#094: The Fundamental Role of FP&A in Value Creation

Rob Trippe

Our Guest Mentor:

Rob Trippe is a corporate finance executive, lecturer and writer. Rob started his career in investment banking as well as holding senior finance roles at large blue-chips like Hertz and GE Capital.

During his career Rob has developed financial models and managed projects spanning every balance sheet asset and capitalization class, numerous industries and for a variety of decision-making and regulatory purposes and applications. He is even the former MD of a private equity group which purchased a coveted professional minor league sports team.

Rob also holds an MBA Finance from Boston College and lives in the greater New York City area.

Key Quotes From the Episode:

“[On the importance of FP&A] Ultimately I see FP&A as a valuation exercise because the concept behind it is truly assessing and creating value.”  [05:16]

 “[On the purpose of FP&A] … That type of [FP&A] is leading us to the bread and butter question of how do we create value, where is it coming from and where can we create it in the future.” [08:06]

“[On how to build great models in Excel] Start at the end result, make sure you nail that down, and then move into your data fields.” [12:51]

“[On the concept of operational leverage in model building] Let’s take the upfront fixed time to get our model where we really want it to be before we start with the variable expense elements of say populating a model. Let’s take the upfront time, let’s nail down the right answer, that end product that we really truly desire and then we’ll start investing in the updates, what I call the variable expenses, populating your model, repeated updates, ….” [15:19]

“[On the benefit of writing about your models] Yes sit down and take the time to write through your operating procedures, but explain what the model is truly solving for and how it gets there and focus in your narrative on the three core components of any financial model, and that’s data, calculation processes and that end result, useful business information … we are numbers people no doubt, but taking the time to communicate and create a narrative that works with our numbers, that goes hand in hand is pretty darn powerful and …. If you’ve previously thought through and communicated, written or verbally, how your model works and where it’s going you’re going to do a much better  job in front of senior management.” [20:15]

“[On the benefit of sharing] The more we share with each other the better we’re all going to get and the more accepted our work and the field of FP&A will become. Let’s face it financial models and the theory behind it and all the data behind it can be daunting not just to us but also to others who may not share our passion for our work, that what’s I call ‘buy-in’.” [23:04]

  (Other resources and how to connect with Rob below).

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Key Points From the Episode:

  • The fundamental role FP&A plays in value creation.
  • Some simple steps to ensure we’re solving for the right answer.
  • The importance of starting at the end result and working backwards to ensure we not simply keeping busy.
  • Rob introduces the concept of operating leverage that all good financial models operate off.

Time Stamped Show Notes

[02:15] – Rob shares his career journey from investment banking to FP&A.

[03:56] – The key learnings his mentors shared with him.

[04:10] – Leveraging FP&A

[04:25] – Taking the core concepts of FP&A seriously

[05:16] – The importance of FP&A

[05:56] – The fundamental equation of FP&A and value creation.

[09:06] – Rob explains how to ensure we’re solving for the right answer.

[09:17] – Why Rob writes out his basic valuation formulas we learn at school every year.

[11:08] – We touch on why we may be dedicating time to non-value adding activities.

[12:07] – The importance of starting at the end result and working backwards to ensure we not simply keeping busy.

[14:03] – Rob introduces the concept of operating leverage that all good financial models operate off.

[17:30] – The current area exciting Rob the most.

[19:37] – Rob shares a great tip we can all do to improve our financial models.

[20:20] – The three core components of any financial model.

[22:00] – The importance of sharing narratives with others in our finance community.

[22:10] – What’s exciting Rob most about his current work (and it’s the huge amount of opportunities with finance technology and education in finance).

[24:40] – The best bit of advice Rob has ever received.

[26:30] – How best to connect with Rob.

[27:10] – Parting thoughts from Rob.

 

Resources Mentioned:

Connect with today’s guest:

 

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