Ben Murray is known to his 40,000 dedicated subscribers simply as “The SaaS CFO”. On the number one website for SaaS finance (thesaascfo.com) Ben provides blogs, research, courses and templates based on more than 25 years running finance teams . Ben is also hired by SaaS companies: from small, private technology firms to global multi-billion dollar public companies.
But few people know that Ben honed his career in FP&A.
Calling Financial Planning & Analysis “the key to strategic finance” Ben explains how this work is “near and dear to my heart” and provides a masterclass for FP&A professionals.
Ben’s formative career roles included manager of FP&A at Manager, at fitness company, A.D.A.M., Inc and (miles away from SaaS)Director, Financial Planning & Analysis (FP&A) at Pinnacle Airlines Corp. Since then he is called in by finance teams to enhance FP&A alongside other finance functions.
In an essential listen for anyone working in or considering a career in SaaS FP&A, Ben talks to Paul Barnhurst about:
- Rising up the ranks from FP&A to CFO and beyond
- How FP&A and finance can make an impact in a downturn
- The essential SaaS metrics most relevant for today’s business
- The “end of party” for SaaS valuations and funding and what finance should be doing
- The best practice he has learnt from advising multiple SaaS FP&A teams
- Product led vs Sales Led SaaS companies – and the metrics for both
- The importance of proper accounting foundations
- The different expectations of SaaS business at $1million ARR, $5million ARR and $10million ARR
- His best career advice
Paul Barnhurst
Hello everyone. Welcome to FP&A Today, I am your host, Paul Barnhurst, aka the FP&A Guy and you are listening to FP&A Today. FP&A Today is brought to you by Data Rails, the Financial Planning and analysis platform for Excel users. Every week we welcome a leader from the world of financial planning and analysis, and discuss some of the biggest stories and challenges in the world of FP&A We’ll provide you with actionable advice about financial planning and analysis. This is going to be your go-to resource for everything FP&A I’m thrilled to welcome today’s guest on the show, Ben Murray. Ben, welcome to the show.
Ben Murray:
Great to be here. Thanks, Paul.
Paul Barnhurst:
Thanks for carving out some time for us. We appreciate it. So, a little bit about Ben. Ben comes from the Denver Metro area. He runs the popular website, thesaascfo.com. He has more than 20 years’ experience in finance and operational management. He has more than five years of experience as a software CFO. He got his MBA from the University of Iowa, and he is an actively licensed CPA. So we’re really excited to have him on the show today. And maybe Ben, you can start by just telling us a little bit about yourself and, your background.
Ben Murray:
Sure. Sounds good. Yeah, my background, of course, been in finance and accounting my entire career, 25 plus years, was worked on the airline industry and then software industries pre-SaaS. I came up through the ranks of FP&A so it’s near and dear to my heart. And then became a SaaS CFO for private equity back businesses and founder back businesses, and then launched my own services about a year and a half ago.
Paul Barnhurst:
Great. Sounds like it’s been quite the journey. How is it making that transition from kind of the airline industry to SaaS? I imagine pretty big change.
Ben Murray:
Yeah, huge change, right? Each, you find each industry has their own terminology, language, acronyms, and airlines probably almost as bad as SaaS with all the terminology and acronyms. So really interesting switch, uh, you know, looking at, you know, the p and l differently, looking at metrics differently. So it was an interesting time.
Paul Barnhurst:
I can imagine. I, uh, you know, worked in the travel industry, so dealt with some airline metrics and had lots of meetings with the different airlines around trying to help them, you know, maximize their revenue with us. So, had a little experienced there and definitely very different from SaaS and other industries. So, you know, you run the popular website, thesaascfo.com. Can you talk a little bit about the website, you know, what services you offer, what type of people it’s for? Like who should maybe check out your website and just share a little bit about it?
Ben Murray:
Yeah, So I started thesaascfo.com about 6 years ago, just to share my knowledge, around SaaS finance, SaaS metrics templates. And I started, because I started off I had a stint a programmer, a mainframe programmer. And I learned from the guys who are very experienced, who never started from scratch. They’re always starting with this program, that program. And kind of the same thing in FP&A, you look at this model, that model. So I, I just wanted to share the templates that I’ve built and just really have actionable items that people could use right away, download right away, and implement, you know, in their business or help their career.
Paul Barnhurst:
That makes a lot of sense. You started that about six years ago and went out on your own about a year and a half ago.
Ben Murray:
Yep. So went on out on my own about a year and a half ago and offering fractional CFO services to SaaS companies, do some coaching, then also offer courses in SaaS finance and metrics.
Paul Barnhurst:
Got it. So coaching courses. Yep. And then also being a fractional CFO.
Ben Murray:
Yep. Yeah. Kind of like the three Cs kind of courses content, and consulting.
Paul Barnhurst:
Yeah. Those, those are the three Cs I have, so I understand that one. So maybe can you talk a little bit about how, you know, SaaS businesses and the finance function, just kind in general, how you’ve seem it evolve over the years?
