Are you starting to think about your budget for the next year? Stop right now, argues Mikus Krams. As a former senior director of strategy and finance at Chili Piper, he described budgets as a shackle — you’ll be held prisoner to the assumptions you make for the next year. Instead, in this episode, Mikus Krums, the B2B Saas finance leader turned co-founder of Trace Space, says budgets are unlikely to be relevant for small agile companies. He tells Paul Barnhurst: “Let’s say you’re doing some activity and it’s yielded you some results. If halfway through the activity you figured that it’s not working, why would you still keep pushing it? But if you have a budget, that’s exactly what you are doing…it just felt silly to be living that way.”
In this episode Mikus describes
- Bottoms up planning as the most impactful strategy for agile B2B SaaS companies
- The reason that budgets are bad for business
- ROI mindset as core to his finance thinking
- Managing incentive structure through a Rev Ops approach
- How on target earnings are sometimes more mirage than reality
- Managers as “powderkegs” and “snipers”
- The path to moving to a continuous forecasting methodology
- His biggest failure in his FP&A career
- Banking as a powerful route to FP&A career success
- The importance of lunch with business leaders and individual contributors in a business
Read the full transcript and blog below
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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 Datarails, 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 and a I am thrilled to welcome today’s guest on the show, Mikus Krams. Mcu, welcome to the show.
Mikus Krams:
Hi, good to be here.
Paul Barnhurst:
Thanks for joining us. So he comes to us from Latvia. He currently works as the co-founder at Trace.space, and he earned his bachelor’s and master’s degree from Rotterdam School of Management. So if I could have you just tell us a little bit about yourself and your background, just if you could introduce yourself to our audience?
Mikus Krams:
So I studied my bachelor’s in Rotterdam. I did my master’s in finance. After that, I went to investment banking in London for a few years. Then more recently went to back home, Latvia, did a bit of VC, did my, let’s say, first startup, which failed and didn’t go anywhere. Then joined Localized as a very early employee looking after finance and operations. So I’m trying to figure out how to make everything work in this high growth environment. And then more recently I was a Chili Piper, which is another B2B SaaS company. And as well kind of initially looking after revenue planning, but then more broadly after finance and a bit of strategy. So now I, since kind of end of January, started my own business with two other co-founders in the requirements management space. So it’s another B2B sales company. That’s what I’ve been doing. That’s what I love.
Paul Barnhurst:
Sounds like you have a love for this, the startup space, those early day companies and B2B SaaS. Is that
Mikus Krams:
Yeah, that’s correct. That it felt really exciting and I kind of never got out of it. So I’ve been thrilled to be here.
Paul Barnhurst:
Well good, I’m glad it’s worked out for you. That’s what we all want to find is something we love doing. So it looks like you started your career working in transactions and restructuring that’s kind of investment banking. Can you maybe talk a little bit about that experience and what that was like?
Mikus Krams:
Yeah, so before I went into banking, I did a year in KPMG in Transactions Advisory. It taught me a few good things, but I thought the pace was a bit slow. So I went back to my masters and then jumped into banking. Actually, I found banking is obviously challenging because the work hours are pretty brutal and there’s a lot of work, you know, kind of prioritize work all the way. But it did teach me a lot. I mean the, it’s not just the technical skills, but also the emotions of going through these large transactions and the entrepreneurs, it could be something that they work their whole life for and then suddenly they come to this transaction and they’re selling the company and it’s really, really exciting. And honestly, I would recommend anyone young and ambitious to go through those a few years and it’s just the best school ever.
Paul Barnhurst:
Great. Now thanks for sharing that experience there. It sounds like you learned a lot in that investment banking space and it helped prepare you for what you’re doing today. So sounds like a good experience. Sounds like on the transaction side you kind of recognized what you didn’t want to be doing long-term, quite the right pace for what you liked doing. Is that a fair statement?
Mikus Krams:
Yeah, that’s quite fair. I think the professional services companies are very good at setting a sort of ladder that you can climb, but the trade off and they train you and they take care of you. They can raise your salary a bit every year. But the trade off is that if you want to grow faster, then it’s very hard to jump over the steps in the ladder. And so got to then find a way where that’s possible and startups tend to be the place. But yeah, I think for anyone starting it gives you such a broad overview and such a, you can try so many things, learn so many items. It’s really helpful.
Paul Barnhurst:
Thanks for elaborating on that and that makes sense to me. And I would agree, very structured where startup right roles can be changing a lot. Your title may be one thing, but you’re doing something different. It’s changing every day, right? High paced, constant movement. And so speaking of that, obviously you just co-founded Company Trace Space. Can you maybe talk a little bit about how you came to found the company and what you guys do?
