Hey ScaleUp Product Leader, The CFO is Just Not That Into You!
...and they won't invite you to the C-Suite Party
I know what you are thinking. “Of course they aren’t; the CFO just wants me to spend less.”
Speaking on behalf of several great CFO’s that I have had the opportunity to work with, this is because they don't know how what you're buying will impact the business.
Here is some advice from a former CPO turned CEO, Operating Partner and Investor: you want the CFO to be into you. This is one stakeholder you need on your side.
Here's a recent example. I was invited to participate in a strategy session with an executive team of a ScaleUp, SaaS company that had just acquired two of its competitors and was in the process of merging the businesses; delivering phenomenal results to date.
The products from all three companies are similar yet different. Knowing that in-line product integration as part of a growth strategy for Portfolio expansion requires a complex set of trade-offs to yield profitable growth in the shortest period of time; they reached out to validate the approach and to partner with a 'coach' along the way.
The presentation/plan included details around how they planned to approach merging platforms, including several high-profile customer impact initiatives, along with the day-to-day of the business. The plan was detailed, much more than a typical executive-level discussion; they really did a great job of looking at possible options. Every section had some sort of time and materials estimated against that initiative.
Unfortunately, what it didn't do is cohesively correlate everything together for the executive team to see Cost vs. Impact vs. Time. There was no way that the team could see the whole picture. While it was a great session, and the product group did a really good job (actually a better job than most), it still left confusion in the leadership team’s mind about what it actually meant.
As we finished up the day and started to chat while packing up; the CFO gives me that stealth mode look and asks in a low voice: “Hey, do you have a minute? I want to show you something.”
I said sure and we proceed into his office. He sits down and turns his screen; his eyes light up and starts to talk in the CFO's universal language of an Excel spreadsheet model.
He looked me straight in the eye and said:
“(shhhh) Don't tell product, but I'm not really counting on them for anything this year in my model. I want to show you that I have enough from recurring revenue and enough from the sales team’s past track record that they're going to sell what's on the bus ..... it's later next year that I have a shortfall ...My topline shortfall in year 2 is about 20% based on current run-rate.
Do I have to cut expenses now or did what they say in that presentation give me something that will close the gap?"
In scale-up companies, no one wants to cut expenses if it leads to sustained profitable growth. More importantly, they want to deliver what they said they would deliver, even if that means less growth and profit. A scale-up needs more things to sell in the future, rarely will the product be able to impact in-year revenue at any scale.
As a Product Leader always know what is going to help close that gap and when, make it clear in all presentations to the CFO. As a product leader, you want to have the CFO be into you.
Below are three basic things that you need to be able to answer and should always know.
- Map your planned spend in your working budget, what percentage of that is going towards keeping the lights on? (Which is running your current revenue?). In healthy product orgs, this is always changing, keep everyone informed before and after the planned changes.
- What percentage of that is features and functions that are helping with retention? As you scale this is just as important as new sales.
- What percentage of that is innovation or new products? New product innovation and innovation that supports retention are not always the same thing. Something you do to keep a customer may not contribute to selling a new customer.
Product leaders, if you want the CFO to be into you have to be able to answer those three questions at a minimum. Walk into a meeting and confirm that you understand that, and then tie the correlation of the spending to what every other leader in your organized learned much earlier in their career. Present the information to your peers and to your leadership team in what it means to them, not to you.
The CFO and every other leader will be much more into you.