Ben Murray:
Yeah, SaaS FP&A you know, when I started in software, it was pre-SaaS, so early 2000s you know, so we weren’t looking at the metrics that we look at today. And really interesting thinking about back in those days. And, you know, really, you know, good P&L management, good solid funnel, fundamental financial management, you know, good FP&A process very analysis, looking at margins. But we weren’t talking CAC, we weren’t talking payback, CaC Ratio, all the terminology that we had today. So it was a bit more fundamental financial management working in software that that has definitely transitioned, you know, and changed over time.
Paul Barnhurst:
No, that, that makes a lot of sense. Imagine when you started, it was all mostly just on prem which is a very, it’s a different model than subscription, different metrics. And
Ben Murray:
Yeah, it was, it was on premise. And I still remember that, that one of the assignments I got from my general manager when subscriptions began to become popular, maybe it wasn’t hosted in the cloud on premise subscriptions, but he came to me and said, ‘Hey, Ben, create subscription pricing for this product. And I was in healthcare tech at the time. So, I was like, Okay, how the heck do I do that Uh, but you know, it was just a different perspective view back then, of course, you know, and things have, have matured, you know, a lot since then, of course.
Paul Barnhurst:
Yeah, I bet. That was quite the challenge. And you’re like, Okay, what do I use to benchmark this? How do I come up with the numbers?
Ben Murray:
Right? What are my recurring costs? You know, what are my margins for the subscription product? You know, And just thinking about that from scratch of what goes into delivery of the product. You now, still remember sitting at my desk and, and playing with the numbers in, in Excel to try to figure out what would be a subscription price. And then we had to get this approved by the, top executive in the company. So, uh, of course a good exercise, but yeah. Started in those, those on-prem, you know, perpetual license and, and maintenance days.
Paul Barnhurst:
Yeah. And what, I mean, what would you say were kind of the key lesson learned from that, from that project, from that experience?
Ben Murray:
I think it’s, it’s really, you know, the big thing is like, how Right? You wanna price it so you have enough margin. And back then, I don’t think we were thinking about, hey, pure play SaaS 80% gross margins. So I was really thinking about what goes into the delivery of this product? You know, who do we need? What technology do we need? So we don’t underprice it. You know, with any pricing, right? You, you learn and iterate over time. But I was trying to think about that cost structure. Who’s involved, what’s involved, you know, if we put this price out there, so that we can sufficiently cover our costs and have enough margin to pass on to OPEX.
Paul Barnhurst:
Yeah. No, that, that makes a lot of sense. And yeah, exactly. There was no 80% rule or all these different metrics you see today. It was really trying to understand those costs and think about, okay, what is, what’s the bottom line number we need for this to make sense?
Ben Murray:
Yep. Yep.
Paul Barnhurst:
Got it. That makes a lot of sense. So, I know you rose through the ranks of FP&A as you mentioned, public companies, some airline, you know, airline industry and other things. You know, you have said you have experienced kind of all shapes and sizes of FP&A. So maybe what have you learned about, you know, best practice and bad practices in FP&A and some of those lessons you’ve learned over the years?
Ben Murray:
Yeah, like I said, I came up through the ranks of FP&A. So worked in FP&A at large public companies, private companies, was the first FP&A hire for some, or you know, became, you know, led the organization for FP&A you know, so you see all different types. When I worked, you know, in healthcare tech, that was at a big Fortune 20 company. And that, you know, was a great learning ground. You know, really mature FP&A processes, you know, strict close timelines, you know, and we had this very set monthly calendar of closes run into the forecast variances, meet with your general managers. So that was great training for me. In addition to when I started out in FP&A in the airlines, I had, I’d say, kind of two training grounds in FP&A and one was in the airlines, and one was at this healthcare tech company. And that really helped me learn the process of FP&A and what you need to do each month. You know, how to communicate, you know, what reports, you know, of course you learn over time as you move from analysts up the ranks. Uh, you know, so that was great, just learning that framework, you know, because in FP&A we have that strict, you know, routine each month that we follow. So that was great. Uh, you know, great learning grounds.
Paul Barnhurst:
No, that makes a lot of sense. Learning that routine. And was there any things you saw at the different companies that, you know, you took with you that you really saw as kind of best practice or maybe some things you saw over the years that just made no sense to you as you’re working through different FP&A?
Ben Murray:
Yeah, I think, you know, one, you know, there’s this one company we had the, the dreaded budget memo. You know, so during budget season, all, you know, this huge analyst shop, we had to write, you know, a couple page budget memo that explained how the budget was changing year over year against that 9+3 forecast, which was our base, and going through revenue, going through our gross margin profile, going through OpEx right? And this was on the on-prem days, no SaaS, but still kind of that same framework I followed today. And that really tested our understanding of the business, our understanding of the numbers, why are the numbers changing? So you could clearly communicate that performance, you know, to the others in the organization. Tons of work, tons, tons of work, but really a good process and a really good learning process.
You know, so you see things like that, you know, throughout your FP&A career, you know, of just how are they managing it, what’s the structure? How do they look at a P&L. You know, what are those important numbers that they, they’re focused on each month, You know, So you just pick that up over time. And, you know, I think in other places where things don’t go well is maybe there’s an FP&A shop but really it’s not a finance-driven culture, or FP&A is really not at that table. You know, when I was in the airline industry, finance really drives airlines, of course, among other departments. I’m a little biased, but really so financially disciplined, you know, that every project analysis came through the FP&A team. And so top down, right? Finance is important. So everyone then, right, believe, you know, it’s like, Hey, finance is important. They have to be at the table. And where you see FP&A fail, I think you could have the proper frameworks, but then that culture at the top doesn’t value the analytical side, the numbers and the discipline and decision-making that come, that can come through the finance process and then you’re just less effective.