Mikus Krams:
What we’re building is essentially the new next generation of requirements management, which is this, it’s a category within product lifecycle management. When you’re building complex hardware plus software product, you need to the process a bit more challenging than agile. And very often you’re not able to build things in the Agile methodology. And so you need to write out all the requirements beforehand and then you need to follow trace them through. So you have to make sure that everything happens as you said it would, and you need to test these things through. And it’s all these, it’s kind of a very complex process. And personally, my two other co-founders, they were in this industry before and so they kind of have a lot of that earned knowledge. I came from outside, so I was the only one that didn’t know anything about it. And initially it took me a couple months to get convinced that this is, let’s see, worth the endeavor. But actually the more I dug into it, then I saw that it’s actually these amazing systems engineers that build some of the coolest products in the world. They’re actually using something that’s very, very outdated and we just saw this is somebody has to help them, somebody has to do something here. And so we decided it has to be us and it’s one of those boring and complex industries, but we wear that as a badge of honor because it means nobody else was tackling it and it’s worth tackling.
Paul Barnhurst:
Great, thanks for sharing a little bit about more on the story there and sounds like it took a little while for you to get comfortable with the idea different space, which can be rewarding and challenging at the same time as you have to learn a new space as you’re doing a new company. So previous to trace.space at Chili Pepper and you were the director of revenue planning, can you talk a little bit about that experience? I know you had a couple different roles, but just in particular kind of what it was like being over revenue planning?
Mikus Krams:
So revenue, actually, the way I joined Chili Piper was with the C EO, co-CEO Nicholas. I kind of said that I’m looking for a new role and I spoke to him and then we kind of discussed how we think about what planning is, what does it mean, how it should work, and I think he saw that our views are quite aligned and the way the methodology that he called is AO. So it’s kind of splitting it into three components. So the whole planning process is split into three components. So actions, yields, expected outcomes and actions is pretty much anything that you do that it could be things like hiring an SDR, improving, improving your marketing stats, launching ads. Then so that’s something you actually do. And then yields is what does that actually yield? So every SDR, so sales development representative can be yielding six to 10 meetings per month.
And so again, you measure how much actually was achieved and then expected outcome is kind of what you expect out of that. And then you measure, first of all whether you did the action, so whether you hired this SDR and the second, how many meetings did they actually achieve. And so that kind of creates that actions yields expected outcome model, which is quite different from budgeting, but that’s how we did it. And that’s what my job was, is actually is not to figure out what people will be doing, but it’s actually to gather this data. So I went into every business leader to ask what, so what are you planning to do in the next quarter, in the next year? What do you think that’s going to yield? And so we put it all together in a single model and that’s how we figured out what the revenue is going to be.
Paul Barnhurst:
It sounds like a bottoms up approach based on what actions are you going to perform, what’s the yield you expect from those actions, and what’s the outcome from those yields? And then you would measure against that.
Mikus Krams:
Yep, that’s exactly right. I think the fundamental pieces that you split it into, so it’s not like you say, oh, well we underperform in outbound because the SDRs didn’t do something. It’s actually, first of all, you check whether you actually did the actions. So okay, we actually didn’t make the hires, they’re just not yielding this or we actually, it’s not yielding, they’re yielding everything correctly. We just didn’t actually make the hires that we said we would. So it’s the logic that comes out is very, very different because you really try to split out these two things.
Paul Barnhurst:
Got it. So when you’re measuring it, you’re really trying to measure it in two areas. You’re trying to measure did we do the actions and if we did the actions, did we get the results from those actions we expected? That’s correct. And so then you can tell, okay, the shortfalls due to our actions or the shortfalls due to our assumptions on what those actions would yield.
Mikus Krams:
That’s correct.
Paul Barnhurst:
And so how did you find that approach worked? What did you see as the benefits of planning it and looking at it that way?
Mikus Krams:
For me personally, I feel that that’s probably the only right way to do things at the early stage if you’re growing fast, because it’s really hard to know what your life is going to be like even in the next three months. And that’s just an inherent part of the growth process. So if you think about the company’s lifecycle, at first you kind of go from we know nothing and everything is possible all the way to let’s say being a public company and paying earnings per share in a very predictable way. And in that process you grow and eventually you plateau. And when you plateau in your growth, you start focusing more on items that are lower in your P&L. So initially your valuation is only based on revenue growth, then it’s on let’s say gross profit, then it’s on ebitda, and then it’s on net income and EPS and so on.
