The Smarter Startup

How Does FP&A Help Startups Scale?

FP&A helps startups scale by leveraging the company’s data for decision making, including data that may be hidden beneath the surface.

FP&A (Financial Planning & Analysis) is critical to the success of any startup, regardless of size, stage, or sector. In the earliest stages of scaling a startup, FP&A is often one of many responsibilities of the founder. As the company grows, however, it soon becomes important to bring on an FP&A professional.

This article explores:

  • What FP&A means
  • Ways FP&A helps startups scale
  • How to know when your startup is ready for an FP&A professional
  • Tips to hire the best FP&A professional for your startup

What is FP&A?

FP&A, or Financial Planning & Analysis, is a set of practices that help companies understand their data and leverage it to make the best decisions. FP&A professionals typically work with spreadsheet applications like Excel and Google Sheets, often enhanced by layover tools like Oracle Smart View and Anaplan.

While accounting and bookkeeping look back to document what has already happened, FP&A looks ahead to plot the best course forward.

The best FP&A professionals provide a unique mix of business consultation, data analysis, and data-driven storytelling.

How Does FP&A Help Startups Scale?

FP&A helps startups scale faster and smarter by leveraging the company’s data for decision making, including data that may be hidden beneath the surface.

FP&A helps startups:

  • Maximize runway to avoid running out of cash
  • Identify when to pivot or adjust course to still be relevant in six months
  • Succeed in fundraising and avoid surprises during VC due diligence
  • Understand customer acquisition costs from different sales and marketing channels to know where to invest for growth
  • Streamline SG&A (Selling, General and Administrative) expenses
  • Create open-ended models to explore likely impacts of different decisions
  • Compare data-driven assumptions with actual results along the way
  • Make the best decisions with the available data in a given moment
  • Get where they want to be on their own terms
  • Scale faster and reach their goals sooner

Is My Startup Ready for an FP&A Professional?

In the earliest days of scaling a startup, FP&A is often a founder’s responsibility. As startups grow, however, they inevitably reach a point where they need to hire an FP&A professional. This is usually around the convergence of three factors: 1) the founder’s time becomes too consumed with other responsibilities 2) decisions and related data have crossed a threshold of complexity which requires a specialist, 3) stakes are increasingly high and “winging it” is no longer acceptable. If you’ve reached one or more of these points, it’s time to start thinking about bringing on an FP&A professional for your startup. This can be as early as the seed stage, or even pre-seed.

Many startups hire an FP&A professional after bringing on an accountant, but before hiring a fractional CFO. In fact, FP&A can achieve many of the outcomes often associated with a CFO, at a lower cost, while helping to implement metrics and reporting disciplines that a CFO will ultimately want to see.

Tips to Hire the Best FP&A for Your Startup

  • Look for an FP&A professional with startup experience. There are significant differences between the FP&A needs of startups and those of larger, more established companies.
  • Ask your candidates about the initial value they’ve brought to their past engagements. How long did it take to realize that value? What about the most significant value?
  • Ask for stories. How have they’ve helped other startups with their financial modeling and analysis needs? How did it improve outcomes? Remember, the best FP&A professionals are great storytellers as well as great quant jocks.
  • What kind of processes do they rely on to work efficiently and effectively? What systems and tools do they use?
  • Evaluate how well a candidate’s sector experience fits your startup’s sector. For example, SaaS startups have much different FP&A needs from Fintech, which are different from Consumer, etc.
  • Look for an FP&A professional who is part of a firm like Burkland that also offers CFOs and accountants for startups. A seamless end-to-end oversight of your finance function improves effectiveness and efficiency.
  • Most importantly, find someone you trust and believe will be invested in your company and its success. An effective FP&A professional builds strong relationships with people throughout the company based on trust and integrity.

Your startup’s data is one of your most valuable assets. Hiring the right FP&A professional at the right time can help you see around corners to make the best decisions. I hope this article adds to your understanding of FP&A, how FP&A helps startups scale, and how to hire the best FP&A professional when the time is right for your company