The Critical Role of FP&A in Today's Market with Ryan Sanders

Curiosity, comparison and completeness. That is fpa. It's not easy to be an entrepreneur as a growth investor. Our jobs are to be more stage specific. Industry expertise belongs with the earliest stage investors. If you get all the way to the place where you developed a million dollars in revenue, you are in the one of 1%. One of the most interesting exercises is to think about the business through those who understand strategy and operations can bring more valuable insights and support. If we were to go back and we were to look at all of our investments and the ones we didn't make, they've all come with a financial projection or analysis on day one. None of them are accurate.

How can finance ensure that they're telling the story? Data visualization, maybe three things right there.

It's rare that it is one data point or two data points. They have to be realistic, they have to be data driven, they have to be historically contextual and they have to be there's one tool that everyone should use. I think it should be Claude Perplexity Meta chatgpt they all will work because they all will cause you to be.

FP and a guy here. Have you ever wanted to level up your FPA skills? Then check out the FPA Guys Ultimate Course Bundle at the fpnaguy.com that's the fpanda guy.com and use code podcast to save 25%. Get started learning today. Hello everyone. Welcome to another episode of FPA Tomorrow. This is the show where we dive into the world of fpa, examining its current state and future prospects. I'm your host, Paul Barnhurst, AKA the FPA Guy. I'll be guiding you through the evolving landscape of fpa. Each week we bring industry experts, thought leaders and practitioners who share their experiences with us. This week is no exception. This week we have with us Ryan Sanders. Ryan, welcome to the show.

Thank you, Paul. Thank you for having me today.

Yeah, really excited to have you. I know it's taken us a little while to coordinate schedules. Flights haven't been nice to you over the last couple months.

I'm not sure that flights have been nice to many people over the last week or so. I feel for those who are probably still either stranded in an airport, stranded on the road, or without baggage.

Yeah, I do too, and I'm hoping it's all squared away because I have my vacation next week and I don't want to deal with flight problems. So I'm crossing my fingers.

We should. We will submit a ticket or request to CrowdStrike to make sure that your vacation Goes off smoothly.

If you could. If you could do that, I'm sure they'll put that to the top of the list. All right, so a little bit about Ryan. He comes to us from Salt Lake City, Utah. He works in the private equity space, and I'll let him talk a little bit more about that venture capital in that area. And he has a BS in finance from byu. And if I remember right, your MBA in entrepreneurship from Utah. Right.

University of Texas.

I have UT here. I don't know why. I don't know why I thought Utah, Texas. Thank you. I had UT down, and for some reason I said Utah. Are you a big Long Horns fan? I saw that.

All in the blood is burnt orange at this point. It would have been interesting to have had the two leagues or super conferences align in a way that would have had more playing opportunities. But Bill Longhorns.

You know, I just think back to the BYU UT game where Kasem Hill just destroyed the Longhorns. That's my good memory.

We call that Trucked. That's what he did, you know, to that team. I saw an interesting video series with Derek Carr, the current quarterback, and he said that Taysom Hill deserved to be in the hall of Fame. And if you think about, you know, who he is and what he's meant and the utility of a player, that man's an all Star. And I go back to that very same moment. You do. We will never forget Trucking. That. That BYU player, the Texas player. Excuse me.

Yes. And I'm sure we have some people on the plus going like, what are they talking about? You know, we have a very diverse audience. But I'll say one other thing. Kind of where you talked about is he's the second player in NFL history that has 25 touchdowns passing, 10 receiving and 10 rushing in one area. Does he have amazing numbers? No. But he's the quintessential U utility player. Something every company needs, not just every team. Right. We all want that person that so and so just left the company. You can plug him in. That's what he is on the football field.

If you throw in block punts, if you throw in kickoff returns. I think what you've described is an entrepreneur, somebody who knows that they simply have to do what is most needed and where they can provide most value. But that have to be all in. I mean, that's probably the way that you would describe Tayson. Taysom is somebody who doesn't hold back. It's. It's wildly impressive. He is a hero to my Kids.

Yeah. And I love how you, you brought that into entrepreneur because I know you're always looking for companies. We're going to talk about finance and FPA, but obviously you're bringing in finance and FP&A to support these entrepreneurs as they're trying to scale. Why don't. I want to start with the question and then we'll have you give us your background. What do you need when you're looking for investments and as you're helping companies grow, what do you need from finance and fpa? As a growth investor, what makes your life easier?

I'm going to use a word. My guess is a number of times during our session today, and that would be the word partnership. I think for the CEO and for the board and for the investors, the FP&A is most often as a partner demonstrated through accuracy and speed. But perhaps as important are curiosity, comparison and completeness. That is FP&A.

