Welcome to FP&A Tomorrow, where we discuss financial planning and analysis, examining its current state and future prospects, with your host Paul Barnhurst.

In this episode of FP&A Tomorrow, host Paul Barnhurst dives into the world of growth equity investing with Ryan Sanders, a seasoned investor from Mercato Partners. The conversation explores the critical role of FP&A (Financial Planning and Analysis) in supporting growth-stage companies, the nuances of growth equity investing, and how entrepreneurs can best position themselves for success. Ryan shares insights from his extensive experience, offering valuable lessons on what it takes to scale companies in today's competitive market.

Ryan Sanders is a growth investor at Mercato Partners, a growth equity firm based in Salt Lake City, Utah. With a background in finance and an MBA in entrepreneurship from the University of Texas, Ryan has a deep understanding of what it takes to support and scale innovative companies. His career spans various roles in investment, and he is known for his strategic approach to partnering with entrepreneurs. Ryan also recently completed the Kauffman Fellows program, which has further enriched his expertise in venture capital and growth investing.

Expect to Learn:

1. The key attributes and skills that FP&A professionals need to excel in supporting growth-stage companies.

2. The importance of customer-centric growth and why organic growth strategies often outperform inorganic ones.

3. Insights into the investment process at Mercato Partners and how they identify and support promising companies.

4. The role of AI in transforming FP&A functions and the broader finance industry.

5. Practical advice for entrepreneurs on when and how to raise capital effectively.
   

Quotes:

Here are a few relevant quotes from the episode 

• “For the CEO and for the board and for the investors, the FP&A is most often a partner, demonstrated through accuracy and speed. But perhaps as important are curiosity, comparison, and completeness.” - Ryan Sanders

• “The number one skill, in my opinion, for someone in FP&A has to be effective communication. We’re all in sales.” - Ryan Sanders

• “We’re in the age of AI, and I think AI eats the lunch of vertical functions. If finance believes their only value is debits and credits, I believe that will be obviated over time.” - Ryan Sanders

• “One of the most interesting exercises is to think about the business through a series or a set of stop lights. Red light, yellow light, green light—that accumulation of answers should drive the decision on the type of financing.” - Ryan Sanders
  

In this insightful episode, Ryan Sanders shared invaluable lessons on growth equity investing and the critical role of FP&A in supporting successful business scaling. Whether you're an FP&A professional, an entrepreneur, or an investor, Ryan's experiences and advice provide actionable takeaways that can help you navigate the complexities of business growth.

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Follow Ryan:

LinkedIn - https://www.linkedin.com/in/sandersryan23/ 

Website - https://www.mercatopartners.com/
Kauffman Fellows Program - https://www.kauffmanfellows.org/

Follow Paul:

Website - https://www.thefpandaguy.com
LinkedIn - https://www.linkedin.com/in/thefpandaguy

Enroll for Financial Planning & Analysis Certificate Program:
Level up your career and build skills for financial planning and analysis. Sign up for the 8 week online financial planning & analysis certificate program by Wharton Online and learn the art of forecasting, analysis, business partnering and financial storytelling: https://bit.ly/4flxfbO

Earn Your CPE Credit
For CPE credit please go to earmarkcpe.com, listen to the episode, download the app, and answer a few questions and earn your CPE certification. To earn education credits for FPAC Certificate, take the quiz on earmark and contact Paul Barnhurst for further details.

In Today’s Episode

[01:15] - Paul introduces the podcast and guest, Ryan Sanders.

[02:26] - Ryan's background and career path

[07:03] - The role of FP&A in growth investing

[10:26] - The benefits of focusing on customer-driven, organic growth strategies over acquisitions.

[14:51] - Insights into the technical and soft skills that FP&A professionals should develop 

[24:48] - Strategic decision making and financial planning & how FP&A can support this process.

