Building Better Financial Models with Chris Reilly of Mission Capital Consulting

Our Guest: Financial Modeling Simplified with Chris Reilly

Chris Reilly is a seasoned professional whose expertise in Corporate Finance, Consulting, and Private Equity led to a transformative entrepreneurial journey. In 2020, Chris took a leap, establishing Financial Modeling Education, where the focus is on teaching Advanced Financial Models tailored for FP&A and Private Equity Professionals. This self-employed venture goes beyond the ordinary, emphasizing a relatable and simplified style of instruction, breaking the mold of traditional financial education.

Running in parallel is Mission Capital Consulting, founded in the same year and based in Littleton, Colorado. Specializing in custom-built M&A and FP&A models, this self-employed venture extends its services across the United States, garnering acclaim for its precision and excellence. Chris’s commitment to delivering value in the world of financial modeling is evident in both ventures, making Mission Capital Consulting a go-to for businesses with serious modeling needs.

Chris’s professional journey, encompassing roles such as Vice President at TitleCard Capital Group and Senior Analyst at Hilton, reflects a career rich in experience. The decision to venture into entrepreneurship in 2020 marked a turning point, with Chris building businesses around a passion for financial modeling that can be shared and taught. Through Financial Modeling Education and Mission Capital Consulting, Chris is not just navigating the entrepreneurial landscape but shaping it by empowering professionals and businesses alike.

Episode Transcript

Chris Reilly: You want the file to be something that’s quick, that can be updated relatively seamlessly so that the operators can go back to work. So it’s really poor design and overcomplication. And I want to say that I see that 95% of the time of all the models that I work with. So I’m always focusing on reining that in a bit.

Jacob Hollabaugh: Welcome to PayPod, the payments industry podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world, from payment processing to risk management, and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place.
 
Hello, everyone. Welcome to PayPod. I’m your host, Jacob Hollabaugh. And today on the show, we are going to be talking about financial modeling with our focus on this show so often on how money is moving, we sometimes overlook the importance of being able to accurately reflect and project all that movement into well-built models, actionable reports. So we’re going to have to talk through all of that today to help us talk through it. I’ve got someone who’s made it their mission to bring better financial modeling and therefore decision-making to the financial industry. I’m joined today by Chris Reilly, founder of both Mission Capital Consulting and Financial Modeling Education. Chris, welcome to the show. Thanks so much for joining me today.

Chris Reilly: Yeah, thanks, Jacob, for having me. Really appreciate it. Glad to be here.

Jacob Hollabaugh: Pleasure is mine. Let’s start by getting to know you and your story a bit here first. What was your journey? What did it look like to the point of if I have my dates correctly here, up to the point where you ventured out on your own in 2020 and started these two companies that I just referenced?

Chris Reilly: Yeah, so I started back in 2009 in the financial crisis. I was in New York City, worked on the Lehman Brothers bankruptcy, like fresh out of school. And that was quite an eye-opening experience, helped them unwind some derivatives. And that was like my foray into the working world. So pretty intense start. And then from there, I switched over to more of like a FP&A Treasury role at Hilton Worldwide that was in Virginia, relocated just for family reasons, and did a couple of years there. I got interested in private equity because Hilton was owned by Blackstone at the time, and a lot of the work that I did there was on Blackstone’s behalf. And so I was hooked by the whole thing. I did some personal research and taught myself some LDO modeling in my spare time, and started applying for PE jobs out here in Denver because we wanted to relocate to Denver after Virginia, and luckily enough, found a mid-market shop that was willing to take a chance on me with somebody with a nontraditional background. So they didn’t really want to hire bankers that are like a more traditional bulge bracket hire. They wanted somebody who had worked in corporate, basically, so came out to Denver, worked in mid-market PE for about six, seven years. And that’s where I got really strong with my business skills, my modeling skills and my FP&A skills. And then when 2020 came around, I decided I had enough experience and enough of a network to go out on my own and build this financial modeling business for myself and really double down on my favorite part of the world, which was building these models. So now today, I do a combination of the two companies that you mentioned. Mission Capital is FP&A or M&A contractor work for companies where I just do hourly work to help them on the modeling side. And then Financial Modeling Education is educational self-study content and courses where I help other people build models. And frankly, the way that I wish I knew when I first started. And so that’s where I am today. The one one-man band, mostly teaching financial modeling.