What I observed is that the way you grow is you try to figure out what are predictable items that you can do. So let’s take for example, the same SDRs or paid ads in after a while, once you hired enough SDRs, you hit a ceiling and you can’t actually, even if you hire some more, you’re just not going to get any more opportunities in that month. So it means you hit the ceiling and it’s just a question being getting them more efficient. And so it kind of creates your baseline of outcomes. And then on top of that, you just keep experimenting. That’s how you create this layer cake of if you’re go to market of your revenue of things that are predictable, things that are unpredictable, and you try to make sure that over time you layer many, many predictable things to kind of grow your revenue.
Paul Barnhurst:
I like what you’ve said there, and I mean, as you were saying that I was relating that to my own business. An action might be I launched a digital course, what do I expect from that? Okay, if I had an expectation, it’s one of two things to caused my shortfall. Either I didn’t launch the course or I didn’t achieve the targets I thought I would with launching it. And then I can go back to the drawing board and say, okay, what actions do I need to do to increase that yield? What are the actions I’m going to take this month? And I can again, measure against that, say, okay, did I do that? Did I do the advertising? Did I do a referral program? Whatever it might be. And I could see at a very small level, especially kind of a business of one, which is my case, how it would be very easy to lay things out like that.
We often think that way and we don’t think of it as planning, but that’s what it is. You know, don’t think of it as budgeting. It’s not really a budget. You’re not setting a budget, but you’re planning. So that makes a lot of sense to me what you’ve said there. I could see where that approach could be really helpful, especially in those early days. So next I want to talk about, you wrote an article last year was titled Why We Don’t Have Budgets. And so obviously that’s a subject that’s near and dear to a lot of people in FP&A’s heart. So maybe can you talk a little bit about how the article came about?
Speaker 3:
Well, first of all, we were doing things differently. We figured that we are doing things differently and we obviously believed that it to be a better way of doing things. And so Nicholas decided to write about this company of the future that we’re building, and every kind of business leader was writing about their own. So for example, the head of sales, he wrote about why we don’t do discounts at Chili Piper. And so for me, he was writing about my work is why we don’t do budgets and why kind of budgets is a dirty word, a chili piper.
Paul Barnhurst:
Interesting. And so can you talk about why didn’t you guys do budgets? Maybe can you just talk a little bit about what led to that determination that there was a different and better approach for you guys?
Mikus Krams:
So we felt that budgets actually come from very large companies and probably very large companies. It doesn’t make a lot of sense, but the inherent problem is that the budget, first of all, let’s say you’re doing some activity and it’s yielding you some result. If halfway through the activity you figured that it’s not working, why would you still keep pushing it? But if you have a budget, that’s exactly what you do. You let it play out all the way, even if already that it’s not working. And the same thing, if actually you start something, you realize that this is giving you a large return, but you’re not going to invest more because you say, oh, well we’re out of budget and you have to wait until the next quarter or even the next year to actually do more of what already know works. And so it just felt silly to be living that way.
And I’ve heard from other people in other companies where let’s say they figured, oh, well we have a problem because we’re not, we’re data blind, so let’s get a data tool then. So we budget $5,000 for it, but it turns out that the data tool costs $7,000. And so now, oh, well are we really not going to buy a data tool because it costs $7,000 instead of five? But that’s exactly what budgets will do, and that’s exactly what happened at that company. But at the same time, everybody says, oh, well we’re struggling because we’re blind. We don’t know the data, but yet we can’t spend an extra $2,000 in this tool. So that’s the kind of logic that just didn’t make sense to us. So it’s every time you see everything that you do, you figure out whether that has a positive return or not.
And if it has a positive return, then let’s invest. And if it doesn’t, then let’s not even invest $1 in it. And I think the other sort of good thing is that it gives people a lot of ownership and responsibility. So because if it’s not like you say, Hey, here’s $10,000, do what you can. You’re actually saying here’s nothing, here’s zero. And unless you tell me what you think you’re going to do and how that’s going to ideal results, you’re not going to get anything. So then suddenly people are actually, well, there’s a lot of cool things I want to try. And the discussion is just much more rich and there’s so much, there’s so many initiatives. And because people know that they’re not restricted by some budget, they know that if something interesting comes up, they’re able to execute on it because after discussion, they’ll actually get the resources that they need.
Paul Barnhurst:
Tha thanks for sharing that. And one thing I found really interesting is the article, you started out with the first line saying if you’re an agile or fast moving company, which obviously a big mature company isn’t, right, is a general rule. Yeah. Agile, a fast moving company, a budget is like a shackle, you’ll be held prisoner to the assumptions you make for the next year. Maybe I think you’ve talked a little bit about that, but can you break that down just a little further for us what you meant by that statement?