[35:20] - Kauffman Fellows Program Experience

[41:30] - The Impact of generative AI on finance

[51:10] - Conclusion and contact information about Ryan

Full Show Transcript

[00:00:00] Guest: Ryan Sanders: If you throw in blocked punts, if you throw in kickoff returns. I think what you've described is an entrepreneur 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, you know, came out. 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.

[00:00:23] Host: Paul Barnhurst: To bounce off the help them in growing. Is that the way to think of it?

[00:00:27] Guest: Ryan Sanders: I think that's a good way to frame it. I just graduated about a year ago. It's a fellowship that is two years long. So I started in.

[00:00:34] Host: Paul Barnhurst: And I think there's 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 for some businesses. FP&A guy here. Have you ever wanted to level up your FP&A skills? Then check out the FP&A Guys Ultimate Course bundle at the FP&A Guy.comm. That's www.thefpandaguy.com and Use code Podcast to save 25%. Get started learning today. Hello everyone! Welcome to another episode of FP&A tomorrow. This is the show where we dive into the world of FP&A, examining its current state and future prospects. I'm your host, Paul Barnhurst, aka the FP&A Guy. I'll be guiding you through the evolving landscape of FP&A. 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.

[00:01:46] Guest: Ryan Sanders: Thank you. Paul, thank you for having me today.

[00:01:49] Host: Paul Barnhurst: Yeah, I'm 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 of months.

[00:01:56] Guest: Ryan Sanders: 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.

[00:02:08] Host: Paul Barnhurst: Yeah, I do too. And I'm hoping that 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.

[00:02:16] Guest: Ryan Sanders: We should. We will submit a ticket or request to CrowdStrike to make sure that your vacation goes off smoothly.

[00:02:22] Host: Paul Barnhurst: 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.

[00:02:44] Guest: Ryan Sanders: University of Texas.

[00:02:46] Host: Paul Barnhurst: 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, you big orange fan. I saw that.

[00:02:57] Guest: Ryan Sanders: 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 go Longhorns.

[00:03:09] Host: Paul Barnhurst: You know, I just think back to the BYU, UT game where Taysom Hill just destroyed the Longhorns. That's my good memory.

[00:03:16] Guest: Ryan Sanders: 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.

[00:03:45] Host: Paul Barnhurst: Yeah. So now I'm sure we have some people on the posse 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, ten receiving and ten rushing in one area. Does he have amazing numbers? No, but he's the quintessential 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 them in. That's what he is on the football field.

[00:04:18] Guest: Ryan Sanders: 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 has to be all in. I mean, that's probably the way that you would describe Tyson. Taysom is somebody who doesn't hold back. It's it's a wildly impressive. He is a hero to my kids.

[00:04:44] Host: Paul Barnhurst: 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 FP&A. But obviously you're bringing in finance and FP&A to support these entrepreneurs as they're trying to scale. What 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 FP&A as a growth investor, what makes your life easier?

[00:05:12] Guest: Ryan Sanders: 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.

[00:05:34] Host: Paul Barnhurst: I love that three acronyms. I haven't heard it that way before, but curiosity, completeness, and give me the third one again, comparison.

[00:05:42] Guest: Ryan Sanders: , 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.

[00:05:58] Host: Paul Barnhurst: 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.

[00:06:04] Guest: Ryan Sanders: It's yours.

[00:06:05] Host: Paul Barnhurst: 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.

[00:06:11] Guest: Ryan Sanders: 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, , you know, 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 $1 billion 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.

[00:06:59] Host: Paul Barnhurst: Yep. And that that firm. It's Mercado, right? Mercado partners.

[00:07:03] Guest: Ryan Sanders: 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.

[00:07:49] Host: Paul Barnhurst: Love it. And what is is there a certain industry that you look for? Is it more just a great entrepreneur or 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?

[00:08:03] Guest: Ryan Sanders: 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 and 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. And 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 Skullcandy. , we have more salt. , we have , most recently stance, in our portfolio today. , but three quarters plus of our investments are inside enterprise technology healthcare, AI, edtech, infrastructure, fintech are areas that we find passionate and where we can what we hope is share a set of insights, experiences, playbooks, frameworks to help them be their very best.