Jacob Hollabaugh: Yeah. Love that. And so on one side, still doing it yourself and for companies. But then to, you know, keep your skills sharp. And I’m sure bring some joy of actually not just doing the hypotheticals and everything, but actually go and do in real live ones for people. But then on the other side, teaching others to do that same thing that you’re doing essentially, right?

Chris Reilly: Yeah, exactly. I would feel a little weird educating on something that I don’t practice, so I make sure that I’m still always doing a little bit of consulting work just to stay sharp and learn new stuff, and that’s been really helpful for me on the educational side.

Jacob Hollabaugh: Yeah, I think that’s incredibly important. I mean, going back to it can honestly happen within companies with like managerial positions sometimes, but especially going back to thinking of either going all the way back to school and remembering like there were certain teachers and professors that I was like, wait, you still have a business on the side? You still do all these things? Okay, I’m going to listen to you a little bit more than like, oh, you’ve been a professor for 20 years. Well, I think you did some really amazing things in your career, but things have changed in those 20 years. I don’t know that I’d totally trust that the current landscape as well. So I think that’s super important for you now with what you’re doing then on their behalf or teaching others to do, you’re trying to help companies improve their financial models, which means that they can obviously be doing better as a company, make better decisions. What are some of the biggest mistakes you see companies making with their modeling practices? Or back to what you said, you’re now trying to teach folks the things you wish you knew when you were starting out doing these things. What are some of the mistakes in the industry that are being made? Is it like dated skill sets? Is it a lack of resource to the people working on these? Awareness of the importance of them? Fill me in on what’s going wrong, what you are hoping to improve upon with what you’re putting out into the world?

Chris Reilly: I would say the number one thing that I always see is poor sign in terms of financial models. And then the other would be overcomplication for its own sake. So a lot of people, and of course, myself included, are self-taught when it comes to modeling. And so we learn the hard way. We learn by making it overly messy. It’s not very structurally sound and there’s a lot of junk. There’s a lot of extra tabs, there’s a lot of stale things, there’s a lot of broken links. And if you can learn the core fundamentals of solid design, you can greatly simplify the flow of the file and then get it back to what it needs to be, which is a decision-making tool. We ultimately obsess over this model like, is it perfect? Is it going to be accurate? Does it have every single thing that this company has? And we often go down that rabbit hole when we don’t need to. It’s supposed to be a directional thing to help us make a decision. So the people who do the work can actually go do the work. It’s a guide for the people that do the operations. And so that poor design is part one. And then overcomplication most businesses are pretty much everything else we do in life follows that 80-20 rule and models are no different. It’s basically your revenue, your gross profit, a couple of big expense items, your capital expenditures, and maybe some of your debt obligations. If you can thoughtfully model those things, then the rest of it can fall into place and you can add details as needed. But you don’t have to start with all that detail because you want the file to be something that’s quick, that can be updated relatively seamlessly so that the operators can go back to work. So it’s really poor design and overcomplication. And I want to say that I see that 95% of the time of all the models that I work with. So I’m always focusing on reining that in a bit.

