Step 1: Throw the last guy under the bus
Stepping into a new finance leadership role is both exciting and challenging. In some situations you’re working with a blank slate - the world is your oyster, for better or worse (wait, all this shit is really still in excel?)
Other times you’re inheriting a matted clump of dog hair.
In this post, we’ll explore priorities every new finance leader should focus on, drawing insights from seasoned, multi-time CFOs.
Phase 1: The First 30 Days – Listen and Learn
You’ll need to fight off the urge to step in and start ripping things apart. Contrary to popular belief, you can actually do MORE damage by moving TOO fast. Remember - even if it’s held together with shoestrings and bubble gum, that’s better than retooling your ERP’s rev rec module alone on a Saturday night.
Your listen-to-speak ratio should be very out of whack for the first 30 days.
“Your first 30 days is all about listening. You want to take notes, start to draw conclusions, but not share those conclusions too quickly or too firmly.”
— Naeem Ishaq, 3x CFO and current CFO at Checkr
With that context, your first priorities are assessing the team and understanding cash flow dynamics.
Identify Keepers: Identify the key players and begin to form an opinion on who’s a “keeper” and who isn’t.
“You need to know at the end of those 100 days who's on the bus for the journey. So that's my first priority.”
— Stephen Grist, 7x CFO and current CFO at Puzzel
And you can kill two birds with one stone here. Ask the team to explain how the tech stack is configured; ask the team about the payment dynamics with your suppliers; ask the team about assumptions in the forecast. The questions you need answers to are actually a means to evaluate the team’s competency.
Speaking of that…
Cash Management: Get an initial understanding of the cash drivers. How does money enter and leave the business? In particular, focus on payment terms and working capital.
“Understanding what are the cash drivers in any business is absolutely critical in those first 100 days.”
— Stephen Grist, 7x CFO and current CFO at Puzzel
Doesn't matter if you’re VC-backed, private equity-backed, leveraged to the gills, or Apple sitting on hundreds of billions of dollars; you need to understand where the cash is coming from.
When do you make your payroll? In Europe, they tend to run payroll only once a month, compared to semiweekly in the USA. When do you invoice your customers? And how soon should you expect them to pay? Levers start to emerge, and you can find quick wins to make them work better for you.
And, obviously, if you are in a leveraged environment, you've got to understand your covenants, and how close you are to tripping them.
Phase 2: The Next 30 Days – Start Making Changes
“The next 30 days is all about starting to make changes. You want to get moving pretty quickly after that.”
— Naeem Ishaq, 3x CFO and current CFO at Checkr
Once you’ve completed your listening tour of duty, it’s time to start making changes. This is where the real work begins, and it’s essential to identify areas for improvement while setting a strong operational foundation.
Usually you are eager to make changes in the first 30 days, but once you get to the next 30, you’re suddenly less excited to start making moves, now realizing the nuances and complications associated with those changes.
In this phase, focus on making tactical improvements, particularly around the systems and processes that power your finance function.
Systems and Processes: Look for inefficiencies and pain points. Are there automation opportunities? Is there a better way to manage workflows? And don’t be afraid to lean on vendors you are intimately familiar with, having successfully used them in the past. Plus, they may even give you a sweetheart deal for being a repeat customer.
Update Forecasts
This is also the time to realign business forecasts. Many high-growth companies are too optimistic in their projections, and it’s critical to reset expectations early. If you wait too long, the last guy’s forecast becomes your forecast.
“Growth-stage companies are often too optimistic, and it's a good opportunity to realign expectations and give yourself room to beat and raise them.”
— Naeem Ishaq, 3x CFO and current CFO at Checkr
Similarly, you’ll want to redefine the measurement of key metrics - both gaap and non gaap. On the gaap side, make sure your gross margin is calculated correctly. You’d be surprised how wrong this can be.
And on the non-gaap side, get to your true ARR as fast as possible. I have a friend who thought he was taking a gig as the CFO of a $5M ARR company. When he got in and reswizzled the numbers, he found out they were closer to $1M. Womp. Womp.
And finally, set clear definitions for non gaap metrics like Net Dollar Retention and CAC Payback Period, which you’ll report on each quarter. You get one shot to reset these critical metrics.
Phase 3: The Last 30 Days – Deliver Early Wins
By now, you should start to see the first signs of progress.
Point to some early wins to get street cred
It’s crucial to showcase these early wins, whether they involve cash flow improvements, team alignment, or optimized financial systems. Your reputation is linked to getting wins within the org. Show that you can knock down blockers for others and that you’re bringing efficiency to existing processes, even if they are no brainers.
“By your last 30 days, you should start to see some impact. They don’t have to be massive wins, but they should be clear.”
— Naeem Ishaq, 3x CFO and current CFO at Checkr
Demonstrating quick wins helps build your credibility and positions you as a leader capable of delivering results.
Here’s an example - Stephen explained that when he came into a new business they were invoicing customers monthly in arrears. He asked if they could move to quarterly in advance and annually in advance. And they did.
The impact was monumental. In six months, he managed to get his sales people from, “Oh, the customers will never accept that. We can't go and do that. They're used to this monthly invoicing," to today, where 93% of their billing is done annually in advance.
Begin Training Your Board: Now is also the time to introduce a standardized format for board reporting.
Training your board on how you will measure performance and present data will streamline future meetings. Board members allocate a certain number of hours each quarter. How do you make them the most helpful during those hours?
“Template might sound like a dirty word, but there’s nothing wrong with it. You take away cognitive load and focus on what really matters.”
— Naeem Ishaq, 3x CFO and current CFO at Checkr
The board should know just by looking at a slide that it came from your team. There’s a certain look and feel associated with the work products that come from your squad.
Exit Readiness: For private equity-backed companies, always be thinking about the long-term goal. Are you positioned for an exit? Assess if the team and systems in place will scale for an eventual acquisition or IPO.
“If you're in a private equity-backed portfolio company, you are always for sale. Potentially.”
— Stephen Grist, 7x CFO and current CFO at Puzzel
Finally, for companies backed by private equity or venture capital, exit readiness becomes an omnipresent consideration. In this phase, assess whether your team, systems, and processes are built to support an eventual acquisition, IPO, or liquidity event. This involves a conversation with your CEO and board on how much tread is left on the tires.
This requires a solid long term plan, a dependable team that can execute through a transaction, and systems that can produce reliable data. Afterall, if you’re attending a party in six months, you want to know what outfit your P&L should wear.
Conclusion: Setting the Tone and Pushing the Pace
Part of the job at the beginning feels like you are sweeping the sheds; it’s yeomen’s work. But there should be a palpable sense that you’ve changed the pace.
The CFO should inject a sense of competitive urgency.
And if nothing else, start setting expectations with your team as to how you’ll show up as a leader. That’s what’s most important.
