The Job of a CFO at a Scaling Company with Sarah Friar and Jason Child | The Scaleup Offsite 2017 | Summary and Q&A

TL;DR

CFOs play a crucial role in growing companies, providing strategic partnership, financial discipline, and forecasting insights.

Key Insights

• 😫 Hiring a CFO should be based on the needs of the company and the skill sets required to support the CEO and drive growth.
• 💪 Building a strong CFO-CEO partnership is essential for successful financial management and decision-making.
• 🔀 Financial discipline involves tracking the right metrics, focusing on forecast accuracy, and maintaining transparency within the company.

Transcript

Read and summarize the transcript of this video on Glasp Reader (beta).

Questions & Answers

Q: When is the ideal time to hire a CFO?

The ideal time to hire a CFO depends on various factors, including the company's product-market fit. Generally, it is recommended to hire a CFO early on if the company needs operational expertise and financial planning. However, if the focus is on scaling a product-oriented company, it may be better to wait until there is greater clarity on the market demand and unit economics.

Q: How can CFOs instill financial discipline within a company?

CFOs can instill financial discipline by focusing on key metrics that drive the business's growth and profitability. This requires understanding the drivers of the business, conducting cohort analysis, and identifying the most important metrics. It also involves setting goals, establishing a rhythm for tracking progress, and ensuring the company is accountable to its financial targets.

Q: What are some best practices for accurate forecasting?

Accurate forecasting involves understanding the drivers of the business and breaking down revenue and cost components. It is essential to have a clear equation or model that represents the business's growth. CFOs should analyze each component, identify the factors impacting accuracy, and adjust their forecasting approach accordingly. Additionally, utilizing different forecasting techniques, such as Monte Carlo simulations, can help improve accuracy.

Q: When is the right time for a company to go public?

The decision to go public depends on various factors, including market conditions, readiness to handle public scrutiny, and having a clear forecast of the business's performance. If the company has a strong product-market fit, predictability in revenue, and a robust management team, it may be a good time to consider going public. However, it is crucial to prepare for the challenges and demands of being a public company, including stock market volatility and increased reporting obligations.

Summary

In this video, Sarah Friar, CFO of Square, and Jason Child, CFO of OpenDoor, discuss their experiences as CFOs and provide insights into when to hire a CFO, financial discipline, fundraising, and going public. They emphasize the importance of hiring ahead and looking for strategic partners in CFOs. They also discuss the ideal time to hire a CFO, which is after achieving product-market fit, but before going public. They highlight the need for financial discipline and the importance of tracking and focusing on the right metrics. Additionally, they mention that the decision to go public should be based on environmental factors and the company's readiness to handle the challenges of being a public company.

Questions & Answers

Q: When Sarah joined Square, how big was the company and what was her role at the time?

Square was about three years old with around 200 employees when Sarah joined. Her role initially was to be more of a strategic partner with the CEO and help Square evolve from a simple payment company to a more impactful and scalable business.

Q: How has Sarah's role at Square evolved over time?

Sarah's role at Square has evolved from being focused on finance and strategy to also managing chunks of operations and even helping found new products within the company. She has taken on various responsibilities, including managing the finance piece, developing strategy, and being part of the product creation process.

Q: How many people are on Sarah's team at Square currently?

Sarah's team at Square consists of approximately 500 to 600 people, including those in finance, customer support, success, product teams, and engineering.

Q: How was Groupon different from Square when Jason joined, and how did his role evolve?

When Jason joined Groupon, it had recently experienced exponential growth, expanding from one country to 48 within six months. His role initially involved selecting bankers and building a finance team and was focused on non-strategic finance tasks. However, as Groupon went public, Jason's role expanded to oversee finance and deal with the various challenges of a public company.

Q: How do you know when to hire a CFO?

According to Sarah, it's crucial to continuously assess the skill sets of your leadership team and hire ahead to fill any gaps. There isn't necessarily an ideal time to hire a CFO, but it's important to consider your company's stage of growth and the need for strategic partnership. Jason adds that the right time to hire a CFO is typically after achieving product-market fit and gaining a good understanding of the business's drivers.

Q: How important is the CEO-CFO partnership, and what qualities should founders look for in a CFO?

The CEO-CFO partnership is critical, and founders should search for CFOs who can act as strategic partners. Sarah emphasizes the need for a strong level of trust and a comfortable working relationship, as the CFO is often involved in crucial decision-making and crisis management. She also suggests looking for someone who complements the CEO's skill set and can provide a different perspective.

Q: What factors should be considered before going public?

When considering going public, Sarah recommends having a minimum required cash balance and forecasting accurately. She suggests calculating how much cash the company needs to survive for at least six to nine months if everything goes wrong. Jason adds that the decision should also be market-driven, looking at the availability and conditions of the market. Ultimately, being ready to deal with the challenges of being a public company and having a thick enough skin are vital factors.

Q: How can companies achieve accurate forecasting?

Sarah suggests breaking down the drivers of the business into an equation and understanding their correlation to accurately forecast revenue. This involves analyzing metrics and cohort analysis to uncover underlying trends and drivers that may affect accuracy. Jason adds that forecasting can be broken down into revenue and cost, with cost being further divided into variable and fixed components. It is crucial to understand the sensitivities and dependencies of these variables to forecast accurately.

Q: What tactics and approaches can be used for accurate forecasting?

Sarah's approach involves understanding the equation of the business by breaking down the drivers and analyzing cohort analysis. Jason shares a high-level approach used at Amazon, which includes various Monte Carlo simulations based on different dependent variables. The key is to understand the inputs of the business, evaluate their defensibility and sensitivity, and monitor them over time for accuracy.

Q: How can companies instill financial discipline?

Sarah emphasizes the importance of discipline in choosing and tracking the right metrics. This involves focusing on metrics that are aligned with the company's long-term growth and success. She also highlights the need for disciplined forecasting by understanding the business's drivers and continually refining the forecasting process. Jason adds that instilling financial discipline requires a culture of seeking the truth and unbiased analysis. Having an independent finance group that is dedicated to providing accurate insights can help maintain financial discipline.

Takeaways

Hiring a CFO should be done ahead of time and based on the need for strategic partnership. The CEO-CFO relationship should be built on trust and compatibility. The decision to go public depends on factors such as environmental conditions and the company's readiness to handle the challenges. Accurate forecasting involves breaking down the drivers of the business and understanding their correlations. Financial discipline is crucial and requires choosing and tracking the right metrics, as well as maintaining a culture of seeking the truth and unbiased analysis.

Summary & Key Takeaways

• Sarah, CFO of Square, joined the company when it was around 3 years old and had 200 employees. Her role evolved from handling finance basics to becoming a strategic partner with the CEO, Jack Dorsey. She played a key role in expanding Square's product offerings and ensuring financial stability.

• Jason, former CFO of Groupon, joined the company when it had just experienced significant growth and was preparing for an IPO. He focused on financial management, including filing the S-1 document, and played a crucial role in scaling the company to $4 billion in annual sales.

• Both CFOs emphasize the importance of hiring ahead of your current needs, building a strong CFO-CEO partnership, and hiring individuals with complementary skill sets. They also highlight the significance of financial discipline, tracking the right metrics, and maintaining transparency within the company.