Jacob Hollabaugh: Okay. So it’s interesting you say “Overcomplication” because that leads me to my main question I want to ask you with all of this is, as I referenced in the intro, if I boiled this podcast down to one core topic, it would be that we cover the movement of money. And so in doing so, we’re always talking about every almost every episode is about some new way money can move, new way payment can be made, new player in the ecosystem, in the ever-expanding complexity of the web, of the world, of money and finances and how it all moves around. I’d imagine all of that change and the quickening pace of everything, and the more players in it and all that other stuff has made what you do with financial modeling much harder. Maybe in like the last decade or so, because the world has what you’re trying to capture for a business is way more complex than it was before. So you say the biggest thing is trying to navigate or remove or not make it more complex than it needs to be. Would I be correct in theorizing that has become harder and harder over the last decade, as the world of money movement has changed so much, and continues to every single day?

Chris Reilly: I would say yes and no. I think what makes it harder is there’s almost too much information, but at the same time, these different ways of payment processing and systems and FP&A software, it also gives you access to data that you normally didn’t used to have. Originally it was you had numbers from an accounting system, and you would do your best to forecast them out to the best of your ability. And just having talks with management and or people that work at the company. Now that there’s so much more data, you can actually extrapolate a lot of the I don’t like this term, like the KPIs, but the metrics that you have to hit, you can really siphon that information out, get actual numbers, and then use that to project a much more thoughtful financial number. So you need the skills to at least go through that data and figure it out for yourself or for your company. But I think it’s been a net positive, and even for my own little company, I mean, I have so much data right on the internet, leads and conversion and email funnels, and it’s a lot to keep track of, but it does help me keep the ship steered in the right direction. So I would say at the company level it’s a net positive, but you just have you can have very data-heavy models and so long as you have somebody who knows how to go through it the right way, I think it’s kind of a value add overall because you’re coming back to performance metrics, not just financials.

Jacob Hollabaugh: Yeah, so it’s good that all these new inputs exist. It still though comes down to the core ability of being able to pick the right ones and which ones matter to actually plug into this. If someone is doing this on behalf of their company or whatnot, where are they pulling all these inputs from? Who are the folks within the company that are working the most closely with, or the departments or whatnot, that they’re where they’re getting all of these inputs from?

Chris Reilly: It depends on the size of the company, but the finance function or the accounting function is going to have access to a lot more software than it used to. And everybody’s looking to build this robust software solution. But a lot of it always comes back to the spreadsheet, because a spreadsheet is so open-ended and so customizable that sometimes there’s a bottleneck in the software. And so what I find is actually most useful is the software can always export to CSV or Excel, and that becomes a data dump. So usually I’m going to be leveraging people in the finance function or the accounting function to get what I need to then filter it back through my spreadsheet. Because even though the spreadsheets are prone to error, and that’s the biggest frustration that people have with them, and it’s the impetus for creating all this software. Again, the open-ended customization and custom logic is hard to beat because every business is so different. It’s very hard to get a one-size-fits-all solution. So I’m usually pulling a lot of that data from software and then feeding it back into the model.

Jacob Hollabaugh: Yeah. Makes sense. So we referenced here all this data that you’re able to work with. And that brings me to the most obvious question that needs to be asked in the year 2023, the year of AI and a bunch of other emerging technologies, which is that while these new things have added some complexity, there’s a lot of opportunity. I would imagine, too, in financial modeling, to me, seems like one of the places of many within the financial world that’s ripe for new technology like generative AI, large language models, et cetera, et cetera. To impact in a really positive way or to be leveraged in a really positive way. What impact do you see new technologies like those having on what you do? Is it hopefully going to be a big positive? Is it going to have a big impact, or how much are you just generally paying attention or trying to incorporate any of that?

Chris Reilly: So I’m certainly paying attention. I think over the mid to long term it will definitely have a meaningful impact. I’d say right now it’s still too early. There’s not enough kind of trust in the AI systems, and I’ve done plenty of messing around with GPT and the code interpreter thing, and it’s pretty darn good at like interpreting well-structured data. And I asked it, hey, forecast my course sales for the rest of the year. And it did a pretty good job. But it’s all based on the historical context with which you give it, and it’s also based on very good prompting. And so that’s like a whole sub-skill that I think is needed now, but may not be as needed in the future. And if you can’t prompt systems in the right way, you really can’t get a lot of good information out of it. And I was working with it yesterday just trying to make fake financials for a fake model that I was working on, and it took me like an hour and a half to just prompt this thing and get it to work. And it was still broken and I ended up doing it myself. So I think mid to long term, will it supplant or probably even replace newer level analysts? It sure could.