Paul Barnhurst:
No, that’s a really good point. And I’ve seen that where when you don’t have the seat at the table, when finance isn’t looked at as a strategic partner it’s just a back office function that we have to deal with, so to speak. And I’ve been in companies and situations where that’s the case, and yeah, I agree with you. It doesn’t really matter how good your processes are. If you don’t have the seat at the table, you really can’t drive value.
Ben Murray:
Yeah. And I, you know, even, you know, I see that today with some of my coaching clients in SaaS where, you know, working through the numbers, but still they’re not following the budget. You know, they’re not, you know, understanding that we’ve gotta stay within this framework because say our cash runway now has shortened, you know, our cash has tightened, the equity markets have tightened, you know, and we could be crunching those numbers, but still, it, it’s gotta, you know, there’s gotta be alignment from the management team that this is important.
Paul Barnhurst:
No, I totally agree. If you don’t have that alignment, it makes it really hard. And something you mentioned there is, you know, the runway shortening. Obviously hat’s been a big, big thing that’s been talked about the last few months is, you know, the VC being tighter around the purse strings, you know, they’re not as much funding going around, the valuations are coming down. You know, all, all those things that come with the fear of a recession with the inflation, with everything we’ve seen in the last few months, is some like to call at the end of the party. You know, as I like to think, capital is basically virtually free. And so you take more bets on companies now that it’s more expensive, you’re not willing to take those same bets you were. And we’re seeing that. So maybe, you know, what advice would you have for finance teams and, and FP&A to adapt to kind of this new reality that we’re seeing where, you know, there’s much more of a focus on balancing cost versus growth at any cost, and there’s, you know, less equity going around valuation, you see some down rounds and things like that.
Ben Murray:
Yeah. It’s really interesting because I think with the change in the equity markets and say tightening up of cash runways, you know, this is where I think CFO shine. And I say it’s like financial discipline never goes out of style, right? Whether we are in good times or bad times, that financial framework, that discipline still has to be in place or are prepared for times where it’s harder to get funding. You know, maybe they’re not funding as many new investments and reserving some capital for their ex existing investments. You know? So that’s where, you know, and we saw in the pandemic just the importance of financial analysis that we’re prepared, you know, to run scenarios, to understand where the company is going so we can be as proactive as possible. And, you know, and, and yeah. Now it’s about, Hey, how long should you know? Let’s make sure we know our numbers, what’s working, what’s not working, have a good cash forecast, so we can be more self-sustaining if needed. You know, and I work with SaaS companies in all different ranges where good cash flow, bad cash flow, great cash balances, lower cash balances, but in within all these, right, we still, you know, follow that same process that we’re just not, you know, if we have tons of cash, we’re just not ignoring a cash runway. Right? We still have to understand the economics of our business.
Paul Barnhurst:
Yeah, no, that’s a really good point of the important of understanding the economics of business and how the framework, like I said, financial discipline should always be there. Unfortunately, you see a lot of leadership when things are good, kind of getting loose with the money, and then as soon as you see the, you know, the challenges coming, that choppy water, they tighten everything down. And I, I get it. Obviously you gotta be a little, little, little tighter during those certain times, but you know, if you’re not careful, it comes back to bite you. Because you get, they, they wanna get too loose with the money and then it’s like, Oh wait, we’re in trouble now.
Ben Murray:
Yeah. But I’ve, I’ve seen that with some companies where they’ve built a nice SaaS business and, and it’s producing cash positive margins, great cash flow, but really poor financial management because it was a winner out of the gate, you know, So they didn’t have to focus. They knew that the cash balance was increasing. We’re good. We’re just looking at our bank balance, some basic P&Ls, not doing forecasting metrics. You know, and you can get away with that, you know, But really right now, not the right approach. We still wanna put in that framework to understand our business, uh, you know, so Yeah. You see all shapes and sizes.
Paul Barnhurst:
Yeah. No, I worked for a company, you know, that when they brought in the new ceo, they sat down, they talked to everybody and said, you know, reason we made changes is we were spending more than a dollar for every dollar of growth we were having. So it was quite profitable spending off plenty of cash, but obviously that was not what private equity envisioned when they bought the company. Right. They need to get a return, which spending more than a dollar to gain a dollar is giving nobody a return.
Ben Murray:
Right. Especially in the PE world where you’re really tightening up the metrics, twisting all the dials that you can. And yeah, it’s not, you know, too extreme or too nitpicking that, hey, our, our, you’re referring to cost of ARR or the, the SaaS CAC ratio where, you know, yeah, we’re looking at that, we’re benchmarking it. Where is it going? Because yeah, we have to fund our operations from our own cash flow, you know, so we have to do the best that we can as we allocate capital within the business. So built out those with that metric sent and now you’re fine tuning.
Paul Barnhurst:
Yeah, no, I agree. It makes a lot of sense. So speaking of FP&A and you know, kind of VCs, private equity, those, those back companies, what role does FP&A play working with other VCs or valuations. What is the role of FP&A in those situations?