Mikus Krams:
Let’s say you’re planning to grow a hundred percent right, which okay, now nowadays maybe a bit more challenged, but that’s kind of what the startups are looking at every year. If you’re saying you’re going to grow at a hundred percent, it means that you’re going to deliver the same amount of revenue. So you’re going to grow the same amount of revenue as you’ve done for all of your past years together. If you’re growing from five to 10, let’s say you grew to five million ARR over three years, you’re going to say, in this one year we’re going to do exactly the same, but you don’t actually. So of course the linear things, how much like each SDR is going to yield, but that’s because you know that from your first 5 million, but for the next 5 million, that yield is probably going to change.
But if you’re saying that that’s still going to work in as you go from five to 10, then you’re probably going to run into trouble towards the second half of the year because suddenly those assumptions don’t hold true anymore and you have to figure some things out. But either halfway through the year, you already know you’re going to fail in your, let’s say forecast and you do nothing. You’re just going to, so what do you do this second half of the year? You just live in misery or do you try to figure out a better way? So the whole point is that you need to have your eyes open every day and look around and see what’s happening and reevaluate all the time, not just once a year at the budget meeting.
Paul Barnhurst:
Got it. So just kind of a couple questions. So obviously you don’t have budgets, but is there a high level kind of plan or target going into the year that you know want to achieve and then you basically throughout the year used I think what you called the ROI mindset to decide what to invest in to achieve that? Or how do I think about, because obviously you got investors, there has to be some targets, there’s some planning that goes on, but maybe can you walk through how you do that connection from that plan to the way you deal with this forecasting approach?
Mikus Krams:
Of course. So the, there’s definitely targets, but I think the important part is that the targets, so let’s say fundamentally there’s two approaches, right? Let’s say top down where investors CEO gives you a number and say you got to hit it, and then you just backs all that, which I don’t think it fundamentally works, but it gives you a direction of travel. So you say, okay, well we kind of want to get to that a hundred percent, let’s see what we got to do. But then the real work is the bottoms up and it’s not actually, so we have targets, but the targets are not given by finance or the ceo. The targets are figured out by the business leaders themselves. So the head of sales says, okay, well how much can I deliver the head of marketing? They actually give the numbers to me and I just put them together in a model.
So it’s important also because I don’t want to be, it’s not me forcing something on to them because I don’t know. I’m not, if I was as good as they are in their respective fields and I’d be doing that, but I’m not. So I’m doing the finance piece, I’m just putting it all together. But it’s their numbers and it’s their sense of ownership that they know that, okay, well we discussed them. We figure out, okay, is this realistic? Maybe this can be pushed higher. So there is this discussion, but in essence it’s they own the numbers, so they set the targets and they deliver against their own targets, not against my targets.
Paul Barnhurst:
Got it. So it sounds like, if I’m hearing this right, the way to think about it is one, it’s the bottoms up approach. You get to that target of what you think you’re going to achieve. You have a plan that you can measure against. So hey, January, based on what everybody’s given us, we think we can get to a million. But throughout the year, you’re really not worrying about that initial budget. You’re making each decision based on, Hey, is this a good return? Let’s look at the ROI on that. And that initial target is just that it’s a target, whatever makes sense. Now that’s what we focus on versus what you often see companies very focused on, okay, we got to get back to the budget. Here’s the budget. It’s not in the budget so we can’t do it. Or Oh, we got to find the money from somewhere else. And so it’s really a mindset shift with a planning process focused on a constant return on investment. Is that the way to think of it?
Mikus Krams:
Yeah, it’s exactly right. I think the bigger challenge is that when you ask that of your executives, they also need to be mindful that say they don’t actually, okay, they don’t have to deliver a hundred percent year in year growth. They can do 20% euro in growth, but they need to be mindful that if that’s what they’re aiming for, then their equity is going to be worth much less. So their options are going to be worth much less and their bonuses and so on. So it’s kind of making sure that people are very aware of the context and what is valued by let’s say the investor community, and it’s that kind of, so you have to work with them as well. So you can’t just say, give me some numbers and that’s it. You have to say, well, okay, you’re telling me this, it’s likely that what if we deliver that, then the implication is something else.
So that’s this ROI mindset and it’s giving people a lot of everything that they could possibly need in order to make good decisions. The other kind of aspect of the R ROI mindset is that there’s never a shortage of money. It’s not about whether we have cash, it’s about the cost of capital. So there’s always more money out there. Sometimes you might have to sell off your hand, but it’s there. It’s always there. And it might be excessively expensive, but it’s never a closed market. I mean, that doesn’t happen if you’re a startup. And it’s just that, again, everything is possible, it just has a cost to it. So you do this balanced equation, you do, how much can we grow? What is it going to cost us if we grow faster, that’s going to cost us maybe more because we need to get more resources. That’s expensive. But it’s really having this balance since this, as every turn you try to figure out what is, we can do more, but what is it going to cost us and is it worth it? It’s building a portfolio of projects. So that’s the analogy.