And there are things that can definitely speed up in the long run. I still think strategic decision-making at the human level is going to be needed. I don’t think anybody is going to pass a AI-generated model to investors without checking it. I think another thing that’s like a good skill set that plays into AI is some familiarity with Python. Like as the AI does a lot of work with Python on the data side. And so that’s another place where if AI takes over some of the computing that we do in the future, well then knowing how to debug it is really helpful. And the primary language that I’ve seen, at least through code interpreters, Python. So I think it will certainly be a nice counterpart to people in the future. I think it can supercharge some of their work, make it a little scalable, sadly. Make entry level positions a little bit harder to obtain, but I don’t. I could eat my words saying this, but I don’t necessarily see it like replacing humans. It’s I think it’s just like a supercharged analyst at some point.

Jacob Hollabaugh: Yeah, it’s certainly and the reason I even asked originally because it just working with data and modeling this in this world or context or in any context, seem like the most ripe for. Yes, that initial fear of like that seems something replaceable, but in reality, it’s well, no, it just changes what that person does and maybe lessens how many people, but that you become as much a prompt engineer or someone who knows how to like. Yeah, we can let that do a little bit more of the busy work that we would have done ourselves before, but we still need to understand it, to be checking it, to be giving it the proper inputs and to be making the decisions at the end. So I’m right there with you on that. To shift gears here for a minute, your main of your two companies, one of them is producing educational tools and teaching others to do it. And with both of your companies are of the variety where you I think you referenced at the beginning, it’s a one-man shop. It’s you to some degree that are the product more or less, which means you’ve got to establish a brand for yourself, a reputation, some authority within the industry so that people trust you to be that product, to teach them to trust that the tools you’re going to give them are going to be what they need to help them be successful at this thing.

 Jacob Hollabaugh: And that’s something you’re far from alone in needing to be able to do those things. What I can see, though, you’ve done really well and continue to do quite well. And I’d like to ask you a few things in regards to building this brand, building a reputation and kind of the content world in general. I’ve got a couple of questions on your kind of approach to LinkedIn content generation in general. First, at a high level, what is your general purpose or goal behind what seems to be looks like posting nearly every day on LinkedIn for you? What’s the what is your approach to the platform, your kind of goal or purpose for being on there and being active every single day?

Chris Reilly: So I’ll start with why I got on there in the first place, and then my goal as of today. And so when I first started Mission Capital, I was doing hourly consulting work, building financial models. And there is a downside to being good at modeling is that once you hand off the model, you’re out of work. Yeah. And so what was happening to me was I was running out of leads for my consulting work. I used up my word of mouth and the referral would eventually the referrals run out and I needed to find new work, basically. And I forget how I stumbled upon it, but I remembered reading in some articles somewhere. Hey, put some stuff on LinkedIn and just see what happens. So I said, okay, I’ll just try that. And this was beginning of last year, beginning of 2022. And yeah, I was just shotgunning I didn’t know what I was going to do. I talked about various topics in finance, but then I noticed that financial modeling content started to resonate, and I was building up a little bit of a following, which was very strange for me. I’m not a social media person, I’m a financial modeling person. But what I noticed was pretty quickly into the journey, like three, four weeks, I started to get inbound interest of, hey, can you help me build this model or whatever? And so I’m thinking, oh, okay, I can see this actually maybe works out.

