OnPlan's David Greenbaum on Improving Financial Forecasting

David Greenbaum of OnPlan - Podcast Transcript

Scott:	Hey, it’s Scott Orn of Kruze Consulting, and thanks for joining us on Founders and Friends for another awesome Podcast. Let’s give a quick shout out to the Kruze Consulting accounting team. We’re very fortunate. We have a ton of people at Kruze who work on the monthly books for our clients and get them all set up, due diligence ready, rocking every month answering all the clients’ questions, making all those adjustments, and there’s no better moment for a founder and for us really when the founder says, “Hey, I think I’m going to get a term sheet. Are my books ready for diligence?” And we get to say, “Yes, they are. Fire away. Send them over. Give them access.” That is a great feeling. It’s the feeling that lets us know we’ve done a job very well done, and nothing is better than watching that cash at the bank account. So, if you are a venture-backed startup, you’re going out to fundraise, maybe check us out. Check us out at kruzeconsulting.com. We love what we do. At taping here, I think we have 575 clients. Clients raised over a billion dollars this year, so we know what we’re doing, and hopefully we can help you be successful in your fundraise. All right, let’s get to the podcast. Thanks.
Singer:	(Singing) So when your troubles are mountain in tax or accounting, you go to Kruze, Founders & Friends. It’s Kruze Consulting, Founders & Friends with your host, Scotty Orn.
Scott:	Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. And today, my very special guest is David Greenbaum of OnPlan. Welcome, David.
David:	Thank you so much, Scott. Super excited to be here.
Scott:	We’ve been friends for a long time. You’re a Kruze client. We appreciate that. You’re one of the people I think who saw the opportunity in financial projections, FP&A delivered through a SaaS service. I think you’re literally the first person I met that was thinking about this. And so we’ve always stayed in touch and OnPlan’s a great product and I wanted to have you on the podcast so we could promote you a little bit.
David:	I’m excited, excited to be here and I remember talking with you about OnPlan way back right at the very beginning actually, you and Vanessa actually both.
Scott:	I think we were four people at that point, and you were probably four people.
David:	I think I was [crosstalk]-
Scott:	Getting together changed the world, but we’ve both grown a lot. It’s been good.
David:	100%. I think you were in a shared space at the time. I think I was working from home. It was early.
Scott:	We rented an office. We rented four desks at thoughtbot, and actually some people at thoughtbot still listen to this podcast, so they will like this. But I remember meeting with you at one of their lunch tables, so that’s very, very happy memory. Well, maybe you can just start off by telling the audience how you had the idea for OnPlan and how you made it happen.
David:	Absolutely. So, I think the first thing I’ll tell you just in terms of my career, I would say the summation of my career is I’ve been pretty much a 20-year Excel nerd. So, I’ve held a variety of sort of roles in the finance department. Started off financial analyst and sort of continued to work my way up the FP&A food chain. Eventually, I guess about 10 years ago, I was working at a company in Miami at the time, a company called ILG, Interval Leisure Group. We had the opportunity… We were a portfolio company of IAC, which is owned by Barry Diller, and we had the opportunity to buy a hotel chain in Hawaii. Yeah. And I, all excited about the due diligence, and it was a big project to go ahead, and I think they had 30 properties. It was a decent sized hotel chain. It was not just going to be the numbers. It was going to be like kick the tires on the play that we want to do. And so basically, I was the one who was responsible for building the financial model to support the acquisition pieces. And we were-
Scott:	I can totally visualize the 30 different tabs that roll up to one… 30 different tabs for 30 different hotels that roll up into one monster aggregated tab.
David:	It was a beast.
Scott:	My financial modeling background. Yeah.
David:	Totally. It was a beast. It was something that was bringing my laptop to its knees. And I remember I got called into the office of the CEO of our company to prep for our meeting with Barry Diller. And I would say our CEO I think both through visually or physically and temperamentally I would say, was sort of a cross between Al Pacino and Harvey Keitel. He was sort of somebody who can sort of smile, and he’s smiling at you but you never knew when he would snap, so sort of his thing. There was another-
Scott:	He might be planning your murder or something like that.