Paul Barnhurst:
Which makes sense. When you mentioned that ROI mindset, return on investment, because that’s often how you think of portfolios, what’s the return? And it feels like, oh, as a finance person, there’s a lot of education you do here. It’s like, okay, well we can draw at 20%, but that means the equity you have is going to be worth 40% of what you know expected when you came in based on the original plan we put together. And so it feels a little bit like almost a continuous planning with a portfolio ROI mindset. So obviously you’re not throwing out the whole process and saying, Hey, we don’t need a plan. Just come to us when you have a good idea and let’s see what it looks like. They’re still measuring and performance, but it’s very much an ownership mindset, a bottom down, and let’s not be beholden to something we set up that frankly in most companies, the day the budget’s finished, it’s not achievable because things have changed
Mikus Krams:
Or it’s easily achievable. Yeah,
Paul Barnhurst:
Yeah, exactly. But it’s whatever number you finished with, it’s almost to a certain extent, often irrelevant when you’re done. That’s
Mikus Krams:
Exactly right.
Be for better or worse. And so I can see that I’ve always been a fan of more of a rolling forecast approach, and it’s just figuring out how you manage the incentives. And so a little bit around that because budget, I think a big part of why budget is set up the way it is, for better or worse, is the incentive structure, right? Okay, these are the numbers I need to achieve and if I get ’em, I know I’m going to get a big bonus. So I don’t care about anything else, it’s just getting to that number. So how did you guys manage the incentive structure without having the budget, that kind of formal budget process in place? How was that thought about?
I’ll put this answer probably in two parts, but the least less cynical part is about is that trying to take this, a lot of what I personally is kind of this rev ops approach is that you try to really break down what each person is responsible for, what is their conversion rate? You can only pay people based on things they can actually have an effect on. And so you try to isolate what that effect is, but also isolate, ask them only to do those specific things. So maybe on a specific example, again, let’s go back to the SDRs, the sales development representatives. Sure. What companies often would do, they would say, here’s, here’s the laptop, here’s a bit of a salary, just go get some meetings. But the problem is that there’s no scalability. You don’t know what works. So there’s no, actually, sorry, there’s scalability, but there’s no predictability.
And so if you wanted to add a third, a fourth to fifth, you wouldn’t know, cause you would just give them a laptop. So what do you, you tell them, here’s an account list, a specific sort of named accounts that you are going to go after and your responsibilities to book meetings, whether those meetings are of good quality is the responsibility of the person who created the account list, not the person who not the SDR themselves. And then in that scenario, you can pay them for meetings booked. And if somebody comes back and says, oh, actually all the meetings that you booked were of low quality, then you go back to the system, you go back to the manager, but you don’t go back to the SDR because they are actually doing exactly what you told them to do.
So it’s that kind of slight mind mindset shift that you say, okay, well can you have an effect on this? Yes or no? So we pay you based on that. So that’s the practical advice. The cynical advice is that all targets are a mirage because I think finance themes all over the world know very well that the targets can be a little bit above the target can be a little bit below. The question is for me, targets are about what kind of culture do you want? Do you want a culture where we’re always a little bit behind and we’re always struggling, or a culture where everybody’s always winning a little bit and we’re all happy. And really it’s just a never-ending process of trying to, I don’t think targets are, they’re not a performance management tool. They’re more like a cultural management tool. It’s sort of where do we end up, all of us together, are we happy, are we not? And because we saw in let’s say in the last years, a lot of companies, what they started doing for sales, for example, they started promising huge OTs, so on target earnings, but they already knew that those earnings are not achievable because maybe half the team only ever gets to that level. So again, it’s a mirage and whether you do that on purpose or by accident, but hopefully you do it on purpose because then you’re clearly trying to achieve some goal.
Paul Barnhurst:
Yeah, I like your example there of on target earnings. You see so often when you dig into it, you say, okay, OTE could be $300,000, right? Whatever. Just throwing out a number. And then you ask, well, how many people were above ot? 2%. Oh, okay. So 98% was below, so what was the average? And the average is like 160. So what you’re telling me is I have almost zero chance of earning OTE. So why Then there’s usually some kind of reason. So I do like how you said you want to try to create quick wins, and I can understand both approaches, the cynical that you mentioned and the non cynical with targets. And I’ve always felt that that’s probably one of the biggest things is how do you know best decouple targets from budgets to go to more of a continuous planning approach? Becausee I definitely think there’s some benefits of having that. Doesn’t mean you don’t plan, it doesn’t mean you don’t have targets and incentives and all the things that you do with a budget. It just changes the mindset and the approach, at least that’s how I kind of think about it.