[00:09:11] Host: Paul Barnhurst: 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?

[00:09:27] Guest: Ryan Sanders: I think that's a good way to frame it when when we have a chance to invest. These are companies that are already winning and 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 this 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 experimented, but it's predictable because it's where the customers are.

[00:10:07] Host: Paul Barnhurst: 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. It sounds like almost an operational focus into the investing AI.

[00:10:26] Guest: Ryan Sanders: So the the term product market fit, we've talked about that for a 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 going to win. For a long time. We have a belief that organic wins over inorganic, there are companies at certain times and 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.

[00:11:25] Host: Paul Barnhurst: I really like that. Thank you. 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. Whichever we heard, insanity is doing the same thing and expecting different results. But that's a separate that's a whole new podcast.

[00:11:52] Guest: Ryan Sanders: If we if we hear the word strategic synergy, it's probably a clue to run the other way.

[00:12:00] Host: Paul Barnhurst: Oh, I hear you when you say strategic and synergy. I still remember 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 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 out, bingo! So there you go, run the other way. If they're playing, , business bingo.

[00:12:32] Guest: Ryan Sanders: Did you win?

[00:12:34] Host: Paul Barnhurst: 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.

[00:12:38] Guest: Ryan Sanders: All right, well, you've won outside of bingo. Very well done.

[00:12:42] Host: Paul Barnhurst: , but 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?

[00:12:56] Guest: Ryan Sanders: Paul, they're all favorites. , you can't separate your.

[00:12:59] Host: Paul Barnhurst: Children, right? Separate your.

[00:13:00] Guest: Ryan Sanders: 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 $1 million in revenue, you are in the one 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 engineers at top research universities 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 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.

[00:14:41] Host: Paul Barnhurst: Love it. That's that's not a bad growth there. That number you mentioned, it sounds like that's been a. 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 FP&A? Often I know as your growth they probably don't have much in that way. They're early in their finance and some may be more mature depending on what growth stage BC whatever it may be. But what are you typically looking from looking for from them?

[00:15:15] Guest: Ryan Sanders: 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 FAA 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, and 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.

[00:16:07] Host: Paul Barnhurst: So I should grab my dad jokes book back there. And so 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.

[00:16:29] Guest: Ryan Sanders: I would say the use of Comic Sans or Wingdings is probably the red flag. I haven't seen that in a little while.

[00:16:37] Host: Paul Barnhurst: When you've seen Wendy. Wow.

[00:16:40] Guest: Ryan Sanders: I would say what we want, is to understand, where investment capital can have leverage and an opportunity for, for growth. So common issues if I think about, you know, what happens are either overly optimistic projections. An investor at any stage has never seen anything but a hockey stick. When you know, when, you know, sort of a review and a projection. But underneath that, it's the lack of detailed assumptions and sufficient 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.

[00:17:33] Host: Paul Barnhurst: FP&A guy here. Today I want to talk about the FP&A Guy’s Ultimate FP&A Course Bundle. This bundle includes over 10 hours of content recorded by Ron Monteiro and myself. Many templates and great lessons to make you a better FP&A professional. The content includes FP&A business partnering, how to manage tough conversations, build world class relationships and hold the business accountable. Includes modern Excel, which is a real game changer for the way your work in excel tables, the gateway to modern excel, power query, a game changer for transforming your manual processes and loading data and then dynamic arrays. Next we cover modeling design principles. In this course, we talk about the importance of designing models in a certain way and how important it is that you think about design. And last but not least, driving value through smart analysis, how you can conduct data analysis to be a better FP&A professional. Go ahead and sign up for this bundle at thefpandaguy.com. That’s the fp and a guy dot comm, use the code Podcast to save 25%. Get started learning today. It makes total sense if you're seeing an issue of cash flow dynamics. Yeah, that's a concern because obviously there's a burn rate that they're all dealing with, hence why they're raising capital.