David:	Yeah, he was also a physically… He looked like Al, sort of like their love child, but also temperamentally I think was there as well. So were going over the forecast projections, and he also was a really sharp guy, and he was like, “The numbers aren’t quite right,” or something. Turned out that I had sort of I think swapped a monthly driver for an annual driver in someplace in the model. And so, super mortifying moment for me. I had to go back to the desk, recalculate everything, and ultimately, I still got to present to Barry Diller and the deal went through. But it left an impression on me that how fragile… These models that you’re building, it’s like you’re doing software engineering, but where-
Scott:	Totally. Totally.
David:	But your QA is like Harvey Keitel. Your QA is Al Pacino. Like the CEO of the company is your QA team.
Scott:	I don’t know if you know this but I did three years of M&A investment banking from ‘99 to ‘02, and all these memories are flooding back as you’re talking about this stuff. Because I remember literally staying up all night a lot of nights and at 2:00 in the morning, the model would crash and my laptop would blue screen, and I would lose three or four hours because Excel wasn’t very stable in 1999. You know? And I’m just having all these memories that we lived parallel lives on this stuff, you know?
David:	Yeah, I feel like… I think it’s something that a lot of people relate to, and I think ultimately, I did a different startup. I realized that wasn’t necessarily the path that I wanted. I realized I was an entrepreneur, wanted to build a company. And actually, so in order to finance the next company I started, Boost Media, I actually, so I quit that job and I bought a domain called financialmodel.net and was buying stuff, an AdWords account, was buying ads to build people financial models. And I felt like [crosstalk]-
Scott:	Wow. That’s awesome.
David:	I was super hard core, like I said, 20-year Excel nerd really. And then, ultimately, we got funded and was consuming a financial model in a high-growth startup. And so, I feel like the culmination of sort of the mortifying moment of realizing my model was incorrect a day before presenting to a big presentation with the CEO and sort of both building and consuming financial models, I think the culmination of those experiences is what led me to want to start OnPlan, I would say.
Scott:	That’s super cool. And maybe give the quick summary of OnPlan for those… How are you making startups’ and middle-market companies’ life easier on the financial modeling side?
David:	Exactly. And that’s just what you said. Our goal is to make your day-to-day life easier as a financial professional in a SMB/mid-market company. We want to make it easier in terms of the data integrations, in terms of data visualizations, in terms of rolling forward, in terms of making it a less error prone environment, a more collaborative environment. And the way that we’re doing that is we’re marrying spreadsheets to your native sort of working environment, a spreadsheet, with a powerful multidimensional database on the backend, and then with a native BI interface. A discriminative FP&A BI interface. And so, you get spreadsheets, BI, plus powerful database. And that’s really what we’re bringing together.
Scott:	It’s really cool. And I think the cool thing about you guys is it can make things easier and speed things up, but also the flexibility of OnPlan. The best example of that is the ability to actually work with a spreadsheet at first. If you’re a person like me who’s nervous about how long it will take to learn a new SaaS tool, I can start with a spreadsheet and baby step my way into the SaaS tool until I’m just working with the SaaS tool. But to me, that’s flexibility, that’s listening to your customer, that’s making your customer’s life easier. I really like how you guys approach things.
David:	I think one of the key insights that we had, and I think something that’s, again, you can probably relate to, is anyone who’s worked extensively with Excel and with spreadsheets, you have sort of this love/hate relationship with a spreadsheet. And on the love side of the ledger you have familiarity of sort of your native coding language as a finance professional. You have the flexibility. You have billion-dollar companies that are still running all their core FP&A processes in Excel. You have extensibility. So that’s on the plus side of the ledger, on the love side. And then on the hate side you have that it’s a great single-user experience, not a great collaborative environment. And another thing, just a general sort of [inaudible] or critique, I think people’s Excel financial models are terribly under visualized. So, I think one of the great ways to sort of avoid errors is to visualize as many of the dynamics of the model, make those visualizations super painless because the errors often manifest themselves as discontinuities or slights. But so, you have it’s not a great visualization medium. They’re not connected to your key data sources. And then generally spreadsheets are Swiss Army knives. You use them for everything from what do I want to name my baby shopping list, et cetera, to doing your FP&A processes. And they’re not really… They don’t make the day-to-day… Things like rolling your model forward and variance analysis take a lot of effort and are manual, and therefore are open to error. And so, you have this sort of love/hate relationship. And the idea with the software was how do we keep what people love about the spreadsheets while remediating the deficiencies? So that’s why we took the core spreadsheet, put a visualization layer on top, and then connected a database so you can still your Excel syntax and formulas while sort of improving the collaboration, visualization, et cetera.
