park City Miners here at the high school in Park City. And that's been an incredible opportunity to spend time with my two boys who are junior and senior, but also, more importantly, the broader community. We have over 100 kids in the program. I get to know all of them as players and the privilege to be their coach and to help them develop as young men and represent the community. So that's been a really fun thing and it takes up a lot of my time from July through November.

I'm sure it does. I know football is a fun event. Great way for boys to learn, and that's wonderful. You can do it with your kids. I'm sure that's something they'll always remember. So what is one book you would recommend to our audience that they read?

You know what, the book that's not going to be anything to do with FP and A, but I really enjoyed it. I picked up the airport the other day. It's Dave Grohl's biography. It's called the Storyteller.

Okay.

And it talks about, you know, someone that I certainly admire and who basically just took his own path and followed what he loved and didn't do any of the traditional. I'm going to learn how to play an instrument, you know, the right way and take a. Take a lesson or go to school. He just basically followed his heart. And of course, he's, you know, an incredibly successful musician today and someone I'm a big fan of. And I enjoyed learning, learning about his story through the book the Storyteller.

Great. So we'll stick that one in the show Notes. What's your favorite travel destination? Where are you going if you can go anywhere?

I'm going to give you two. My favorite places are Maui in Hawaii. And I so devastated with the wildfires last year. I'm looking forward to going back and hopefully they'll help some of the people there. And my last name is Castelli. I'm an Italian and I'm taking my family to Italy this summer and that is absolutely one of my favorite destinations. I studied abroad there in Florence when I was in college, and I'm super excited about sharing some of that culture and the great food and sites and everything else with my family this summer.

That sounds like that will be a lot of fun. So last get to know you question and then we'll wrap up here. If you could have dinner with one person in the world alive, who are you going to dinner with?

You know, I'd probably choose Warren Buffett. I think he is the sage of Omaha. You know, obviously he's an incredibly successful investor, but he's also, you know, I think a pretty, pretty shrewd person who's got wisdom about a number of things. And I would love to learn from him and have a chance to meet him.

Yeah, I've had him mentioned before. He'd be a great one to learn from. I'd love to be a fly on the wall at that dinner. So any parting thoughts for our audience, particularly around being a better business partner today? You know, FPA professionals, how can they be better business partners?

Yeah, I think that the big, the big opportunity for people in FPA and it's easier when you get more senior and people always ask like, how do you just able to see that by. I've been working on this for 12 hours and I give it to you in three minutes. You find the one error on the spreadsheet and it is kind of magic. It has nothing to do with my capabilities, but it has to do with this being big picture. Right. So to even, no matter what your role, whether you're a first year analyst or you're a director, taking time to look at the whatever problem or report you're creating from the business's perspective. And the nice thing is when you're a CFO or a CEO, that's the only place you live in. So you can see those things jump out of the page. Not because you're looking at the formula, but you just know that you have an 80% gross margin business. So if you see a 65% gross margin, it pops off. Yeah, right. Whereas if you're going bottoms up and you focus on the 12 hours of work and whether you tied the formulas and blah, blah, blah, and then you just, you know, all your checks look good, but you're never thinking about the business and what the implication of your work is. You miss those things. And so my, my advice would be, you know, take some time, either before you do the project or after, but before you present it and say, okay, who's the audience and why? What are they going to use this piece of work to solve? And then look at it from that perspective. It'll both prepare you for the next role, but it'll also help you find those things that'll jump off the page, which seems mysterious, but it's just basically a different, different lens you're looking through.

Great advice. Looking at that big picture and looking at it from the lens of why you're presenting it, who you're presenting to. Sometimes I call it that business sense of being able to do that sanity check and look at things and say something's not right here. Even if, well, the math's right and it rolled up correctly, sometimes that doesn't matter. It's still wrong.

Exactly right.

Well, you know, in conclusion here, I just want to thank you for carving out some time. We'll put your, you know, LinkedIn profile out there if somebody wants to contact you in the show notes and really appreciate you, you know, taking almost an hour of your time here to talk about FPA and your experiences. I've really enjoyed it.

I enjoyed it too, Paul. I like what you're doing with FP and a shining light on it. I think it's one of the secret weapons for companies to grow and grow successfully and share the information that needed to make great decisions. So I'm happy to be part of it.

Well, thank you very much and you enjoy the rest of your day and I'm sure the audience will enjoy hearing the advice you had to offer.

All right, have a great day. Thank you so much.

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