[00:18:49] Guest: Ryan Sanders: It's 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 the 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 and another product and another channel and another partner. And 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.

[00:19:35] Host: Paul Barnhurst: 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. Smith, you probably know Jaron.

[00:19:57] Guest: Ryan Sanders: Paul Jaron 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.

[00:20:07] Host: Paul Barnhurst: Yeah, I love Jaron Paul, but he tells the story and this gets into where finance and 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 had 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 spiff, 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 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 for 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.

[00:21:17] Guest: Ryan Sanders: Paul, this is an this is an excellent point. If I can make one other point. You know, here we talked early on about, you know, sort of the opportunity for for entrepreneurs and my sense and prior to working at Mercato, I was with a subnet 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, you know, advice. And, sometimes it feels as simplistic as well. Debt is cheaper and so I should pick it. Right. And 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. 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.

[00:22:45] Guest: Ryan Sanders: It is about the margin. It is about the collectability. It is about, you know, sort of 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 were 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 inputs and outputs. And I think a key role of FP&A would help a 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 a 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, 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.

[00:24:04] Host: Paul Barnhurst: 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 terms. 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 a strategic side is what are we getting beyond the money? Right? Or 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?

[00:24:54] Guest: Ryan Sanders: You're absolutely right. I guess I would say for professionals, if we take it back to, you know, something that you've got passion for and, 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 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. You said, you know what? I think your question was, what does a great FP&A professional look like? It's a partner.

[00:25:48] Host: Paul Barnhurst: Yep. I mentioned you mentioned the partner and we had the three C's. There's 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 clothes that are also CFOs or CFOs that are close. We're seeing more strategy done through FP&A. 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?

[00:26:37] Guest: Ryan Sanders: 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 the, , I think a question you asked in advance, you know, about, you know, skills, you know, whether technical or soft skills, you know, my technical skill still would be advanced financial modeling and understanding. , I think that still includes proficiency in Excel or or other financial software, but it's more of a 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 FBA still has to be effective communication where 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.

[00:28:10] Host: Paul Barnhurst: 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 explained 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 exp and a, but Gartner did coin it and they got it. They gotta have their marketing engine. So I get it.

[00:29:04] Guest: Ryan Sanders: 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 ones we didn't make and they've all come with a financial projection or an analysis on day one. , none of them are accurate. I can probably go on record and say that, I, I showed somebody the other day, and this company, , we probably looked at, 8 or 9 years ago in this interim, 8 or 9 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 that 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 reporting analysis. It's a 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.

[00:30:41] Host: Paul Barnhurst: Yes. I want to dive into that point for a second and then we'll go a little different. How how can finance ensure that they're telling the story? Data visualization. What? 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.

[00:31:05] Guest: Ryan Sanders: 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's strategic, strategic objectives. So that's, you know, sort of box one that has to be done. , number two, the most 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 or the or where the wins can be had, or where they can be seen, and clearly show where sensitivity is and what is the magnitude of the upside or the downside. , you know, here. So it's historical context. , so that you don't 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 plot or, or help them understand what the, what the end of 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 form. If it looks difficult.

[00:32:44] Host: Paul Barnhurst: Looking to level up your career and build skills that make you stand out to FP&A hiring managers, how about earning a certificate from a world renowned business school? Wharton Online and Wall Street Prep have partnered to create an eight week online financial planning and analysis certificate program. You'll learn the art of forecasting, analysis, business partnering, and financial storytelling from Wharton Online's world class faculty, coupled with firsthand exposure to technical and interpersonal skills. With real world applications as practiced in top corporations, space is limited. So level up your career today and use the discount code the FPA Guy 300 to receive $300 off tuition. That is the FPA Guy, 300 to receive $300 off tuition. Learn more by going to wallstreetprep.wharton.upenn.edu/. Oh yeah, I'm digging back one of the roles I had. I came in to help convert a company to more of a SaaS, and just trying to define even what are ACV just basic terms or, well, what's really a, you know, the contract term, what's a renewal mean? Because they weren't really SaaS, but they wanted to be SaaS, right. And so you're trying to make it all fit. And so many conversations around that. Just remember meeting with like the CFO, the CRO, this is a decent size company. I mean, several hundred million. Around that conversation, you're like, I'm having this conversation with, you know, all these people trying to get agreement and sending emails around, you know, what these basic terms mean? It was it was a good experience. But just getting to your point of just because it's a common term doesn't mean that you interpret it the same way as that. Your firm you're talking to is the company down the street is your competitors. We've all seen it.