And so I started to build a habit of, I’m not going to I’m going to start, I first want to just post once a week. And I said, okay, I’m going to post three times a week. And I just noticed the more I was on there, the more it would compound, the more the audience would grow. And so then I did every weekday. That was my goal for last year, but I wanted to take the weekends off, and then this year I decided I’m going to do it every single day. Because coming back to the purpose of today, it is now a top of funnel, lead generation engine for me to bring people either into my newsletter, which is like a mid-funnel, or to the course website, which is bottom of funnel, or to my consulting website where I can either sign new clients or if I’m at capacity, I have relationships to refer those out. So LinkedIn is like my tip of the spear, top of funnel to build the personal brand and generate new leads for the business.

Jacob Hollabaugh: Love it. So that leads me to wanting to talk about a little bit or ask about where you’re. Because when you’re doing that and doing it very effectively, you are walking this little bit of this balancing act between putting out real educational content that’s meant to drive value to your readers, to help them want to come back for more, but you have to actually give them something of value. It can’t all just be. If you come over here and give me money or join this thing, then you’ll get all of the value. So you’re walking this balancing act between actual educational content and kind of promotional content on the other side. And I’ve seen a lot of folks who really falter at that or consistently fall off that balance beam, so to speak, onto the promotional side, and an audience will dwindle really quickly. Or someone who maybe had gotten some traction and starts to sell and maybe has an amazing product or amazing service and amazing information to give, but it sparks and then fades really quickly because folks need a little bit more on the kind of free side or a little bit more trust built up or anything. So how do you approach what you’re putting out on there and the value it might have versus saving things for like I am selling educational content like your product is, I will teach you to do all of these things. So I can’t just teach you to do all these things for free. I got to eventually move some of you over here. How do you think about if at all, if you do walking that balance beam, so to speak? Yeah.

Chris Reilly: So the big picture is and this is cheesy to say, but you get what you give. And so you have to approach it with a giving mindset which is difficult. Because you’re like, well, I’m giving away all my free stuff. Like, why would I worked hard on this? And it just, I’m just shotgunning out there for free. Why would I do that? But in turn, what that does is that builds some genuine interest and some authenticity. And so you have to give free content 80 to 90% of the time. But then that other 10 to 20%, it’s okay to sell and it’s okay to ask. And you got to do that too. So you just can’t overwhelm the audience with all this promotion. And I will run periodic seasonal promotions for a while. But then you got to let that stuff cool off because you don’t want to be seen as another advertisement, basically. So it is a little weird to constantly be giving. And I suppose you could theoretically argue somebody could go through every post I’ve ever created and maybe cobble together enough of certain things that are in my courses. But the beauty of financial modeling is that it can be so in-depth and comprehensive that you do. You need to sit and watch on video for a handful of hours on end, how to build something structurally and be focused. And the only way to do that is by going through a course or doing it yourself. Whereas top of funnel LinkedIn content is more like micro pieces that help you in that journey, but you can’t learn enough from that to become proficient. So that’s a nice thing. That is, I’m fortunate in that niche so I can give a lot of content without losing the prestige of the monetizable piece. But I’ve learned if you try to sell too hard if you try to compete, you’re going to lose. You have to work with other creators who are doing their own thing. You got to prop each other up and you have to give stuff away. And then that builds the reputation and then the inbound comes as a result.

Jacob Hollabaugh: Yeah. Love that. How do you measure the impact or success of your time spent on this? I’m guessing as someone who does models and we talked about inputs before that, you probably have something that you’re looking at to measure if this is effective, if this is worth it, what are there any specific metrics you look at to judge how impactful your whether it’s LinkedIn or other mediums like it, but your the content efforts are?

Chris Reilly: Yeah. I mean I think big picture I look at revenue obviously I think okay the content is top funnel then emails mid funnel and if I’m generating enough revenue then I’m knowing okay this is a good use of time. I make sure to only spend about 1 to 2 hours a day on content. I get up early in the morning and just do it and knock it out, and so it’s anywhere from 5 to 10 hours a week. And I would benchmark that against opportunity cost of being on the clock for a client. And that usually comes out to a better hourly rate all in. So I’m tracking it that way. I track newsletter subscriber growth, follower growth, not just to see the trajectory. I think followers is a big vanity metric. So I’m just I think as long as the ecosystem is growing, then I say that it’s worth my time. Because if as you work in digital marketing, it’s all about conversion. And I know as that top grows, then percent should eventually flow to the bottom. So that’s how I do. I just benchmark the funnel metrics along the way.

