A CFO's Perspective for Understanding Operations and Driving Value

Megan - 00:00:18: Today, my guest is Aaron Sallade. Aaron is the Chief Financial Officer at BiggerPockets. He is a seasoned finance strategy and operations leader with over 15 years of experience in enabling value creation. Before joining BiggerPockets, Aaron led multiple strategic initiatives and category expansion opportunities at HomeAdvisor. Prior to this role, he held various positions in corporate finance, private equity, and investment banking. He is also an Army veteran who served in both Bosnia-Herzegovina and Afghanistan. Outside of work, he owns a small portfolio of investment properties and enjoys time with his wife and four kids. Aaron, thank you very much for being my guest on today's episode of CFO Weekly.

Aaron - 00:01:34: Megan, thank you for having me. It's absolutely a pleasure to be here.

Megan - 00:01:37: Yeah, today our topic is value-added finance, and I'm excited to learn about you, more about this topic, and the company you're with today, BiggerPockets, which, as I mentioned, has personally helped and motivated me to venture into real estate investing. So we have a lot to cover, and let's get started. First and foremost, in your own words, tell us a bit about yourself and your career journey.

Aaron - 00:02:02: Sure. Well, I started my journey actually in the military. I was in the army and I served three years of active duty. I did another three years in the National Guard while attending college. I got a finance degree. From there, I went into investment banking for a few years, then transitioned to private equity for another few years. Most of those roles really accelerated my financial and strategic acumen. I'd say they took me from being an apprentice to really being a journeyman in my career. However, overall, I really wanted to get a deeper impact and have a deeper impact on operational growth. So I transitioned from the capital markets side, finance to the corporate side. I moved on to Newmont Mining to lead strategic planning for their APAC region. So Newmont is one of the largest producers of gold in the world. That was also a really great experience in really learning how large multinational companies operate. It was a resource-rich environment, no pun intended, but we had robust planning processes, and numerous stage gates for every initiative. It gave me great insight into the trade-offs, large-scale versus nimble operations, and I quickly realized it's hard to turn a large ship. So after a few years, I determined I wanted more exposure to earlier stages and faster operations. That led me to find a great opportunity at HomeAdvisor, now Angi. I moved into a role leading their finance and strategy team. In that role, I oversaw numerous strategic initiatives and M&A transactions. I also oversaw subsidiary operations, a real period of transformational growth in the business. I'd also say that role really helped me transition out of being that journeyman in my career and become that master across numerous business domains. It also propelled my excitement around working with growth companies. After watching that organization mature, I realized I wanted to take that experience to a smaller organization with similar growth prospects, which led me to find the opportunity here at BiggerPockets.

Megan - 00:03:57: So what drew you towards BiggerPockets? What was it that you liked about the company and what they were doing?

Aaron - 00:04:05: Yeah, I'd say the biggest structure of BiggerPockets was the growth opportunities, but against really the backdrop of an extraordinary mission. The mission of our company is to help our community gain financial independence through investing in real estate. Whether it's quitting a W-2 job and retiring early or just creating passive income that enables financial flexibility, it's been quite humbling to work here and hear audiences' success stories.

Megan - 00:04:33: And I think a lot of us possibly know about the BiggerPockets podcast, but can you talk about just BiggerPockets in general and what kind of products and what it is they do?

Aaron - 00:04:45: Absolutely. So we fundamentally provide educational content, but also tools and connections across our platform. Our content is largely free to consume and offered across a variety of mediums, including podcasts, but also YouTube, social, newsletters, and our website. We also have a publishing arm with more than 30 titles in our backlist across various real estate topics. But as I mentioned, beyond content, we have a subscription product, which helps users analyze deals and then manage their property. And then we also have a marketplace product, which helps our audience connect to investor-friendly vendors, such as agents, lenders, professional services, etc.,

Megan - 00:05:27: And when you first come into a business, what tends to be your early goals in terms of adding value? How do you find the low-hanging fruit?

Aaron - 00:05:38: Yeah, so for me, it's really gaining a deep understanding of the business's operations. I think that's the first step in adding value. The true value in finance is really created when you understand the operations underlying the statistical metrics and then partner with those business owners to test typically novel concepts that could be contradictory to maybe existing business heuristics. That's typically the first step. Tactically, I also focus on people, processes, and strategy. On the people's side, are they hungry? Are they humble? Are they smart? Do you have the right people in the right seats? Are there gaps in organization design? Or are there gaps in skill sets or knowledge? From a process standpoint, I look at the maturity level of reporting, forecasting, testing, and planning. And are the right metrics being measured? Are those financial outputs built up from statistical or behavioral KPIs? And is there the right level of financial transparency throughout the organization? And these are some of the key processes that I look for. And then on the strategy side, what's the company's North Star? Is it achievable with the anticipated investment? Are priorities and resources aligned? What are the competitive dynamics? Are there any considerations around buy-bill partners? Are there time horizon constraints, et cetera? These are probably the three tactical areas that I look for in the business to drive the most value across people, processes, and strategy.