Ben Murray:
Yeah, FP&A you know, two roles here in, in one, right? We’re building out our financial profile internally, the metrics that are important, the right metrics of the right stage for our business. But it’s twofold because we can use those to operate our business. Those numbers, those metrics. But they’re the same numbers that investors are going to look for. You know, whether it’s the VC world, PE world, any investor coming to SaaS is going to wanna know, you know, your margins, your margins by revenue stream, you know, your sales and marketing efficiency metrics, your bookings numbers, you know, So it’s really twofold that FP&A as we build out these metrics to manage our business, then we can also have intelligent conversations with our investors, our board, or potential investors on those same numbers.
Paul Barnhurst:
Makes a lot of sense. So are you seeing, do you feel like when you go into companies and you see all these companies that most companies are tracking all the SaaS metrics? Cause I’ve seen some data that it seems like it’s pretty spotty and a lot of companies aren’t really doing a good job. So what are, what are you seeing in the companies you work with and just kind of in general in the industry for, you know, tracking those SaaS metrics?
Ben Murray:
Yeah, I’d say early stage, Like if you’re less than 10 million ARR really you’re not seeing much. You know, we’ve got our, our QuickBooks or zero P&L and maybe trying to calculate some metrics, but really nothing there, the reporting structure is not in place. So you’re really starting from scratch. Above $10 million, of course, it can still be all over the place, but really you should be able to start calculating those right metrics if you’re enough over $10 million, because I would say there has to be enough volume of data in your business to make these metrics meaningful. But early stage, we’re building it out above, say, $10 million for sure. You should have a nice metrics framework in place, benchmarking your business. But, you know, again, it comes in all shapes and sizes. Like I said before, this one SaaS company, highly profitable, say $20 million, no SaaS metrics, no forecast. You know, so it’s not just a given, you know, if you’ve got some scale you should have a good FP&A process in place.
Paul Barnhurst:
Sure. And what, I mean, what do you recommend companies under $10 million? Those, they’re starting that ARR, what are those maybe key metrics that they should try to track? Cause I know they’re not going to be able to track all of them They don’t have the tools in place, but if there are maybe three or four things that they should be looking at in those early stages, what would those be?
Ben Murray:
Yeah, and definitely there are a couple subsets within $10 million. This is something I teach in my course, like less than say like a SaaS company, less than $1 Million, $1-3 million, $3-5 million, and $5-10 million where you know I implement for my clients and teach in my course this five pillar framework that’s center around growth, retention margins, your financial profile, and then sales and marketing efficiency. And it follows that pattern as well. So early on it’s about growth and retention. You know, if you’re a couple of million ARR right? You’re probably not calculating your CAC payback period at $2 million arr. You know, maybe you could, but it might be unreliable. But as you scale closer to the $10million especially above $5million, what I see in that $5-10million range, we should be able to produce almost the entire metrics framework for that business. Of course, there are a lot of caveats to that, but early stage right? Growth, retention. So either through bookings, how many customers are you signing up, you know, new and existing business. And then retention, customer retention, gross dollar retention at dollar retention, you know, focusing on those. And then we progress the maturity as you scale.
Paul Barnhurst:
Yeah, no, that, that makes a lot of sense. And question, do you see a big difference in what you should track and how you should think about things if it’s a product -ed SaaS company versus sales-led? Cause I know there’s a lot of discussion around that, and there definitely is some differences. Maybe talk a little to that.
Ben Murray:
Yeah. You know, tons of talk, of course, product led versus sales led or doing both one or the other. And you know, what I see early stage is really, you know, there might not be much expansion yet because they just have one product out there. You know, whether it’s sales led or product led, you know, so we’re more focused on new growth, new customer growth, the retention of those customers, and then, you know, as you mature, then maybe later on, you know, the kind of the ambiguous areas, all right. Product led companies, all right, the R&D cost, you know, should some of that be allocated to sales and marketing expense, You know, and how to look at that and how to balance that. And I’d say that question is still up for debate. You know, of how you do that? But I think you do need to know as an FP&A professional, yeah, what’s my sales motion? Your go to market motion dictates so much of how you look at your business and what metrics you’re going to monitor, the pricing, the cost structure, you know. So I think the more you know about that sales motion, the better you can be in FP&A
Paul Barnhurst:
No, I, and I would agree with that. I can say, you know, the most time I spent with sales was definitely when I was in a SaaS business. There was a lot of time really trying to dig deep and understand things. We had a lot of different products and we had filled and inside and account management because of the type of, you know, nature of the business. So it was definitely, you know, really important to spend that time with sales.
So, you know, as a CFO or even, you know, head of FP&A, is there maybe three to five, like in your experience, metrics that you would say are kind of key that you all, that you like to look at? Like, if you’re first coming in and evaluating a company, and I, I know it could change some depending on sze. Some of those things, but just say, you know, a type of company that’s over $10 million, so they’re relatively, you know, mature in the sense they may still be growing fast, but they’ve, you know, got some systems in place and they have the data. What do you typically like to look at?
