What is the best piece of advice one can provide to a startup CFO? This was a question that was posted on the popular online question-answer website – Quora. It received many good responses, most of which were quite insightful. We present to you one such answer as posted by Michael Wolfe:
All startup jobs are challenging, but CFO can be especially tough. The lessons that CFOs learn during their careers, especially if they have experience at a more established company, are often at odds with what it takes to make a startup successful. And those differences are not just a necessary evil to be tolerated: embracing them is the very essence of what makes a startup win over larger companies and over less nimble startup competitors. A few tidbits:
- Have a bias toward the “best” plan and not the most “predictable” plan. Predictable startups go out of business daily.
- Therefore, replan at least quarterly if not more. Not just because you have to anyway, but because you’ve made agility a core discipline to crush competition.
- The most interesting things happening in this company probably don’t show up anywhere in the numbers. Play detective and figure them out.
- Learn the new set of metrics. Engagement. K factor. CAC. CLV. NPS. They often speak to the health of the business more than revenue, expenses, and margin do.
- Maintain a strong bias towards change, not status quo. Ask every day if the plan is still right and if it could be improved.
- Your job is to advise and coach the CEO and work effectively with the whole team. Not to be the advocate for the finance department.
- Publicly support the CEO, even when you have disagreements behind closed doors.
- HR has little to do with benefits and payroll: it is about getting the best team on the field and getting them trained and motivated and in the loop. It is purely art, not science. For every decision you make, ask if it will attract good people to your company.
- Facilities that don’t reflect the company’s values or help attract good people can kill a company. Do not be penny-wise. I’ve never been at a successful startup that had grey 6-foot high, 8’x6′ cubicles. And I’d never work at one.
- When you update the team or board, see how far you can get before using any numbers. And never give a number without interpretation and color commentary. 10% data, 90% interpretation.
- Use the word “policy” sparingly. Don’t say, “here is our expense report policy.” Say “here is how we do expenses.” The word “policy” always knocks down everyone’s motivation by several points.
- For every minute you spend helping keep bad things from happening at your company, you should spend ten trying to make good things happen. If you go out of business, it will be because you didn’t hire the best people, make the right product, or sell it effectively. It won’t be because someone hacked into your conference call because you didn’t rotate the 10-digit code.
- Your job is not to be the one trying to spend less money. You help think of ways to spend it the most effectively. If you see your job as pushing for less spending vs. the rest of the team spending more, then resolve that misalignment. Don’t accept it as the “CFO’s role.”
- Internal disagreement on company strategy often manifest themselves in budget conflicts. A CFO resolving those conflicts is often doing the CEOs job. Bring the CEO in right away to resolve those.
- Never waste employee’s time in the interest of saving a little money. Go ahead and pay $100 a month for that new saas expense reporting system if it keeps the team from spending an hour a week each printing and stapling receipts. The opportunity cost for an hour of employee time is several hundred dollars. It also tells the employee they are valued.
- There is an inverse relationship between time spent preparing for and “rehearsing” for board meetings and the health of a company.
- If you run IT, use cloud-based solutions. Let people choose their equipment within reason. Make them manage it. Do not seek uniformity for the sake of uniformity.
- Assume all information should be shared with the team…if you think you’ve found an exception, make sure you have. If you ever say, “I’m not sure the employees can handle….” you are going a road that may not end well.
- Assume it is going to be a wild ride! Enjoy it!
There are a few pointers that we would like to add to it:
- Being a startup CFO brings its own set of challenges, primary amongst which is to be ready to play different role as the situation demands. We have already shared an article on the roles that are expected of a startup CFO
- A startup CFO also needs to make decisions that will have long term impact on the growing venture. Important decisions; such as what software to use for accounting, what are the processes around it and the strategic objectives of finance department; shape the long term performance of the organization in future and should be taken with this in mind.
- A startup investor also needs to focus on the funding needs of the venture and should have plans for the various stage of funding that the business may go through in future.
You can read the complete answer and all the other answers at http://www.quora.com/Startup-Advice-and-Strategy/What-is-the-best-advice-you-would-give-to-a-new-startup-CFO?share=1
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