I love that. Three acronyms. I haven't heard it that way before, but Curiosity, completeness and give me the third one again.

Comparison. Their. Their job is to assess whether internal investments or whether benchmarks relative to other opportunities or competitors or other use cases. Their job is to provide a complete picture so that decision making can be had.

Like that. Comparison, completeness, curiosity. I'm going to remember that one. I'm going to steal that one. Just so you know. I'll give you credit, but I'm going to steal.

It's yours.

All right. Why don't you run us through your background and what you're doing today, how you ended up where you're at.

I'm lucky, I would say I'm the product of people and their investment in me. I've been surrounded my whole life by entrepreneurs. I grew up the son of an entrepreneur and I had an up close seat to the lessons of businesses that worked and didn't work as well. I returned home from a church service mission during the boom of Internet 1.0 and I started a company with two best friends. I'm probably the first place that a little bit of this came out. We ended up selling the business. I completed business school in Texas and began my own career as an investor to help other entrepreneurs pursue their own entrepreneurship. I've long said if I didn't have a billion dollar idea, I would love to enable those who do. So today I am a growth investor at an institutional growth equity firm based here in Salt Lake City.

Yep. And that that firm, it's Mercado, right? Mercado Partners.

Yeah. Mercado is an institutional growth equity firm based here in Salt Lake City. The incredible scenery right here behind me. We have a belief that the most interesting companies and entrepreneurs are found in places less served, less appreciated and certainly less capitalized. So as our mission it is to find, fund and support the most compelling growth companies. We look for companies that are clear customer favorites at the growth stage and we invest both capital and stage specific experience and expertise to help them be their very best. I would go back and say we are incredibly lucky to have secured the partnership of institutional limited partners worldwide and to have been picked as a partner to ambitious and driven founders and executives.

Love it. And what is. Is there a certain industry that you look for? Is it more just a great entrepreneur, great idea that we really think can scale or what's, what's your area of specialty? How do you kind of think about things?

It it might be easier to think about the industries that we don't invest in. We have a belief that industry expertise belongs with the earliest stage investors, whether they be angels, sophisticated family and friends, early stage venture groups, and with the founders. We believe that as a growth investor our jobs are to be more stage specific. So we're willing to look across a very broad range of industries who in some way develop all the same competencies, characteristics and winning attributes of a growth company. We have spent more of our time in enterprise technology and we have a couple of standout consumer companies. Our very first company was Skoalcandy. We have, we have most recently stance in our portfolio today. But 3/4 plus of our investments are inside enterprise technology. Healthcare, AI, ed tech, infrastructure, fintech are areas that we find passion and where we can what we hope is share a set of insights, experiences, playbooks, frameworks to help them be their very best.

So it sounds like it's really about the stage and then specific looking for a company that really has that product fit and just needs that capital and experience to bounce off to help them in growing. Is that the way to think of it?

I think that's a good way to frame it when we have a chance to invest. These are companies that are already winning, customers have nominated and they are receiving value. These are companies that are growing, often at scale, still in excess of 100%. What we want to help a founder and a team do is to stay on that path. It often takes capital to invest in that stage of growth, whether that be humans or products or strategies. But we have a belief that the most enduring strategies and returns are developed through organic growth. It's customer Driven, not burn laden, not sort of experimentive, but it's predictable because it's where the customers are.

Yeah, so it's basically if you got product market fit and good operations, you're going to be able to scale. You're not looking for those that want to do a bunch of acquisitions or try something nobody's ever done before. I mean, there may be times that makes sense, but you want that core sounds like almost an operational focus into the investing.

So the term product market fit, we've talked about that for a long time and I think that's well understood what that is. I think we've started to think more about what we might describe as customer market fit or customer product fit because there's, there's an aspect of understanding your customer base and an understanding or a belief of where you can predict that they will buy. And if you do that, you're, you're going to win for a long time. We have a belief that organic wins over inorganic. There are companies at certain times, in certain scale that have to pursue inorganic because the market size is either taken up, commoditized, hard to access. But if you look at value creation over time period, private or public markets, it's very clear from a statistical standpoint that organic growth delivers more value to shareholders. So how do you keep them on a winning path? It's capital, it's insights, it's support, it's surrounding them with the very best to allow them to be their very best selves.

I really like that. Thank you. And I like that you said, look, it's a statistical fact that the returns are lower for inorganic growth. Generally the acquirer wins and the new company does not. Right. The data is just, it can't dispute it, but yet we continue to do it again and again, which haven't we heard. Insanity is doing the same thing and expecting different results. But that's a separate. That's probably a whole new podcast.