Ben Murray:
Yeah. See if I’m coming in new or, you know, say new head of FP&A or CFO. One is, and same with my client base is the accounting foundation. You know, looking at the chart of accounts. How are we coding revenue? How are we coding expenses? Are we coding by cost center? Do we have rev rec in place? You know, so it starts with that accounting foundation, that review. Do we have enough detail there? You know, to have the analytics that we need down line, you know, and down line from there, it’s the correct setup of your SaaS P&L. And that’s such a common thing. Whether you’re $1 million or working with $50 million companies, you know is that SaaS P&L set up correctly. And starting with fundamental financial management, right? This distinct revenue streams. You know is recurring, separate from say, are subscriptions separate from usage professional services on its own line?
You know, then looking at your delivery of revenue and COGS, You know, do you have support, customer success, DevOps, all the cost centers that you need to deliver on revenue? Then OPEX, R&D, sales marketing, G&A (General and administrative )is pretty standard there. You know, looking at my margins, my gross margins, my revenue stream, my OPEX profile. And then from there I transition into the metrics. All right, What metrics should we be calculating at this stage of the business? And say, if you’re above $10 million, really it should be your growth metrics, your retention, your margins, your financial profile. Looking at the rule of 40, your OPEX profile, and then sales and marketing efficiency, of course everyone’s favorite. You know, looking at tech, LTV, cost of ARR , CAC payback, magic number, uh, you know, an aggregate. And then maybe you’re segmenting that by ICP or different demographics.
No, that makes a lot of sense. And I, like I said, starting with the chart of accounts, because if you don’t have the systems and the chart of account and the, the actuals, right? It makes forecasting and everything else, analyzing and all that work near impossible. If you have, you know, fundamental flaws on that end, it’s just, you, you’re, you’re swimming upstream.
Oh yeah. And I’m sure the analyst listening right now who are doing three statement models, like you’ve got, you know, your campaign, R&D and that’s like buried in your balance sheet or buried in GL accounts, right? And you’re trying to set up your three statement model, it’s like, Oh my goodness, I don’t have enough detail. Here you go talk to accounting. We need these GL accounts. Uh, so, so yeah. You know, for FP&A for sure. And just the general financial management Yeah. Starting with accounting and working your way out.
Paul Barnhurst:
Yeah. I’m laughing because I joined a company, you know, it was my first company where they just consolidated all their, uh, accounting from, they were being run as individual portfolio companies into one central kind of going operational and had a shared service brought, you know, 50 people in and companies on all different platforms. And I remember those very conversations, Hey, we need accounts to be able to track how much time we’re capitalizing. You can’t just back it out of salaries. We have no idea hat these numbers are and the percentages. And so I, I was laughing because I’ve been there, I’ve had those exact conversations with the accountants of, Look, this doesn’t work. We can’t track things this way
Ben Murray:
Yeah. Oh yeah, yeah, definitely.
Paul Barnhurst:
Totally. I a hundred percent agree with you that, that, that makes sense of that structured approach of accounting, looking at the P&L, the financials, then going into those metrics, looking at each of the different departments, the efficiency and building out and understanding, you know, how the business is performing on those metrics. So it’s a great approach. Makes a lot of sense. So I know recently you wrote a post on setting up an FP&A function in SaaS companies. Can you maybe walk through what, you know, the key advice was, maybe the highlights from the article?
Ben Murray:
Yeah, definitely. You know, and I wrote that post and that actually originated, you know, the kind of the concept when I was an in-house SaaS CFO where sometimes, right, your executive team earlier don’t really know what’s going on in finance and accounting. You know, they kind of have a general idea, but they are ot sure of all the details that go on. And then also talking to founders, you know, where they’re trying to understand, hey do I need an FP&A yet? You know, and, and they don’t have accounting. Accounting is outsourced and you know, what kind of value does this FP&A you know, initiative help? You know, how does this help my company? So I wrote the post you know, just to provide some clarity to SaaS founders out there of how FP&A can be helpful and just in general about what we do.
And you know, it’s, and I’ve been in a lot of FP&A departments. Some were like, Hey, Ben, come in, renovate this, revamp the FP&A Department. And, you know, I’d focus on people process and technology, you know, because we’re still very process driven with FP&A you know, have to have a clean process each month. Uh, you know, the people side, the talent, the technical skills, you know, the communication skills, the training that you need on the people side. And then technology becoming a huge part of just finance and accounting in general. You know, it used to be, hey, maybe we have a forecasting solution and a general ledger. Now you know, in my tech stack survey, I’m now surveying 13 different categories that apply to finance and accounting and it expands every year. So, you know, then the fourth, you know, so that was kind of that three-legged stool of looking at that, how is our FP&A team functioning, you know, what are we doing?
What do we need? And now added data to that, you know, it’s like, oh my god, you know, data, it’s like the same old thing, but still data very under leveraged in our businesses. You know, that now CFOs have to become the data steward and really be involved and influence those tech decisions, data decisions, because now all the data is so co-mingled that FP&A is really using, right? Using data you know, within the entire org. And we do need to be involved in that process. So people, process technology and data. And I look at that framework and what’s working, what’s not working, what do we have to improve in our department?