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One other thing I wanted to ask you about from the article, so you know, talked about two distinct types of managers and some pros and cons to each of them. And I really liked what you mentioned in this framework. You said there’s the manager that’s the powder keg and the manager that’s the sniper. Could you explain that analogy, what you meant by that and kind of what the difference is between those managers and maybe the benefits and challenges they create?
Mikus Krams:
So actually that’s just to also kind of mention it’s a framework borrowed from Matt Robinson. Taking both categories of managers it applies to competent managers. So putting aside lack of competency, let’s just focus on those two just on competent people. So the powder kegs are the ones where you light the fuse and they just explode in every single, every possible direction. So you hire them, they’re competent, they’re excited, they know exactly what to do, they come in, they set up the processes, they buy the right tools, they hire the right people, all these good little things. And the first 90 days is just a wild ride of progress. And all these, you know get educated because they’re telling you what you’ve been doing wrong the whole time.
And I think that sounds all good, but the problem is they never stop to think whether the company needs that. So they need that as managers to prove themselves and let’s say their department needs those things, but whether the company needs them right now is I think still a question mark. And that’s where sort of snipers come in. So they are aware that there’s all these things that they could be doing. So the processes, the hires, the tools, but they take a bit of pause and try to understand whether the company needs this right now or maybe it’s something we do in 12 months. So the example I mentioned is NetSuite. So you’re coming in as a new CFO, it’s easy to say, you know what I’m going to do. Nothing works until I implement NetSuite, so I’m going to do that for 12 months and then talk to me again. But the reality is maybe that’s not necessary now maybe QuickBooks is just fine, just keep working with that and then let’s, when it really starts hurting, then you go to NetSuite. But just be mindful that is a large endeavor. And I think the problem is that as a senior leader, you really have to trust these snipers and not say, Hey, it looks like you’re not doing anything. It’s just no, they’re deliberately avoiding doing things not to distract the company as such.
Paul Barnhurst:
Thank you for that analogy. And when I first read this article, it reminded me a little bit, I worked for a large bank and they were talking about us versus another bank and they’re like one when making a decision, one just points and points and points very deliberate. And the other one just points and shoots, which is a little bit like the powder cake. It’s like, all right, we see the problem, just go tackle it whether it makes sense or not, whether it’s the right timing because it’s a problem. And so you just kind of run off and start solving them. And then there’s not always the strategic to it where the sniper, it’s very deliberate and you may not always see what they’re doing upfront, but over time you start to realize, okay, the progress is being made, it’s just being done in the right way, in the right pace versus just being done everywhere.
Mikus Krams:
Yep, exactly. And I think coming back to the context of the, the ROI mindset and the budgets and all those things, if you assume that money is infinite or it just has a cost, the one thing that is not infinite is executive attention and just like Hheadspace. So if there’s just too many things in your head, there’s not possible physically to put more things in. And so that’s why sometimes you really have to figure out what are the things we’re not going to do because it’s just not worth the head space for us right now. So I think it, it’s really actually important to really, really focus on, and actually what I loved was there was this video and somebody was talking about how Steve Jobs said that prioritization is not doing things you don’t want to do. It’s actually not doing the things that you really, really want to do. And that’s again, comes back, you have to value it. Is this a worthy destruction or not?
Paul Barnhurst:
And I’ve been learning that the hard way in a business. I’ve had more opportunity than I ever expected and I want to take all of ’em. And I’ve been slowly getting better at like, no, that doesn’t make sense, that doesn’t fit to who I am. Just close that door. As a good mentor of mine. Put it, strategy is about closing doors, it’s about limiting down the opportunities and being laser focused on what you need to do and when the times are right, yeah, she’ll occasionally open doors, but more often it’s about closing out the noise and staying focused than it is about opening up a bunch of doors and running through all of ’em.
Mikus Krams:
Yep, absolutely right.
Paul Barnhurst:
I can totally relate to that both on a personal level and just professionally in my experience. So I appreciate that. So last question around the budgeting process. And I’ve enjoyed this discussion, it’s given me something to think about and I think there’s definitely a lot of similarities with what you’re doing to the idea of the budget process. Well unshackling the things that make the budget process less than ideal, taking apart that target and recognizing that look, having a number at the beginning of the year isn’t maybe the best way to approach this, especially if we’re growing fast, we need to be nimble. So I’ve enjoyed this discussion. Let’s say somebody listening wants to implement the approach that you’ve talked about. What would you recommend for them? How would you recommend they try going about that or getting started?