If we, if we hear the word strategy, synergy, it's probably a clue to run the other way.

Oh, I hear you. What do you say? Strategiary and synergy. I still remember in. I'm sitting in a undergrad course on business strategy and the teacher one day brought in the sheet of paper and he called it BS bingo. And had all the. Had strategy on it. Synergy, re engineering, you know, all those terms that you just hear that are just the common place. Win, win, you know, whatever it might be. And throughout the whole class, every so often we'd hear somebody yelling al bingo. So There you go. Run the other way if they're playing business. Bingo.

Did you win?

I don't, I don't remember if I said bingo or not. I don't think I did. I listened to the others win.

All right, well, you, you, you, you've won outside of bingo, very well done.

But it, I still look back and laugh at that one. So I'm curious, before we get into the finance side of things, do you have a favorite investment you've made? Maybe an experience in your career that's really stood out to, to you that you can tell us about?

Paul, they're all favorites. You can't separate.

You're like your children, right?

Separate your investments. I, in all sincerity, I'm proud of all of them. It's not easy to be an entrepreneur. More should do it. The reason they don't is because it's hard. I'm in awe every time if I have a chance to share what the funnel looks like for an entrepreneur, from ideation to business creation to funding. And if you get all the way to the place where you developed a million dollars in revenue, you are in the 1 of 1%. So kudos to all entrepreneurs for starting. I would say with that in mind, maybe what I'll share is a more recent one instead so that I don't have to play favorites. We made an investment in a deep learning infrastructure who provides world class compute to the world's most highly acclaimed and recognized AI engineers at top research universities and and Fortune 500 companies. Not 60 days later, ChatGPT was released to the general public and we entered the AI gold rush. An arms race for AI, certainly an acceptance and an adoption of advanced technology. It's been amazing. I've been in awe and a wonder working with this team. We've worked closely with the management team, particularly the CEO and the CFO during this time period. Their cloud compute revenues are more than 100 times larger than the time period of our investment. They are one of the true catalysts of AI. The CEO likes to say that he envisions a world from a GDP standpoint where every human has access to one gpu. That is the AI world that he envisions that we are supporting.

Love it. That's not a bad growth there. That number you mentioned. It sounds like that's been. Yeah, exactly. That's been a fabulous investment so far. So thank you for sharing that. I appreciate that. When you're going through that due diligence process and considering investing in a company, what are you looking from for their Finance teams or fpa often I know is your growth. They probably don't have much in that way. They're early in their finance and fpa. Some may be more mature depending on what growth stage BC whatever it may be. What are you typically looking from looking for from them?

Oftentimes it also is in the background and the experience of the CEO and the founder and where they feel like they have weaknesses or gaps in what they've endeavored to strengthen over time period. So I would say during due diligence we need the FNA team to provide clear, accurate and detailed financial data. So this includes historical financials forecasts. KPIs become really important and insights into the assumptions behind the projections. I would say one step further. We also appreciate thorough analysis of market trends. They know it, they see it better than we do. They're in the fight, competitive positioning and potential risks. If I go back and I think about some of the very best diligence sessions, if they can throw in a dad type joke and some witty banter during, you know, marathon type due diligence sessions, that's always the plus.

So I should grab my dad jokes book back there and oh good.

So good.

That leads me to a question you mentioned. You know, completeness, accuracy, how big of a turnoff or is a red flag is it if the financials aren't in a good shape? If you're looking at the company, you feel like you're not getting good assumptions and those things aren't put together?

Well, I would say the use of Comic Sans or Wingdings is probably the red flag. I haven't seen that in a little while.

You've seen Wing Ding. Wow.

I would say what we want is to understand where investment capital can have leverage and an opportunity for growth. So common issues, if I think about what happens are either overly optimistic projections. An investor at any stage has never seen anything but a hockey stick when sort of reviewing a projection. But underneath that it's the lack of detailed assumptions, insufficient historical data, inadequate contingency planning. I would say sometimes the disconnect is between the financials, their projections, even the company's strategic plan. Sometimes there are inconsistencies in financial reporting that display a lack of understanding of either cash flow dynamics, which can definitely be a red flag.

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Actually it's interesting. It's not always a burn rate. We think of the most interesting opportunities are with entrepreneurs who have discovered over time that they whether they realize it or not, they build a stack of unfunded growth initiatives. They realize that they the investments that are making are to continue the opportunity with their current customer set. But they know because they are creative and they are curious. A word that I used early on. And if they had additional capital they would invest in another geography and another team in another product, another channel and another partner. So I would say it's not necessarily that it's burn laden. It's when they can think about ROI or return on new investment against this set of unfunded growth initiatives.