Paul Barnhurst:
Yeah. No, I, I like how you say that people process technology and, and data. Cause sometimes people lump data in with technology and they really, you need to look at ‘them together and alone. There’s, you know components where they obviously impact each other, but there are times when, you know, there’s things you can do. They have nothing to do with technology that fix your data.
Ben Murray:
Yes, definitely important. Yeah. All those data sources, whether we’re using great technology for it or not, there’s data in the org and yeah. How do we, how do we leverage that and bring it all together?
Paul Barnhurst:
Yeah. And you know, another thing we’ve seen a lot of, I’ve seen a lot of debate on LinkedIn and in companies, you know, and the last company I worked with before I went out on my own, you know, they had had most of IT sitting under finance . They actually just pulled the data and analytics team under finance. So do you, what do you typically see in SaaS? Do you have a kind of a recommendation there of, you know, what level the CFO should get involved in data and, you know, structure that maybe works? Just kind of your general thoughts about that? Cause there’s a lot of debate in that area these days.
Ben Murray:
Yeah. You see two camps, right? Where say IT reports up to the CFO and IT is that internal infrastructure, you know, the networks, the security or laptops and you know, know, and then those internal systems. You see that reporting up through finance. Sometimes once the org becomes big enough, it’s its own silo that maybe reports to the CEO. So you kind of see different org charts there. But I think regardless of the org chart, FP&A or the, the CFO have to be involved in those decisions when it comes to internal systems, the data. Because like I said, the data in SaaS is so co-mingled. You know, I work so closely with my CRM administrator, you know, those implementing things, you know, and that data comes down line to your accounting team. It eventually comes down line to your FP&A department. And, you know, whether it reports to you or not, you do need to be at that table and influencing those decisions.
Paul Barnhurst:
No, I totally agree. Especially you mentioned like the CRM. Finance better be involved in that process. Cause there’s so much data, especially in a SaaS business that you get from your CRM. I mean, in many, many cases, almost as important as your accounting data.
Ben Murray:
Yeah. And once you’ve done a CRM to accounting integration, you realize, oh my goodness, the, the efficiency, the data there, how important that integration is, especially in SaaS.
Paul Barnhurst
Yeah, I know that, that, that makes a lot of sense. So, you know, can you share maybe an example of best practice FP&A you have seen, you know, working with SaaS companies, maybe a tangible action from FP&A that, you know, demonstratively help the business where you’ve seen FP&A really bring that value to the company.
Ben Murray
Yes I think best practice FP&A really arounds, again, around that monthly close calendar, you know, and what, what are we offering? What are we doing? What’s part of our delivery each month to, you know, those internal departments, maybe customers, but those internal stakeholders, You know, and obviously, you know, there’s some pretty set stuff in FP&A we do actual the budget or actual, you know, forecast. Having the a variance analysis, which, you know, I remember my first FP&A job they typed up a cheat sheet of like, here’s how you write variance explanations. And I’m sure someone listening also has seen that, but right. Here’s the order, here’s the, you know, the, we’re using New Times Roman and all this stuff. Uh, you know, so I think it’s that process of what we’re trying to achieve and what’s that, you know, And, FP&A take time.
Maybe it’s just doing some variance analysis to start with. Then we, you know, get the forecast process in place. Then we have the monthly financial review where FP&A leads that review with the executive team. So you know, so it’s, it’s that process and what we’re trying to achieve. And again, are you starting from scratch or are you trying to revamp an existing FP&A process? You know, so that, again, it’s that, that framework that I follow: the people process, data, technology. You know and, understanding what we’re trying to deliver: deliver timely, accurate each month. Of course, you know, sometimes it doesn’t go right, you get the forecast wrong. But it’s, it’s that looking at that deliverable each month, you know, that, uh, you know, we are providing value in that and not just, you know, spinning our wheels producing reports.
Paul Barnhurst:
Yeah, I know that, that’s a good point. When you talk about process, and you mentioned getting the forecast wrong, it made me hearken back to my first experience in SaaS. I had built the budget and I was at the time serving, I was doing two roles. I was supporting the CFO for everything in the US and they’d given me a business as we were trying to hire somebody. And I hadn’t done it. I’d never done SaaS before. I was figuring it out. And we got the calendarization and we underestimated our churn. And the first month out of the gate, I think churn was like three times what we had forecasted. I’m like, there goes the budget for the year, we’re not catching up. Because that cumulative impact of being that far off in 12 months, it was, we were done. And that was not fun to explain that one in month one.
Ben Murray:
No, I think once you’ve been in FP&A long enough, there are those times where yeah, you have to go and admit like, Yeah, we’ve really messed up this assumption, had a formula or something. Because that’s right, it’s worst nightmare that you do the budget and you’re doing variances for that first fiscal month. Let’s just say it’s January and actual, the budget is way off in a certain area, and you and your heart drops, like, Oh my gosh, I forgot to add all contractors to the budget or whatever it might be. Or got expansion wrong or churn , like you said, you know, so that’s everybody’s worst nightmare in FP&A you know? But again, it takes time. You know, if you’re coming into an FP&A role for the first time, you don’t have that intuitive sense of the numbers. That builds over time, where then you can tighten up your forecast. You can tighten up your budget where budget is within 5%, you know, for the revenue the year, Right? Because you’ve got all those good inputs, especially for SaaS, you know, the new customer acquisition rates, you know, expansion numbers, downgrade numbers, churn numbers, reactivation numbers, all those layers of MRR that you need to produce an accurate revenue forecast, for example.