Scott:	Everything you said there I agree with 100%. The love/hate, the single-user experience, the way you find errors is the visualization, the discontinuity of a month spiking or your example of you’re using an annual driver instead of a monthly driver. But then also it’s awesome to be able to access things on the web and being able to… That’s what OnPlan’s really great at. I can share it with my coworkers. The board can look at it. You’re prepping for a board deck, you have people who can huddle around it or virtually huddle around it. I really give you a lot of credit for seeing… You saw this seven years ago or eight years ago. It’s pretty amazing.
David:	I appreciate that, but I think what’s also true is that whereas FP&A people love spreadsheets, that’s not necessarily true of the rest of the company. And so, our goal was to build a product that would not just be for the finance folks, but that would be this… Ideally, finance is best as a team sport where you can decentralize the planning, have everyone collaborate, understand in real time the give and take, and the rest of the departments, you present them a model and they freeze. And so, we want sort of the web-based side of it. You can have this great contributor experience for your head of sales, for your head of marketing, et cetera, for the CEO reading and sort of consuming the model. So, I think another thought here was to have this amphibious if you will, sort of modeling platform where you can sort of model in the native spreadsheet, but also where you can use a true SaaS application and not realize that you’re interacting with a spreadsheet because it just looks like a thousand-
Scott:	Also, you said something there what I totally agree with and respect, is that you want to get other department heads involved in the projections process and owning their numbers and signing off on their numbers. And there’s a little bit of when it’s someone’s hyper-engineered Excel model, it’s hard for those people to do it, and they have a deniability of being responsible. You understand… So that’s what the power of putting it into a web-based tool and making it easy to interact, easy to read, easy to tweak, because all of a sudden that built-in excuse is gone, and the company can operate at a much healthier way. So, I think that’s actually… I’m sure you thought about that when you started the company, but I got to believe that’s one of those epiphanies that’s accelerated in the last year where people, or last couple of years where people really are probably messaging that to you.
David:	Yeah, I think when you’re building one of these software platforms, you really have to think who is your customer. And the reality is you have multiple people that you’re designing for. The Excel spreadsheet is mostly designed for the builder. And even in OnPlan, I feel like we are very builder first, but as in like the FP&A analyst as opposed to the CFO. I think you win by making the FP&A analyst more productive, and ultimately, they’re the ones who are in the tool day in, day out. But you can’t lose sight of the fact that you really want this to be a cross-departmental tool and it needs to be approachable. You need sort of different UI layers for different people in the company, I think really, and it’s tough in spreadsheets.
Scott:	That’s a really good point. And I think before we turned on the mics you were talking about… You had a really good phrase for the board meeting and how people… Can you repeat that and tell people what’s behind that?
David:	Yeah. I think the other key thing that’s driving the vision for the product is we’re looking to what I would say reverse engineer the board deck. So, if you think about your quarterly, however frequently you’re doing your board meeting, as we work with just large collection of companies, you start to notice that really there’s call it seven-ish, maybe eight canonical slides that are the core slides that are found in most everyone’s board decks. Part of our vision for OnPlan is to make it super easy, want to sort of make it super easy to take your financial statements and translate those directly into these canonical charts. And so, for example, you have waterfall charts to explain how you’re growing your ARR, your customer count. You have your cohort charts to look at patterns possibly around customer retention. I think there’s a bunch of great sorts of cohort charts around AE sales quota attainment for example. I think you have your variance reports, and typically you’ll see month to date, quarter to date, year to date, and then you want to have that along with inline commentary on those. But you want the ability to toggle the timeframes on those to go forward, backwards, sort of your year-over-year, month-over-month type of variance. You have just sort of like trend analysis. So, the idea was let’s make these canonical charts pushbutton for your financial data and automatically gets translated. When you’re doing that, one, you’re saving a lot a lot of time, but also, it’s like you’re building these buffers for… Anytime you’re doing things manually, you’re opening yourself up for making mistakes. I feel like a lot of the mistakes that I’ve seen in financial models come when you’re sort of trying to summarize periods or when you’re sort of wiring things. You have a whole collection of different error types that are possible, but a significant portion of the mundane just wiring [inaudible] stuff. And so, if you can make them pushbutton it’s huge time savings, but also a huge just sort of, you avoid the embarrassment that I’ve had and I think we’ve all experienced at some point.