I love that that makes a great point of kind of separating. It isn't always that hey, we just need funding because we got a burn rate. Often it's we need it because we see there's an opportunity in the market and with this funding we can fund these examples and I'll give an example. Anyone who's from Utah will recognize this company. Some may not spit. You probably know Jaron Paul Jiren deserves.

A place on our Mount Rushmore of entrepreneurs. Unheralded entrepreneur and one of my favorites, one of the heroes that I look up to.

Yeah, I, I, I love Jiren Paul, but he tells the story and this gets into we're financing, you know, CEOs recognizing this with his prior company. You know he sold a tool that's very around cap tables. And we all know, you know, his tool didn't end up winning in the market. He didn't take any capital. And he looks back and says, I think if I done that differently, I could have scaled much quicker. And it may be me everybody's talking about instead of the common cap table tool that we all know that's out there. And so when he went to Smith, he said, I'm going to go that VC route and really try to scale and grow this. And he had a very successful exit with Salesforce. And I think there's a the lesson to be learned there. There's a real lesson. You don't always need to raise funds. Of course not. And you shouldn't forget some businesses and your finance should be able to tell you that and say, look, this is probably not a good idea. But also having access to it and knowing when to use it and having those unfunded ideas can allow you to do things. You just can't do without that. Because growing without funding is very, very hard to grow fast because businesses are capital intensive when they're growing quickly.

Paul, this is an excellent point. If I can make one other point here. We talked early on about the opportunity for entrepreneurs and my sense. And prior to working at Mercado, I was with a sub debt or a mezzanine fund based in Austin, Texas, and we invested through credit structures. And so we sat in between senior debt and the equity of a company. And oftentimes entrepreneurs will come to me. And the question I almost hear is, should I pick equity or should I pick debt? They're looking for advice and sometimes it feels as simplistic as well, debt is cheaper and so I should pick it right? And my sense is more equity is not more better and more debt is not more better. I think that one of the most interesting exercises is to think about the business through a series or a set of stoplights. And every business should ask itself a set of questions. And if the questions are answered, they would have a red light, a yellow light, or a green light. And I think the accumulation of those answers would derive an answer of the type of the cost of the size of the financing. So it is more detailed than assessing just their current financial health or their current growth trajectory or their capital needs. And it's about cash flow, it is about Runway, it is about burn rate, but it is about the quality of revenue, it is about the number of customers, it is about the margin, it is about the collectability, it is about, you know, sort of the the market size. And if you sat and you asked yourself a very honest introspective question in each of them, you just would sit and say red light, yellow light, green light. And if I got to all greens, I might want more optionality which I think is best served for equity. And if I got to a spot where, you know, maybe there were some yellow, maybe there's some greens, maybe there were some reds across a different set of questions, what I might want is a piece where it the answer, in fact they all could be green. The answer might be that I don't need more optionality. I would choose something that's either lower cost, I would choose a covenant because I have a predictable set of cash flows, because I have a predictable set of, you know, inputs and outputs. And I think a key role of FPA would help us CEO and a team to evaluate sort of if I should raise another round and what type of round. Because we most often go to the terms and the conditions of new investments and how they align with long term objectives. But the question almost is really should you need another round or if you're just in a period of burn and you just don't know. So I think it's more complex and I think the questions at a more detailed level produce an answer or a path that will best fit a company.

So it sounds like you're thinking finance should really be able to help them think about those optionality and path beyond just hey, this is going to be cheapest. These are the term imagine a lot of times it's easy to get caught up in that and you're probably first time you're doing it. That's what you're focusing on. How can I get the best term?

That's right.

Giving up the least equity or lowest interest rate or whatever it may be, where it may be. Okay, what's the optionality? What does this really mean long term? And also I would imagine another thing, this isn't so much finance, but the business in general and finance can always share something from side is what are we getting beyond the money, right? Are we just getting a paycheck? Is that what we want? Or do we really want advice? Is there something that company can offer us that goes beyond the equity? And I imagine you often have that conversation as you're investing in companies, right?

You're absolutely right. I guess I would say FPA professionals, if we take it back to something that you've got passion for and your listeners, those who understand strategy and operations, can bring more valuable insights and support they are best served to bridge the gap between financial data and business decisions. They ensure financial planning aligns with strategic goals. I think in the end this understands or allows them to identify the key drivers of performance. They anticipate the challenge. They can suggest actionable solutions. It enables them to collaborate across departments. I think they sometimes are some of the very best at fostering an integrated approach to achieving the company's objectives. So I go all the way back to the very start of our conversation who said, I think your question was, what does a great FP and a professional look like? It's a partner.