Mikus Krams:
I think the best way is to increase the cadence of, in this case, budgeting. So if you’re budgeting yearly, try to do it quarterly. If you’re budgeting quarterly, try to do it monthly. Monthly might be a bit tough. So what you can do is just try to rebudget bits and pieces of the business. So if something is very predictable, it always does the same thing and you’ve kind of hit the ceiling and so exactly how it works, don’t touch it, just let it work. But if there are things that you don’t know, then you want to experiment with just rebudget those and add them into the plan. So I think that’s the best way. It’s really increasing the cadence of your evaluation.
Paul Barnhurst:
So it feels like, if I’m hearing it right, it’s really kind of moving more and more to that continuous forecasting methodology where you’re just on constantly revisiting your numbers. And what about mindset? What about if people are struggling with this idea, this O ROI mindset, any advice around that shift?
Mikus Krams:
I think on a practical level, the best way is to have the finance team educate the leadership, the rest of the leaders or if the people are ready to listen, do that. I did that for my personally as well. We had town halls and maybe once every six months I would actually prepare some slides and explain how valuations work, how the P&L works, what we’re doing with the forecasting, just to give people the context on what we’re up to here. I think that that gives people suddenly they’re like, oh, I understand why we’re putting these numbers together. I understand what they mean. I understand how they play into the larger organization. It’s really, it’s just this transparency and education, not education, just letting people what’s inside the FP&A department, showing them why you’re doing those things and why they matter and how it works together. I think that’s very, very helpful
Paul Barnhurst:
Tha thank you for sharing that. That makes a lot of sense, being transparent, sharing with what’s going on and making sure everybody’s on the same page and they understand the philosophy and thinking. So you moving on here, we have a few kind of standard questions we’d like to ask everybody. So I’d like to kind of move forward with those. And the first one here that we’d like to ask is, can you describe a time you have experienced a failure? And the reason I like to ask that is I look at failures as a learning experience, so maybe a failure you had at work and what you learned from the experience, what it taught you.
Mikus Krams:
So I think especially with in my more recent let’s say financial planning career, I think the failure that had one of the biggest effects was I kind of pushed this, I’m just here to gather the data. I’m not here to push targets on, I kind of pushed it maybe a bit too far. And so what I did is when I was producing this analysis, I would just put the slide decks, I put all the right things on there, but I wouldn’t actually call them out and say, Hey everybody, please make sure you pay attention to this because I just assumed that everybody knows and they’ll notice the right things. And it it kind of led to some people suddenly being, hey, I didn’t realize this has been happening for a few months. And I said, well, it’s in my slides. But yes, that’s true, it is in my slides, but that’s not helpful. If that’s important. It’s my job to actually call it out and to actually seek solutions and try to understand what’s happening before somebody else actually calls it out. And I think that was one of the things where it was hard to sort of say, oh, well it was there for myself because yes, it was there, but at the same time I had produced the output but I hadn’t ensured the outcome. And that was something that, yeah, I had to learn a bit the hard way.
Paul Barnhurst:
Thank you for sharing that. And I can see where that’s a learning experience where it’s like, okay, it’s my job to just present the information to ’em and they’ll f kind of figure it out from there versus help giving them the insights and things they needed so that they made sure they were a aware of potential changes that were happening. So appreciate you sharing that. One next question here. Moving forward, what do you see as the biggest opportunity and challenge for FP&A?
Mikus Krams:
I think the biggest opportunity is bringing in people who have never been part of the FP&A process. So if you push it, of course the head of sales, the VP of sales has always been part of the process. But I think with improved tooling and kind of ease of use, you can include not just maybe managers, but actually individual salespeople saying for they give their individual forecast that gets aggregated up to the common forecast. I think that’s a great opportunity. We’re really, yeah, it just will you have better outcomes because people will be more involved. I think the challenge on the flip side of that is that obviously that kind of system is complicated to set up and there’s a lot of data and there’s data hygiene and whatnot. And so again, in order to do that, you’re going to have to have some very smart data people that can really set it up that not only understand data piping, but they also understand the business side of things. And I think that can probably take easily a year to get that growing. But sure, I think once you do get there, it’s great, but it will be challenging.
Paul Barnhurst:
Tha thanks for sharing that. And I could definitely see where everybody having ownership for their number, there’s definitely advantages to that and being able to have that very granular kind of bottoms up. And I could also see how that’s a big challenge. That’s a long process, a lot of data, so I appreciate you sharing that. One next question here, and this is one we like to ask everybody, is what is something unique about you that you can share with our audience?