Paul Barnhurst:
Yeah. No, that, that, that makes a lot of sense. And what advice, just kind of we were talking about a little bit, would you offer to somebody when they’re in that experience where they all of a sudden look at the numbers, say, you know, in January and it’s like, I forgot, you know, contractors or I messed up expansion, Or what, what advice would you give somebody when they’re in that situation?
Ben Murray:
Yeah, and you know, I’ve been there and I think, you know, one, when you notice that, you know, you have that moment of panic and then, you know, then it’s, it’s going to your boss and FP&A whether that’s your manager, director, whoever it might be, and just say, Hey, here, here’s what happened. You know? And, and you just have to admit that because Right? That’s an important thing going forward in the process. And, you know, and maybe you have to live with that variance for the year. Maybe they’ll let you fix it. But I think you, you just gotta own it and, and see, you know, what are those next steps? You know, can we fix this or am I going to be explaining this all, all year?
Paul Barnhurst:
No, I, otally agree. It might always, the best way is own it. I’ve seen people that try to find a way to cover it and just, it never ends well, nor is it the right thing to do. Bosses always going to be more understanding if you’re just upfront and say, Hey, here’s what happened. I own it. I made a mistake. Here’s how I can, you know, here’s proposals to fix it and move on.
Ben Murray:
Yep. And I think if you’ve been in FP&A long enough, that’s, that’s probably going to happen at some point.
Paul Barnhurst:
Oh yeah. I know I’ve had, I’ve had plenty of, more than I care to remember, but agree with you. Anyone who spent a career in finance or FP&A and a just career in general, you’re going to make mistakes.
Ben Murray:
Yep.
Paul Barnhurst:
And unfortunately, with budgets, when it’s numbers, it, you know, it can be hard because you know, that impacts so many downstream things that, that panic sets in. So kind of talking about that, you know, we talked a little bit about just those, those type of failures. You know, I actually kind of funny, I think it was just yesterday, I wrote a post on LinkedIn talking about how you know, failure really is an opportunity to learn. So do you have an experience maybe in your career where you’ve had a failure with an analysis, you know, with a budget and implementation that really taught you something that, you know, was really a good learning experience for you in your career?
Ben Murray:
Yeah, I think, you know, as far as those learning experiences, right? It’s, you know, I think it starts out on the technical side, like the budget mistake, the forecast mistake calculation errors. And right. In your FP&A career early on, you’re building those technical skills. You’re learning the business, then you’re learning how to communicate. You know, I think for me, of course everyone’s going to have those technical errors, but really is learning that communication process. And really, f there was a failure, uh, uh, mistake, our learning thing on my part, it was on the communication side, you know, and constantly communicating, you know, And, also, you know, it’s like communicating to your bosses, whoever that is, if it’s the board, if it’s the CEO, if it’s the FP&A manager – always keeping them informed, you know, and learned that I could have done better in some areas along the way.
Uh, you know, and, and, you know, because we build the technical side mm-hmm. <affirmative>, and then, Right. The real art is delivering that story. And also looking back at my career of just not voicing my opinion enough. You know, where it’s like, Hey, if I’m the director of FP&A, it’s like they wanna hear from me, Right? And you learn that over time, but you kind of look back and, and say, Yeah, I, you know, if I didn’t get that CFO position, you know, because I just wasn’t proactive enough, I didn’t communicate enough, I didn’t really, you know, push my seat at the table.
Paul Barnhurst:
No, That, that’s some great advice about being proactive and sharing your opinions, especially FP&A, that’s one of the things we’re hired to do. And if we’re quiet and just kind of in the background, then we’re forgotten about. You know, we don’t, we don’t have that seat at the table. So let’s say somebody in FP&A you know, they wanna improve their communication, you know, as you talk about this key skill, obviously, what advice would you, would you offer to them? Obviously there’s tons of resources out there for the technical, I want to learn Excel, I wanna learn the SaaS metrics, I wanna learn, you know, financial modeling, but you know, you don’t see as much talked about or focused on the communication side. So what advice would you offer to somebody who’s looking to be a better communicator?
Ben Murray:
And that’s, yeah, it’s a hard one because you learn that a bit on the job, but I think one, it’s like, who’s your audience? You know, and, and is it yet that divisional manager who really doesn’t have much of a background in, in finance,. You know, when I was working in the airline industry and say, supporting the, the tech ops division or the maintenance division, )the mechanics) maybe they don’t have that finance background. And you’ve got to also educate, right? So who is that audience? Do I need to educate? Do I need to help? What do they need from me as an FP&A analyst? You know, for example, you know, so knowing your audience and also keeping it simple, I think where things go really bad, you know, whether you’re a CFO or analyst is where you confused, you know? So keeping it simple because once you start confusing, it’s over, you know, it’s lost.