Yep. I mentioned, you mentioned the partner and we had the three C's, those two things you mentioned. And I really, I really like that. I love, I love teaching. One of my favorite things is talking about business partnership because if all you're doing is spending your time in a spreadsheet, you're doing a disservice to you in the business. At the end of the day, it really, like you said, operations strategy, that's becoming so important. I imagine you've seen this over your career. We're seeing a lot more CEOs that are also CFOs or CFOs that are CEOs. We're seeing more strategy done through FPA. FP&A has gone from what I would have said when I started my career, very much a back office function to really being almost an internal consultant from a finance lens. What, what's your thoughts on that? How would you kind of think about that?

I would say, you know, back to the investment that we've made. We're in the age of AI and I think AI eats the lunch of vertical functions. And if the only job of finance or they believe their only value is debits and credits and is, you know, budgets, I believe that that will be obviated over time. I will do that. It will be complete, it will be accurate, it will be quick. So, you know, what, what are the. I think a question you asked in advance, you know, about, you know, skills, you know, whether technical or soft sk. You know, my technical still, still would be advanced financial modeling and understanding. I think that still includes proficiency in Excel or other financial software, but it's more of the deep understanding of the financial statements and metrics and impacts. It allows them to create the accurate forecasts, it allows them to conduct the sensitivity analysis. It allows them to support decision making. But the number one skill, in my opinion for somebody in FPA still has to be effective communication. We're all in sales so this is the ability to clearly convey complex financial information to non financial stakeholders or presenting insights in a compelling manner to financial stakeholders. But certainly this collaboration across all departments, this is what allows them to build strong relationships, influence decisions and ultimately they drive alignment across the entire organization.

Totally agree there. There's a real opportunity to help align is as I say, you know, any company that doesn't align their strategic, their financial and their operational together is going to be. Is just selling themselves short. You're missing something. I hear this term XP and A all the time. Extended planning and analysis. Why do we need a special term for it? It's, it's called connecting. Integrating. Aligning your planning. That, that's just good planning. Like if I create a budget at home, that budget should probably tie to my long term goals. I want to retire at the age of 50 and how I get there. Right. We don't just create a financial plan and ignore the strategy or ignore the operations of it in our personal lives. It's the same thing in a company. I've just never understood this kind of craze with that term of XP and A. But Gartner did coin it and they got it. They got to have their marketing engine.

So I get it, they've monetized it. If, if the, if we were to go back and we were to look at all of our investments and the whats we didn't make, they've all come with a financial projection or an analysis on day one. None of them are accurate. I, I can probably go on record and say that I, I showed somebody the other day and this company we probably looked at eight or nine years ago in this interim eight or nine year period the company is. And the projections they had made were half of where we sit today. So in a period twice as long, they are 20% of the revenue and 3% of the profitability. And I looked at that and I was like that's just okay. Because again it comes back to relative to your opportunity, relative to the investment you took, relative to, you know, what you've endeavored to do. They were a company that didn't choose to take financing. But they're all wrong, they're all off. And if I go back and say the error is if we don't learn from it. Because post investment we expect them to provide ongoing accurate financial report analysis of learning mechanism. It's a learning function. That's who we all are as beings. So this includes regular updates on financial performance. This is a variance, this is insights into the key drivers of the business. We value strategic support, we value scenario analysis, we value operational opportunities and improvements. Bonus points. If they keep the jargon to a minimum and they keep the charts colorful.

Yes, I want to dive into that point for a second and then we'll go a little different. How can finance ensure that they're telling the story? Data visualization, that, you know, they visualize the data, they don't just throw a wall of numbers at you. What have you seen that works there that really helps you where you're like oh wow, this all makes sense versus another presentation with a ton of numbers and a lot of jargon.

So maybe three things right there. You know, one, it's always a story. It's rare that it is one data point or two data points, but it is a simulation of data points that's conducting the picture or concocting the story. So you know, number one, they have to be realistic, they have to be data driven, they have to be historically contextual and they have to be aligned with a company strategic objective. So that's sort of box one that has to be done. Number two, the most insightful are where the assumptions are either easy to understand or if detailed are laid out. You're trying to follow the plot of the story. They have clearly defined what the KPIs are though or where the wins can be had or where they can be seen and clearly show where sensitivity is. What is the magnitude of the upside or the downside, you know, here so it's historical context so that you know, if you have to change the story board to board, report to report, it's hard to be able to follow and get to the plotter or help them understand what the, what the end of it is. So keeping accuracy, keeping context, having the assumptions, transparency, you know, certainly is there in the model. And I would say having words be able to track in a way that we can, we can follow. Don't leave it up to, don't leave it up to someone's own assumptions of how you think they'll interpret it. Interpret it for them if it looks difficult.