Scott:	Well, also you set the company up to be measuring and have a feedback loop on the right things. I forget the old saying, but it’s what’s measured is what gets done, or something like that. And I, huge believer in that. Because we have a lot of people at Kruze. There’s a lot of moving parts. There’s a lot of metrics we really have to pay attention to to make sure we’re not going off the rails and make sure we’re delivering the quality of service we want to deliver, super high quality. And so, as you’re talking about setting up those canonical reports, I’m like, “Oh my God, this is the North Star. OnPlan can provide the North Star for the company.” And also making that data and how it’s going accessible to a lot of different people so that they can measure themselves. Because no one wants to do a bad job. Getting the report on if you’re off course or you’re on course and where you are towards the North Star is critical. And so, even setting those reports up is a good exercise for the company, for everyone in the company to make sure they’re aligned, they agree, make sure the board… How many times have you been in a board meeting where people disagree about the KPIs? Having a consensus and cementing that via the tool I think is super valuable. It gets me actually excited about it because I see so much miscommunication. You’re right about the errors because people are rushing to re-spin an analysis two hours before a board meeting, or things like… Whereas if it’s all set up templatized, done properly in OnPlan, it’s a less stressful thing and you got everyone bought in way before that point.
David:	100%. The way that I think about financial forecasting, financial modeling, why do you build a financial model? In my view, the whole point of building a financial model is so you can perform variance analysis, is so you can… If you’re just building a model and checking it once, six… If you’re not going back and looking at it on a month-over-month basis understanding where you were right and wrong and recalibrating it on a monthly basis, if you’re not doing that, there’s not much of a point to… I think about it as like Maslow’s hierarchy of needs, and you need to get… First of all, the foundation of any good financial model is having your books in order, frankly. And one of the reasons that super excited, after we got funded, my first phone call was to you to get-
Scott:	Oh, thank you. Thank you.
David:	We were working with a lower sort of like an outsource… Anyway, super frustrating with our accountant, lower quality. But in order to… You need to have your books in order. That’s the foundation. You need to have… And that’s sort of the foundation. Then you build your financial model, and on top of that, you build your financial model, then you build your charts and your graphs and your dashboard. But to me, at the apex of that whole pyramid is your variance reporting.
Scott:	Totally.
David:	You need to have all of that support structure in place. And so, it’s such a healthy exercise each month you run your variance analysis, you understand… The true test of the quality of a financial model is the accuracy on cash. Cash is the most downstream element of the model. It’ll pick up any… How accurate you’re on… It can [inaudible] but also obviously pick up how accurate you are on the balance sheet on forecasting those elements, and so the degree of variation is cash from what you report, and start to peel back the onion where there’re always things you should think about forecasting differently, and it’s this iterative process that you’re doing with each departmental head that it really helps the business to function sufficiently to understand which of your assumptions are working, which you need to rethink.
Scott:	Hey, it’s Scott Orn and we’re going to take a quick break from the podcast to give a shout to the Kruze tax team. Gosh, it’s so nice to have an in-house tax team. I can’t even tell you. We have some really amazing professionals on the team. It’s over I think it’s 13 people now, and we do everything from your federal and state income tax return, state franchise tax filings, R&D tax credits. Those are pretty popular these days. And guess what? They’re there for you when you go through diligence. A lot of people don’t know this but you actually go through tax diligence, not just operational financial diligence, but you do go through tax diligence. So it’s nice to have Vanessa Kruze on the phone with your VCs and with the accounting firm they hired to diligence all your stuff, and the law firm they hired to diligence all your stuff. Vanessa knows what she’s doing. She’s done this a million times. And it’s not just Vanessa. We have a really great team of tax professionals that will do those calls too. It’s sometimes the difference between getting a round closed or having it take another two weeks because something was disorganized and the tax compliance wasn’t done correctly. We hear those horror stories from clients that come to us, so hey, if you want Kruze’s tax team on your side, we’re for you. Check us out at kruzeconsulting.com. Thank you. I couldn’t agree more, and I feel like we’re both agreeing so much, but we see the world the same way because we have a lot of experience doing this. And that monthly… The Kruze books, the internal Kruze books, we’re very blessed to have a great CFO and controller and staff accountant, and literally, one of- This is dorky, but one of my favorite parts of the month is going through our budget to actuals. And my opinion is you should be able to go through your budget to actuals in 30 minutes. If you know your business and have everything dialed in, the negative variances or positive… It could be a positive variance but it could be a non-healthy positive variance, should jump out at you and you should be able to diagnose and put the fix in quickly in the business. It’s almost like I say everyone goes to the dentist every six months. Well, you should be doing your financial model and budget actuals every month, and that’s how you keep healthy. And you need that feedback loop because things change. We’re all in these high-growth industries where stuff changes or something wonky happens or you have a personnel problem you don’t know about or churn problems. So, I’m with you. Once a month, and hopefully you enjoy it. That’s actually a really exciting time. It should be an exciting time. You get to work on your business instead of working in the business. (Not in the Pod, but important to note: Kruze is a leader in Finance as a Service, delivering finance and accounting advice to VC-backed companies on a recurring basis).