[00:34:42] Guest: Ryan Sanders: 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 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.

[00:35:04] Host: Paul Barnhurst: 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. And the Kauffman Fellows program, right I am.

[00:35:21] Guest: Ryan Sanders: I just graduated about a year ago. It's a 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 even 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.

[00:35:44] Host: Paul Barnhurst: Great. So tell our audience what it is like. What did you do and how did it benefit you so much?

[00:35:50] Guest: Ryan Sanders: Ewing Marion Kauffman, 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. And so some of the very best studies today come from Kansas City, from the Kauffman 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.  it's made up of limited partners general partners, corporate venture capital.  there 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.

[00:37:20] Guest: Ryan Sanders: For me, I wanted three pieces out of out of the Coffin 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 your 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, over time period. I love the opportunity to shape and define and change my network. , 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. , 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 had a chance in just this last little bit to write a couple of letters of recommendation, and in fact two here locally that I'm really proud of. , are two investors from Kickstart and Pelion Venture Partners here locally.

[00:38:43] Host: Paul Barnhurst: 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.

[00:38:49] Guest: Ryan Sanders: Suz and Kat are exceptional investors and I'll be excited to watch them go through the program themselves.

[00:38:55] Host: Paul Barnhurst: Awesome. Well, I appreciate you sharing that. It 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&A, what I call section, where I ask a couple quick questions where you just like 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?

[00:39:32] Guest: Ryan Sanders: Can I say neither or both?

[00:39:34] Host: Paul Barnhurst: If you say neither, what are you going to put in its place?

[00:39:37] Guest: Ryan Sanders: It's a good question. I think it's the rare case that I don't think today in, in our industry that there is somebody who, except if they're in complex leveraged 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. Communicative. 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 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 in 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.

[00:40:34] Host: Paul Barnhurst: 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's it doesn't play nice with Excel. All right, you hinted at this before, but we'll go ahead and ask it. I think you mentioned it. Number one technical skill for FBA professionals to master.

[00:40:53] Guest: Ryan Sanders: Financial modeling and understanding.

[00:40:56] Host: Paul Barnhurst: 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?

[00:41:05] Guest: Ryan Sanders: I think I said it earlier, it is effective communication. I think it's about influence.

[00:41:11] Host: Paul Barnhurst: Yeah, I, 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 not immediately like you bet I'm using it.

[00:41:27] Guest: Ryan Sanders: , if you're not the 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 falling. 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.

[00:41:59] Host: Paul Barnhurst: I love what you said there about using the different tools. I'll often ask the same question of both GPT and clod. Sometimes I may even ask it of Google or Copilot, and usually I use two, but sometimes I'll use 3 or 4. There may be some certain questions. I'll use just one. But you know, 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.

[00:42:26] Guest: Ryan Sanders: 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. And he described something that he did with his son and it, it 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 it to both Claude and ChatGPT, and we asked that 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 it simple prompts like, can you analyze and tell me if I have anything that looks like an overspend? Or can you tell me if I have something that looks like a subscription that should be turned off? And 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 ChatGPT 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 in 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 it'll be an adventure that you won't regret.

[00:43:52] Host: Paul Barnhurst: Yeah. And I'll give an example along those same lines of, , Claude, I, 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 Claude 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 ChatGPT. You know, it can export the Excel file. And so there really is definitely those use cases where one is just 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 closed minded, you may miss off on an opportunity that can make you more effective or efficient for the situation you're working on.