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I remember as a kid, I can't remember what movie or what show was on, but somebody said, do you know what assume means? And they broke it in obviously into three words and they said, listen, if you assume you're going to do it to both you and me. It's not a place where we hope that a good movie plot unfolds with a surprise twist, even one that's well explained.

Yeah, I'm fully with you on, on the assumed part. Well, I want to switch gears and then we're going to move into the last couple sections where we get to know a little bit about you and ask some kind of quick questions. So you're currently participating, I believe you're still current in that, in the Kaufman Fellows Program, right? I am.

I just graduated about a year ago. It's. It's a fellowship that is two years long. So I started in 21 and finished my fellowship from an active participation in 23. But I continue maybe more from an out of the fellowship. Passive participation. It is a piece that I love. It has blessed my life. It has changed my perspective and outlook and I'm grateful for it.

Great. So tell our audience what it is. Like, what did you do and how did it benefit you so much.

Ewing Marion Kaufman when he was an entrepreneur and sold a business, he had three ambitions that he would dedicate his wealth or his liquidity to. One was certainly his family, two were causes that he believed were core to children. And the third was entrepreneurship. So some of the very best studies today come from Kansas City, from the Kaufman center for Entrepreneurship in the mid to late 90s. They felt like it was a piece that could be taught. We've long said that to become an investor, it's not a class, it's not a book, it's not a set of theorems, it's a set of practices. Oftentimes it's hard lessons, it's patterns and repetitions that you hope to be able to assimilate in your career. And they wanted to take that and be able to give that to investors. It's what they think about as teaching investor behavioral fitness. So how can you show up and be your best self? So it's a two year fellowship. They select about 50 globally that's made up of limited partners, general partners, corporate venture capital. They are emerging managers, first time fund managers. They're highly experienced fund managers. They're world class. It's a highly competitive dynamic to be able to get into it. Once you're into it, that's your crew. It's the most authentic place where you get to go to be able to ask questions and to see and to receive feedback. And so that's the piece I would probably say I've been most grateful for. For me, I wanted three pieces out of, out of the Kaufman fellowship. Number one, I believe experiences like this are a demonstration of proactive and active learning. And I think there's no greater signal to the universe that you're a learner than to go pay for education. And that's what I did. And it was expensive and it's been an amazing return for me. So number one for me was I continue to want to be an active learner. Number two, um, over time period, I love the opportunity to shape and define and change my network. Um, the longer that I live here in Utah, it starts to be more common to me and less differentiated. And so Now I have 50 individuals that are worldwide that don't look, act, speak, invest like me. And it gives me perspective that I love. And my third is I wanted to learn how to become a better support for a CEO. Um, that was my endeavor so that I could show up as my best self and be the best support to somebody who was courageous and ambitious and gritty enough to Go choose something difficult. So long. Commercial for Coffin Fellows. I've, I've had a chance in just this last little bit to write a couple of letters of recommendation and, and in fact two here locally that I'm really proud of are two investors from Kickstart and Pelion Venture Partners here locally.

Great. Yeah, I'm familiar with both those, you know, obviously being here local and I'm sure some of our guests will recognize.

Those Suze and Cat are exceptional investors and they all be excited to watch them go through the program themselves.

Awesome. Well, I, I appreciate you sharing that sounds like it was an amazing experience. And I like they talked about being willing to invest in yourself, in education because it's hugely important and it makes a difference with however you do it. And sometimes that investment is time, sometimes it's money, often it's both. But you need to make an investment, whatever that may be. So we're going to move on to the FP and a what I call section where I ask a couple quick questions where you're just one or the other giving an answer here. So the first one I'm going to ask you and you can't tell me. It depends. You got to kind of pick a side. You can elaborate at the end if you want. But do you prefer Excel or Google Sheets?

Can I say neither or both?

If you say neither, what are you going to put in its place?

That's a good question. I think it's the rare case that I don't think today in our industry that there is somebody who, except if they're in complex leverage finance or a buyout role, that they maximize the utility of either role. So for me, the reason to choose either are because it is the collaboration, community, communicative and consistent tool that everyone can use. There's nothing that breaks when I said neither or both. There's nothing that breaks when you have people using both. And so I would say it has more to do with the productivity suite that they've probably employed. Generally, Excel is the preferred tool for complex financial modeling. It's got more advanced features and functionalities. Google's better for collaboration and real time updates that can be beneficial in certain scenarios. I would say ultimately the choice depends on the specific need and the specific workflow preferences. I just wish they would agree on shortcuts.