Megan - 00:07:05: As far as operations, I'm always reminded of the show Undercover CEO, where the CEO gets immersed in a business by really being in the weeds with the employees. But how is it that you go about understanding operations?

Aaron - 00:07:24: Yeah. So I think fundamentally it's partnering with business owners. So for instance, BiggerPockets, I haven't personally been on a podcast, but I work with everyone that's directly involved with making the podcast. I sit next to our head of publishing. So I understand the evolution of writing a book from start to finish and all of the processes that go into writing a book. From a technical standpoint, I think it's really important to understand the product roadmap and what's going on in the ceremonies of the technology team from start to finish, how are initiatives being prioritized, and what some of the retros are happening in areas that product maybe wasn't successful. So I try to be involved in operational meetings. We actually have op reviews with every one of our functions as well to go through and really do a deep dive into their business and what's going well, but also what's not going well. And I'm trying to understand how we can be helpful in testing something new or coming up with new insights into the business by partnering with them.

Megan - 00:08:29: And in your current role as CFO, is it the case that you now have more freedom than ever to assess possible savings or areas where efficiency and productivity could be upped?

Aaron - 00:08:40: Yeah, that's a really good question. I'm not sure I have more freedom to assess, but I definitely have more freedom to implement. But fundamentally, I'm actually a big believer in revenue before cost. I kind of think cost savings opportunities are an easy way out of right-sizing a P&L. So I like to over-index my time on revenue enhancements, which are much harder, but kind of a greater impact, both tangible and intangible. The intangible aspect really could be the company culture. I found that employee sentiment can change in a cost-cutting cycle, which is why I prefer to spend more of my time on revenue enhancements. This could be creatively taking price. It could be pursuing an acquisition. It could be pursuing partnership opportunities. It could be changing the refund or credit policy. But ultimately, I really try to over-index my time on those revenue enhancements versus cost-cutting exercises. Sometimes those are necessary, but I prefer not to take key resources away from the team, if at all possible.

Megan - 00:09:38: And are there things that you can do at BiggerPockets that you might have been frustrated at not being able to do at previous less nimble companies?

Aaron - 00:09:48: That's a really good question as well, Megan. I think it's really a guiding strategy at the highest level. One of the biggest economic mistakes I've seen in previous organizations was bad strategy. What I've seen is leadership can become really consumed with yesterday's variances, and they miss that invisible asymptote that's right around the corner in their company's growth profile. I've also seen cases where there's been poor scenario planning or actually not compiling or investing in a set of coherent actions and support. The plan or the strategy. So being able to identify, analyze, and invest in the right items is really the critical key to success in strategic planning. And I've been able to lead that process here at BiggerPockets, which has been really exciting.

Megan - 00:10:32: And do you think it's the responsibility of the CFO to always be making improvements? Is it possible that a company can get to a point where this is the best we can do?

Aaron - 00:10:43: Yeah, I think that's a good question. You know, I personally believe there's always an opportunity for continuous improvement. And honestly, I haven't come across a position where more value couldn't be added. However, I definitely see situations where it's hard to get alignment for opportunities that could drive value. It's typically due to a business heuristic where stakeholders believe it's true, but it hasn't been tested or maybe hasn't been tested in the current environment. It also could be just the perceived level of risk. But that can always be mitigated with appropriate testing. So that business truly believes it needs to pursue unethical tactics to drive value. And I'd probably go back to the core tenets of people, processes, and strategy to determine where improvements need to be made instead of compromising any boundary or believing that additional value couldn't be added.

Megan - 00:11:32: And when you're implementing a new project, how do you go about getting buy-in from both your team and the business as a whole?

Aaron - 00:11:40: Yeah, I think the best way to get buy-in is really developing the appropriate test, right? Or having the appropriate data within the conversation. So I think the places where you don't have buy-in are where the organization believes something's true, but may not be true. And until you have that data, it's really hard to get alignment. So the best way I've found to get that data is whether could be a survey, it could be getting customer feedback, it could be usability labs, it could be developing a test at a smaller scale, and ideally bootstrapping that test. And then bringing data with ideal statistical significance that would be representative of what that initiative could be when you scale that into a larger size. So I believe in using data to try to gain alignment within the organization.