Jacob Hollabaugh: Yeah. Final question I have for you then, since we’ve spoken so much about your LinkedIn content, I should at least ask something related to something you’ve posted on there recently, which was not too long ago. I think in the last week or maybe two weeks at most, but you had a post laying out the ten characteristics you’d look for in someone you were hiring. And I oftentimes like to end these shows asking this question. Very similar question anyway, so it made it perfect to ask it of you. You made note in that of those ten characteristics, only one of them was technical skills, albeit you did have it listed as the first one, so we should say that. But it was still only one of them that actually came down to like the tactical part. So for folks who are maybe just entering the financial world trying to build a career within this industry, what would you say? You don’t have to give the nine others by any means, but maybe 1 or 2 that are the top characteristics or traits you think someone should be focused on trying to build up to find success in this industry.

Chris Reilly: Yeah, I love that question because there’s so much focus on technical skills and I will start with you. Technical skills will get you in the door, but they won’t keep you there. And that’s why technical skills are at the top of that list. And that’s why I teach technical skills. And that’s why you need to know them. You need to be technically sound to get in the door, but once you’re there, then it all becomes about relationship building. And this was especially true in the private equity side, where you have an owner that acquires a company that isn’t theirs. Right. Imagine somebody building something out of their garage for 20 years, and then somebody comes and owns it, right? There’s going to be a big culture clash. There’s going to be a brand new balance sheet. There’s going to be a lot of confusion and stress. And so I don’t remember all the things that I pointed out. It’s really about empathetic being understanding, willing to educate. Being willing to listen to people and just make a difference in culture and a difference in work styles, because that’s ultimately what’s going to create a sustainable private equity relationship long term or really any other relationship. Even in like the corporate setting day to day with your colleagues, you have to connect with people on a human level. You need the EQ or the emotional intelligence to stick around. Be thoughtful, be strategic. So it will always come back to everybody calls them soft skills ultimately, and I feel like that’s where the longer-term success is. You can’t just be technically skilled and then really just be like rude to a bunch of people. It’s just not a good recipe. You have to have that empathetic and EQ side to stick around and build a long-term tenure, and then you can help educate the technical stuff to the newer folks. So technical gets you in, but the other stuff keeps you there.

Jacob Hollabaugh: Yeah, I’m right there with you. You do need to know the tactical stuff, but that stuff’s easier to teach or easier to improve upon by those around you that might know it. And I think we’ve everyone is continues to learn over time never changes that the harder things to teach or change in people are the softer skills, the EQ side, all of that. So right there with you, Chris, this has been a real pleasure for those listening who may want to learn more about Financial Modeling Education. Either your companies, you, yourself where’s the best place for them to go? I’m going to guess one of those places where they can go and follow you, as we have talked about it quite a bit here.

Chris Reilly: So LinkedIn is the place where I’m on there a lot. I connect on there a lot, do my best. Another one is my email. It’s just financial modeling educator.com, which just goes into all my best content there. And then financialmodelingeducation.com is the courses if you’re interested. But LinkedIn is the number one place to just say hello and get in touch.

Jacob Hollabaugh: Love it. We will link to those and more in the show notes below. I appreciate the time and knowledge today. Chris. Hope to talk to you again sometime soon.

Chris Reilly: Yeah, thanks so much for having me. Really appreciate it.

Jacob Hollabaugh: If you enjoyed this episode and want to hear more, head on over to soar.com/podcast to subscribe on your podcast listening platform of choice. That’s soarpay.com/podcast.