Oh, that's why I don't use a Mac. Anyway, we'll leave that for another day. I can think of some other reasons. I love love Mac, but it doesn't play nice with Excel. All right, you hinted at this before, but we'll go ahead and ask. I think you mentioned it number one technical skill for FPA professionals to master.

Financial modeling and understanding.

I love that you added understanding. It's not enough to just model, you need to understand. I think that's a great distinction. What is the number one soft skill?

I think I said it earlier, it is effective communication. I think it's about influence.

Yeah, someone else used the word persuasion, right? That whole effectively communicate, selling, whatever you want to call it. Love that. And then are you currently using generative AI today in your role? How are you guys using it? I nod immediately like you bet I'm using it.

If you're not, the subtle question that you should ask is is it gone so far that it's on your home screen? If it's not on your home screen, I don't believe that you're using it every day and I believe that you're following. You're falling behind. I don't think there's one tool that everyone should use. I think it should be an exploration. Claude, Perplexity, Meta, ChatGPT. They all will work because they all will cause you to be in the world of AI today.

I love what you said there about using the different tools. I'll often ask the same question of both GPT and Claude. Sometimes I may even ask it of Google or Copilot and usually I use two, but sometimes I'll use three or four. There may be some certain questions I'll use just one, but they all have their strengths and weaknesses and AI is something that if you're not figuring out how to use it and learn it, you're being left behind.

I had breakfast with one of my favorite CEOs who is a fintech expert. He is steeped and he is somebody that people should go to if they want to learn about fintech. He described something that he did with his son and inspired me to go do the same with my son. I have a 15 year old. We downloaded all of the transactions that he has in his bank account and then on his debit card and we gave to Both Claude and ChatGPT and we asked it a number of simple prompts and it was designed really just to help my son be able to see the power that his world is going to experience with AI. And we asked a simple prompt, psych. Can you analyze and tell me if I have anything looks like an overspend or can you tell me if I have something that looks like a subscription that should be turned off? Can you Tell me, are there places where I could become more effective in my spend, Just, you know, simple human to human answers. And it was interesting in that Chat GPT was nowhere near as good as Claude on the order of like 3 to 1 in terms of the accuracy and the insights that Claude gave. That's opposite and some other examples that I've, you know, seen. So that's why I come back to say, just explore, put something on your home screen, use it every day, experiment, test, try, share something with somebody else. It'll be an adventure that you won't regret.

Yeah, and I'll give an example along those same lines of cloud AI. I use it all the time for transcripts, for podcasts, to help getting the, you know, the summary written and then I go through and edit it and I find Cloud AI is better than ChatGPT. But if I want anything, usually around data where it's going to do any coding, I'm typically turning to Chat GPT. You know, it can export the Excel file. And so there really is definitely those use cases where one is, it's better in certain areas than the other. And if you do that tunnel vision, you miss that. It's kind of like the Google and Excel argument. There are cases where it makes sense to use Google, there are cases to make sure where it makes sense to use Excel. And if you're close minded, you may miss off on an opportunity that can make you more effective or efficient for the situation you're working on.

Two quick questions for you. If you were to grade the finance function and if you were to grade it on a scale of 1 to 10, and 10 being the most advanced engineers who are using AI today, what grade would you give finance? The folks that you talk to in their use or maybe the value that they're getting from AI.

Yeah, So I, I, I'll separate that. The people I talk to a lot of times because I do an AI finance podcast are the ones that are a 9 or a 10, but the function as a whole, I think we're a three, three or four. I think we're a little bit behind the curve. And there's, there's a couple reasons for that. Generally, finance tends to lag behind technically and some of that is the high risk, the fact you're dealing with finance numbers. Right. Let's take marketing as an example. If I use AI and it screws up a campaign I sent out, all right, it may cost me, you know, thousands, a couple thousand dollars to fix it. If I use AI and it screws up something I send out to investors or externally a public company CEO might be fired. I mean, that's an extreme example, but just a different. So I think there's a little more fear sometimes. I think the other thing as well is there's different areas. There's the content creation, which I think everybody can use it for. You're not using it to help with brainstorming or email or giving you ideas. I, I think you're just missing out. Then there is the predictive and some of those areas where, you know, the open AI tools just may not be there yet. Machine learning is still in many ways the better to do prediction. And a lot of people don't yet have the skill set, but if they're willing to learn. I talked to a guy today that's an AI guy that says, look after our course, within 30 minutes people can be using their own data and using the profit open source algorithm, machine learning to forecast their number. We couldn't have done that two years ago. So I think it's getting there. But I think on the data side, there's some limitations for generative AI that we haven't fully overcome. And so I'd say we're definitely lagging behind there on the content, I think it's better. But as a whole, I think finance trails most other functions.