Megan - 00:12:31: And when you're developing strategy and planning for the future, how far do you like to look ahead?

Aaron - 00:12:37: Yeah, I think five years is a good benchmark, but it can also vary based on the industry or organizational maturity. So, for instance, when I was in the mining industry, it was actually common practice to develop 30-year mine plans. There is typically data to model out the economic viability of extracting resources over that mine's life. So a 30-year strategic plan was typically common. In regard to early-stage companies, there also may be a need to build longer-term plans, maybe 10-plus years, because it may take that long to achieve profitability. However, the trade-off is the level of fidelity tends to be low when you start going out longer than five years. So I probably wouldn't recommend it for most businesses.

Megan - 00:13:18: And what risk mitigation do you perform in your role, particularly when it comes to cyber threats?

Aaron - 00:13:24: Yeah, so we have a great team that focuses on these areas for the business. We also routinely engage outside parties to evaluate our overall investments, investments in protocols, and investment resources. But I think you have to right-size that against the backdrop of your organizational maturity or business maturity. You always have to balance the investment of risk mitigation versus alternative value-added initiatives. So I think it's critical to understand what truly needs to be prioritized versus kind of those nice-to-have items. And that's something that I lean on my team pretty heavily on. And also we use external resources as well to make sure that we prioritize the right level of risk mitigation within organizations.

Megan - 00:14:07: And do you think it's more important for a CFO to be an optimist or is it better for a CFO to be a pessimist and expect the worst case? Which do you see yourself as?

Aaron - 00:14:20: Honestly, I think it's good to play both roles. This can allow you to book possible outcomes in a forecast. It can foster deeper conversations around assumptions. It improves group decision-making. I found some of the most novel concepts come from having a dissenter in the conversation. That doesn't mean I always play that role, but I do think it's important to have an optimist in the room when everyone's pessimistic. And I think it's really important to have a pessimist in the room when everyone's being optimistic. So I think that drives incremental value for the organization and your decision-making processes.

Megan - 00:14:55: Talk to us about the most innovative method of increasing value that you've enacted while at BiggerPockets or even in a previous role.

Aaron - 00:15:04: Good question. I'd say it was probably adding free lunch on Wednesdays for everyone who comes into the office. No, I'm just kidding. So no, I think the greatest value that I've added here at BiggerPockets is likely adding a new economic model to our business. When I started, the business was largely comprised of a media and subscription model. However, it was clear that there was a huge opportunity to connect our community to investor-friendly vendors. So those are investor-friendly agents, lenders, professional services, property management, etc. So I helped the business size the opportunity test the opportunity and then start reallocating resources to the investment. And it's since become the fastest-growing segment of our business.

Megan - 00:15:46: That's awesome. So when you try out new things, how much wiggle room do you give yourself financially? Is it okay to fail or do you need to stress test everything before you implement it? How do you work when it comes to it being okay to fail?

Aaron - 00:16:02: Yeah, I think I'm a big believer in testing and fundamentally testing just about every initiative across the board. But there typically needs to be a budget set aside for testing. And growth investments. Now, the size of that budget may depend on shareholder expectations for the company and the budgeting process. But I do think there should be a budget set aside for testing and growth investments within a budget. I'm also a big fan of using outperformance to the plan, to fund new tests and investments. So if you're outperforming your budget, giving business owners the ability and flexibility to test something new and novel to grow the business. But fundamentally, yeah, I believe that you should rely on data as much as possible before scaling. And if you construct the right tests, you can typically drive more value for the business.

Megan - 00:16:50: And last question for you, but what is it that keeps you up at night?

Aaron - 00:16:56: Yeah, mostly my kids. Two teenage boys.

Megan – 00:17:00: They tend to do that.

Aaron – 00:17:02: You know, that operates on a completely different circadian rhythm. And I also have two girls that are in ice skating and they get up at 5:00 AM most days. So they keep me up most of the time. I mean, kidding aside, from a business standpoint, I think I'd probably be most concerned about a black swan event. Something that we just haven't contemplated or really scenario planned for.

Megan - 00:17:25: Aaron, thank you so much for being my guest today.

Aaron - 00:17:27: Absolutely. Yeah, it was a pleasure to be here, Megan.

Megan - 00:17:30: Yeah, I really enjoyed speaking with you. And thanks for finding the time to be here with us today to share your experience and knowledge. I wish you and BiggerPockets all the best. Sounds like you're both doing great things.

Aaron - 00:17:42: It's been a lot of fun and definitely appreciate that.

Megan - 00:17:44: And to all of our listeners, please tune in next week. And until then, take care.