[00:44:39] Guest: Ryan Sanders: Two 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 ten 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?

[00:45:00] Host: Paul Barnhurst: 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 nine or a ten, but the function as a whole, I think we're a three, 3 or 4. 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 send out all right. It may cost me, you know, a thousand, a couple thousand dollars to fix it. If I use AI and it screws up something I sent out to investors or externally, you public company CEO might be fired. I mean, that's an extreme example, but just a difference. 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 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 prophet open source algorithm, machine learning to forecast their numbers. We couldn't have done that two years ago. So I think it's getting there. But I think on the data side, there are 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.

[00:46:47] Guest: Ryan Sanders: 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's what's what, what is giving the most value today?

[00:47:10] Host: Paul Barnhurst: I think for finance professionals. Oh, 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. I think one of the biggest things that finance, I think that super power that a lot of people miss is how can I solve the pain point of the person I support. 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.

[00:48:01] Guest: Ryan Sanders: I love it. Thank you for sharing.

[00:48:02] Host: Paul Barnhurst: 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. I'm going to cover a couple questions and then we'll finish here. Favorite hobby.

[00:48:12] Guest: Ryan Sanders: Today. Motorcycles.

[00:48:15] Host: Paul Barnhurst: Nice dirt or street started.

[00:48:18] Guest: Ryan Sanders: As dirt moved to street. I'm now , into the touring on I'm Harley guy today.

[00:48:24] Host: Paul Barnhurst: Nice I like it. What is the one book you'd recommend to our audience?

[00:48:29] Guest: Ryan Sanders: , 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 heat. I think reading is one of life's unlocks. I think my first recommendation, and something that I say so that I remembered 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 Morrie, by Mitch Love.

[00:48:58] Host: Paul Barnhurst: Tuesdays with Morrie I don't.

[00:49:00] Guest: Ryan Sanders: Run across many people who've read it.

[00:49:01] Host: Paul Barnhurst: I love 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 Tuesdays with Morrie, I don't know, 15 years ago now and loved that book. Fabulous. So I'm totally with you. Favorite travel destination? If you could go anywhere in the world tomorrow. Where are you going?

[00:49:19] Guest: Ryan Sanders: Not on planes, right? .

[00:49:22] Host: Paul Barnhurst: We'll assume there won't be any problems with the plane. If you go.

[00:49:25] Guest: Ryan Sanders: 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 their plane 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.

[00:49:47] Host: Paul Barnhurst: Love it. How fun. And last one, if you could have dinner with one person in the world today, who you who you taken and why?

[00:49:55] Guest: Ryan Sanders: 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 fan on the learning side. I'd love to have dinner with Warren Buffett or Elon Musk. , wildly different dinner conversations.

[00:50:31] Host: Paul Barnhurst: I would imagine.

[00:50:32] Guest: Ryan Sanders: 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.

[00:50:54] Host: Paul Barnhurst: Yeah, they're in the the 1% of the 1%. That's right. 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?

[00:51:07] Guest: Ryan Sanders: Smoke signals. Come on, Harley, ride. , send me an email. Send me a call.

[00:51:12] Host: Paul Barnhurst: , give me your address. I'll put smoke signals up.

[00:51:14] Guest: Ryan Sanders: Our Sanders at Mercato Partners.com is super easy. Linkedin any way you want. I would love to meet with entrepreneurs or people who are considering. I'm. I'll do my best to push you into it. It's the thing that I love about it.

[00:51:28] Host: Paul Barnhurst: So if you need to get out of finance and into entrepreneurship, Ryan's your guy. Got it. Got a role 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.

[00:51:40] Guest: Ryan Sanders: Kudos to you, Paul. Thank you for the insights and the expertise that you bring to the audience.

[00:51:45] Host: Paul Barnhurst: 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 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 earmarkcpe.com, downloading the app, taking a short quiz, and getting your CPE certificate. To earn continuing education credits for the FPAC certification. Take the quiz on earmark and contact me, the show host for further details.