David:	100%. And I think it’s also a good tool for making strategic decisions, running the what-if analysis, so if we were to sort of offer multi-year discounts, and we get three… We sort of give you a 15% discount for a three-year prepay, running that, running the scenarios through understanding how it impacts cash out, how it impacts your ARR. So, I think having your books in order, having your model in order allows you to really understand your business in a much more fundamental way. And I think a good way to sort of test it and understand the dynamics, it’s often help… You put in these sort of extreme numbers to understand the limits and the true financial workings of your business, like what are the major levers? How important is cash collection versus price versus growth in customer account? And you get this, as you’re saying, this intuitive feeling for what’s healthy and not. And I think things just become more apparent and jump out more as you operationalize this new process.
Scott:	I totally agree. And I have to be respectful of your time, but there’s one more question I want to ask, and then we can wrap up. But were you… Because we work Kruze, it’s very focused on the venture-capital-backed-startup ecosystem. But I think one of the… My hypothesis, we’ve had conversations about this, but it seems like… And these are VC backed, so the VCs demand reporting, they demand visibility, and so that’s one category of client for OnPlan. But it seems like you’re having success in additional categories, maybe like more traditional SMBs or traditional middle market. Where are you seeing success? What’s driving or moving the needle for OnPlan?
David:	I think, yeah, I think we do have a lot of B2B, venture-backed SaaS companies. I think that’s probably the function of the fact that I started the company when I was in San Francisco and that’s some of the early people I knew to bring on. But the nice thing about building this type of a business is, and much like my accounting business, is it is a very horizontal business. It’s something that you just need across the board. We’ve seen a lot of growth in health care in sort of health-care businesses. I don’t know if that might be somewhat COVID related. I think we’ve seen financial services is another area. But it is, we were just bringing on a brewing company. That was the one we got just yesterday.
Scott:	That’s awesome.
David:	I wouldn’t have thought that we would be working with a brewing company for example. Yeah, it is a very horizontal type of a business and super interesting to see all the different types of companies.
Scott:	The venture-backed startups get a lot of press and things like that, but there’s a lot of companies out there that need visibility. Every company needs visibility on this stuff and be able to move the lever, so that’s really cool. Well, David, this is awesome, and I’m a big believer, and I also have a lot of respect for how you’ve steered the company through the years, and it’s exciting to see your growth. And thanks for the kind words on Kruze. Maybe you can tell everyone how to get ahold of you if they’re interested in a demo or checking out the software, and what the next steps would be.
David:	Absolutely. You can check us out at onplan.co. We have a LinkedIn page. And basically, we’re financial forecasting for SMBs, mid-market companies, and we combine spreadsheets, native BI, along with a multidimensional database to give you a lot of power and flexibility, but also, we deliver it very rapidly. So, thank you so much, Scott. Really appreciate the opportunity to connect with you here and to be on the podcast.
Scott:	My pleasure, man. Well, best of luck. Give my best to everyone in OnPlan, and we’ll talk to you later. Thanks, David.
David:	Thanks, Scott.
Singer:	(Singing) So when your troubles are mountain in tax or accounting, you go to Kruze, Founders & Friends. It’s Kruze Consulting, Founders & Friends with your host, Scotty Orn.

David Greenbaum of OnPlan talks about improving and streamlining financial forecasting for startups and other businesses

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