Mikus Krams:
Something you probably unique or interesting is that I, I’ve lived in six, seven countries and on three continents, so I’ve seen a lot and I think that’s quite unique because when I was living in Geneva in the international school, everybody was doing that and everybody had lived in so many other places and speaking so many languages. But when I moved to other places, I realized that actually that is quite unique and there’s kind of a relatively small privileged group to be able to see all those things in the world.
Paul Barnhurst:
I know for myself, I’ve lived in one country, lived in a couple different places within that one country and I’ve been traveled to other countries. So I can definitely say that’s unique from my experience. And most people I know to have lived in five, six countries. I have a few friends that have lived in a lot of different countries, but not many. So I would say that’s unique. Next one, this is a question we ask everybody. Our sponsor is Datarails. They’re big fans of Excel. So we like to ask, what is your favorite Excel feature function formula? Your favorite thing about Excel?
Mikus Krams:
So if I want to say, if I want to sound smart, I say Offset, but in reality it’s V lookup and pivot tables. That’s like if those are my favorites, because it tends to be that you kind of, there’s a large dataset I need to get an answer, I just download it and I pivoted, I VLook it up and then I get my answer. So that’s the reality. Those are two my favorite functions.
Paul Barnhurst:
Well, you’re in good company because I know those are two of our top three answers we get from people. I know V Look up and pivot PA tables are both right at the top. I can’t remember if they’re one and two or two and three, but
Mikus Krams:
They just work. They do the job. So
Paul Barnhurst:
They do lookups, whether it’s V lookup and next match, whatever lookup you’re using lookups and summarizing your data, they’re at the top of the list and V lookup and pivot table do that. So I think everybody can appreciate that. So let’s assume somebody’s starting their career today in FP&A. What advice would you give them?
Mikus Krams:
So I’d say if you haven’t started your career yet in FP&A and you’re still thinking about it, I would say do that. Do the banking route, do the consulting route. I think you learn a lot and a lot of those trainings are super expensive and the companies pay for them. So you’re just learning on somebody else’s dime. And the professional skills you learn, they’re very valuable. And the work ethic just do that if you’re actually already in it. I would say try to learn data. That’s something I haven’t done to be honest. But I think the sooner you’re comfortable, let’s say stepping out of whatever Excel can do and being able to do SQL I think it would just very, very helpful in the future on a more professional skill level, what I’ve found to be very, very helpful is actually have lunch or just have chats with the business leaders to really get to know them.
How do they think about it? How do they see you? And the next thing you need to do is also have the same lunches and chats, not just with the leaders but also the individual contributors because then you can see how someone saying, we got to deliver a hundred this quarter, how that gets translated to the leaders and then how that gets translated to the individual contributors. And that message is not a linear, it’s there’s all these sort of noise in the middle and the way that people see it is very, very different from how it actually gets translated into you. So it’s, and actually learned this in forensics, I had a one forensics project is that you got to ask the same question to different types of people and then you actually see how information travels through the organization.
Paul Barnhurst:
Yeah, when you said that, I don’t know if you’ve ever played the game telephone.
Mikus Krams:
Yeah, it’s exactly
Paul Barnhurst:
Right. As a kid, the idea was right, you say something, you give it to the next person and by the time 10 people have heard it, what they said is almost completely different than what person one said. So that whole translation. So yeah, the more you can get to know the different people in the business, the more you can understand the challenges and how different people are putting their own filter on it and translating what’s going on and allows you to provide greater insight and help create value for the business. So I really like that one and good point. I think a lot of people that have come to fp and a have come from a banking route. So it’s definitely something people consider the consulting or the banking. And then very last question here. If someone wants to learn more about you, get ahold of you, what is the best way for them to contact you?
Mikus Krams:
So you can find me on LinkedIn, that’s where I’m most active on. My handle proudly is https://www.linkedin.com/in/ebitda/ It’s been for a few years, so that’s how you find me.
Paul Barnhurst:
I didn’t realize it was Im, I think I may have saw that when I was looking, but that That’s great. Yeah, I snagged the fp and a guy, so that’s my handle for LinkedIn. So I had a little fun too. Yeah, it’s always good when you can get a unique handle like that. Well thank you so much for joining us today. I really enjoyed chatting with you and spending a few minutes and we’ll let you go so you can enjoy your evening. I think it’s probably what about seven, eight o’clock for you now?
Mikus Krams:
Yeah, it’s eight eight. Eight o’clock. Yeah,
Paul Barnhurst:
Eight o’clock. So we’ll let you enjoy your night. But thank you again for joining us and thank you. I look forward to our audience listening to this.