That conversation is over or that presentation is over. Uh, you know, so I think FP&a Is who, who’s your audience? What are you trying to communicate? What numbers are important to them, You know? And, and also as we start out in career and FP&A we’re so in the weeds, right? We get into the details, we lose the big picture, we lose that macro view. And, you know, I, you’ll learn this on the job, but, you know, just taking a step back, looking at the numbers from a high level, what’s important? What do I want to communicate? Because I think it’s common with analyst. You just get so into the weeds. You lose sight of what you’re actually trying to do. Say what That analysis, that forecast, that number that you’re trying to present.
Paul Barnhurst
No, that’s, that’s a great point. And I love the part where you said, you know, kind of stepping back and getting out from the weeds, because I know I’ve been there, and it, you know, it, the more you move up the ranks, the more you have got to be able to speak strategically and look at the big picture. You still may get into the details, but you have to learn how to communicate it at senior management’s level.
Ben Murray:
Oh, definitely. And how many, you know, analysts, the manager have gone to their boss and present that analysis, and right away they point something out, right? They’re thinking big picture, and you’re like, Oh my goodness, how did I miss that? You know? So you, you just learn that in time and just having good feedback from, from your, from your, your managers, you know, to improve as as an FP&A pro.
Paul Barnhurst:
Sure. No, it makes a lot of sense. So, kind of switching gears here, we have a few questions we like to ask everybody a little more on the, you know, kind of fun and personal side. So the first one, what is something unique about you that you can share with our audience? Something they wouldn’t find online?
Ben Murray
Yeah, I think, you know, I mentioned this earlier in the, in the show is, is actually I did a stint as a mainframe programmer. So I was a COBOL programmer, you know, before grad school. And, you know, was really, I think really helped me in my career just to be able to manage large data sets. Uh, you know, and there was funny was, this was late nineties where the, of course there’s Y2K but there was just a demand for COBOL skills to be able to program and mainframe the mainframe language because all that, that skillset was retiring. Uh, so did a little stint as a COBAL programmer before going to grad school.
Paul Barnhurst
Yeah, no, it’s definitely a different one. One you not, you don’t see a lot of All right. So here, you know, Datarails is a big fans of Excel. They’re an FP&A platform for Excel. And one question we’d like to ask all our guests we have a little fun with is what is your favorite Excel, you know, formula function kind of feature, and why?
Ben Murray:
Well, for anyone who’s downloaded my templates, you know, I’ve got tons of V lookups in there, you know, so that’s just a standard, you know, Vookup, uh, you know, super functional. Of course now we got the X lookup, but, uh, yeah, v lookup probably top the charts. But you know, in, in my process in in Excel, it’s, it’s tons of V lookup, SUMIFs and INDEX MATCH uh, you’ll, you’ll find in my forecast models.
Paul Barnhurst:
Yeah, I think those three are probably three of the most common. You’ll find those some ifs mm-hmm. <affirmative>, some kind of look up, whether it’s X lookup, V lookup, index match, whatever kind of lookup you’re doing, and then maybe some if statements here and there, depending on how you’ve built it. Yeah. Yeah. I, I agree with you. Those are very, very common ones you see. So I think those are ones everybody likes. So here we have just, you know, kind of one final question for you before we let you go. So say someone was starting their career, and we’ll say this specifically in SaaS FP&A. So, you know, they just barely started it, maybe fresh out of college. What, what advice would you offer to that person? What career advice would you give them?
Ben Murray:
Yep. So, yeah, I mean, that was one big thing, you know, is the industry. So if you’re just focused on SaaS one, I think it’s, it’s learning the language of SaaS, the terminology, you know, that’s a big thing, otherwise you’re going to get lost, you know, So that’s, you know, understanding what’s a booking, what’s growth, what’s retention, You know, what’s payback, what’s CAC so you can understand, because those are metrics that you’re going to have to implement. So one is the language of SaaS, and then two, whether you’re SaaS or not, is just those good technical skills of, you know, of whether you’re using Excel or Google Sheets. I’m a Excel guy. Uh, but, you know, be able to have the technical skills to be able to manipulate data, you know, to give, to be given unstructured data and to make something out of it. You know? And that’s, that’s the, the big thing in FP&A and that learning progression is that you then become a little bit self-sufficient in the FP&A roles. So you’re not always seeking that, that help out from your boss, you know, so the technical side, uh, but then just learning the terminology, uh, the metrics that are going to be applicable and into your process.
Paul Barnhurst:
That’s a lot of great advice. I love the, you know, particularly for SaaS was learning the terminology, learn the metrics, and then just in general is learning how to deal with big data sets. Mm-hmm. <affirmative>, learning how to work with data, boil it down and synthesize it, find trends and bring, bring those insights to the business and recommendations. Cause yeah, it takes time to learn how to work with data and, you know, the data sets as, you know, as I think everybody knows, are only getting bigger. And that’s not going to change anytime in the future.
Ben Murray:
No, definitely not. Well,
Paul Barnhurst:
Thank you for joining us today, Ben. We really enjoyed having you on the show. If our audience wants to learn more about you, what would, where would you recommend they go or what would you recommend to them?
Ben Murray:
Sure, Yep. They can check out my blog, have tons of resources and templates that’s at thesaascfo.com. Uh, you can reach me there and then download all my resources, uh, for my blog.
Paul Barnhurst:
Great. Well, thank you again for your time today, Ben. Really enjoyed it.
Ben Murray:
Yeah, thanks Paul. Enjoyed it.