Give us a little time, we're making some investments, we'll address sort of aimed at the heart of what you've described. My other question was going to ask for finance professionals, what is maybe the tool or technique that's most unheralded today that has the most value that you could imagine? What is giving the most value today?

I think for finance professionals, I think one of the things they don't do enough that gives the most value to the business is asking how they can what the pain points are of the business and helping figure out within their framework how they can solve them. I mean, you have to be careful with that because you want to be doing stuff totally out of your job. It's a little out of your job and it builds trust and you get that relationship, it will pay off in the long run. Just do it and move forward. So I think one of the biggest things that finance, I think that superpower that a lot of people miss is how can I solve the pain point of the person I support, whether that's the CEO, the general manager, set of sales, whoever it may be, and then you get that trust that allows you to have that seat at the table and make a real difference.

I Love it. Thank you for sharing.

Yeah, of course. Thank you for asking. I always like when I get some questions. So we're going to do a quick get to know you section, going to cover a couple questions and then we'll finish here.

Favorite hobby today? Motorcycles.

Nice. Dirt or street?

Started as dirt, moved to street. I'm now into the touring on. I'm a Harley guy today.

Nice. I like it. What is the one book you'd recommend to our audience?

This is one of the few rules that I'm okay with my kids breaking if they stay up late and choose books to explore that'll take the heap. I think reading is one of life's unlocks. I think my first recommendation and something that I say so that I remember it is more long form, less short form. I think the social is changing our brains. Perhaps two that are less recommended that have been life changing for me at different times are how will you measure your life By Clayton Christensen and Tuesdays with Maury by Mitchell.

Love Tuesdays with Maury.

I don't run across many people who've read it. I love it.

I have Clayton Christensen's book on my list to read. I haven't done it. It's been highly recommended. I really need to pick that one up. Yeah, I read Tuesday with Maury I don't know, 15 years ago now and just love that book. Fabulous. I'm totally with you. Favorite travel destination. If you could go anywhere in the world tomorrow, where are you going?

Not on planes, right?

We'll assume there won't be any problems with the plane if we go on.

With my wife, I'd have to say Spain. I have an intense love for that country. But with my family, with my kids, I'd have to say a baseball diamond, either they're playing or a major league ballpark where we can watch a game together. My wife's been amazing. She has taken on sort of the fun path to be able to go see a game in all of the major league ballparks with our kids.

Love it. How fun. And last one, if you could have dinner with one person in the world today, who you taking and why?

I'm a die hard Michael Jordan fan and he didn't push off. I've long said that I would love to have lunch or play a round of golf with mj. But since you've asked about dinner, I'd say on the inspiring side, I'm going to give you a couple. On the inspiring side, it would have to be Simone Biles. As I started thinking about the Olympics. An amazing athlete. I would also have to say Lewis Hamilton from F1. Become a race Race fan. On the learning side, I'd love to have dinner with Warren Buffett or Elon Musk. Wildly different dinner conversations I would imagine. But I. But I think in each case I think I would be able to walk away feeling like I had learned new perspectives, that I had seen value and I had seen people who were world class in their domain. If you think about Simone and Max and Warren and Elon, they have all demonstrated something that they are clearly superhuman.

Yeah, they're in the 1% of the 1%, right? Just amazing. Well, that pretty much concludes our interview. If anyone wants to learn more about you and get in touch, what's the best way for them to do that?

Smoke signals Come on a Harley ride. Send me an email, send me a.

Call, give me your address. I'll put smoke signals up.

R. Sandersrcado partners.com is super easy. LinkedIn any way you want. I would love to meet with entrepreneurs or people who are considering. I'll do my best to push you into it. It's the thing that I love.

Got it. So if you need to get out of finance and into entrepreneurship, Ryan's your guy.

We've got a rule for you.

Well, thank you for joining me. I thoroughly enjoyed the conversation and I'm sure my audience will enjoy it, so I appreciate you carving out some time.

Kudos to you Paul. Thank you for the insights and the expertise that you bring to the audience.

Thank you. Thanks for listening to FP&A tomorrow. If you enjoyed the show, please leave us a five star rating and a review on your Patreon podcast platform of choice. This allows us to continue to bring you great guests from around the globe. As a reminder, you can earn CPE credit by going to earmark cpe.com downloading the app, taking a short quiz, and getting your CPD certificate to earn continuing education credits for the FPAC certification. Take the quiz on Earmark and contact me, the show host, for further details.