What I wish I knew as a first year CFO
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What I wish I knew as a first year CFO
Advice from Salesforce's former CFO, Mark Hawkins
I recently attended OG Summit in San Francisco, an annual meeting of CFOs, COOs and Operators. It’s like if Coachella and Davos had a baby and all it talked about was SaaS metrics and cloud based FP&A tools. My kind of people.
The event is organized by Operator’s Guild, a community for execs who make the trains run on time at venture backed companies (note: hard to do). I joined OG about six months ago at the behest of my friends Casey Woo (a 6x CFO / COO) and Paul Barnhurst (the FP&A guy). I constantly bounce ideas off of them as I wade my way through the mud that is startup finance. As a result, OG has quickly become my real life ChatGPT for real life CFO questions (usage based commission rates, expanding abroad, hiring your first sales VP).
This year’s keynote speaker was Mark Hawkins, former President and CFO of a small CRM startup in northern California called Salesforce. In addition to helming CRM 0.00%↑ through relentless growth, as well as turbulent economic conditions, he completed tours of duty as Master of Coin at AutoDesk and Logitech. He’s also served as a trusted advisor to Workday, Cloudflare, SecureWorks and Toast. To a young gun like me, he’s the Greg Popovich of CFOs.
Mark gave an inspiring speech - “A letter to my younger self” - filled with 30ish truisms he discovered over the years while in the trenches as an operator.
After his speech, with the Q&A shot clock ticking down, I let it fly:
“I’m a 1st time CFO in his 1st year in the position.
If you could go back and give advice to yourself at that time…
What would you say?”
He hit me (and the audience of +100 operators) with the following advice:
Know you business cold
Serve your peers, not just the board and CEO
Never surprise your CEO in a meeting
Benchmark your decisions against CFOs you trust
Find your place on the risk frontier
Know your business cold
You must know how your business makes money, and what your business spends money on, better than anyone else. Full stop.
Although you may not “own” the outcome of every metric, you need to know what the number is, how it’s trending, and the levers to alter it.
Similar to how in today’s NBA you can’t play small forward without a corner three point shot, you can’t be a startup CFO without knowing the levers to impact net dollar retention.
Intimate knowledge of your business is what you fall back on when you don’t yet have all the requisite soft skills in your tool kit, which you’ll develop over the next few decades (e.g., managing up, navigating the board room, negotiating with vendors).
The fastest way to gain trust from those around you is with command of the facts.
Knowing your business cold is something that’s very much in your control, and is a result of passionately examining performance on an ongoing basis.
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And probably also read this newsletter.
Serve your peers, not just the board and CEO
Did you know the average tenure of a CFO is just 26 months? I’ve had rashes that lasted longer (sand fleas from Jamaica in 2019; long story).
Anecdotally, the most common reason CFOs move on to other opportunities, other than the allure of a higher paycheck, is due to friction with their peers.
You’d think it’s because they miss a revenue target, or get in a fight with their board. But that’s not the case.
You see, as CFOs we inherently over-rotate to serving our biggest customers: the CEO and the Board (arguably in that order).
And as a result, our relationships with our peers (CPO, CTO, CMO etc.) may become secondary considerations to serving the big dogs.
Mark explained that your longevity, and mental health, will directly correlate to the quality of relationships you have with the other people who report into the CEO.
Never surprise your CEO in a meeting
Surprise parties are never fun. Especially when there’s no cake, no balloons, and your CFO jumps out from behind the sofa and yells:
“We missed revenue by 7%! Happy fucking birthday!”
Something I’ve come to increasingly appreciate is the meeting before the meeting. In my younger years, I’d wait to break news at what I perceived was the allotted, scheduled time. Quarterly P&L review? Great, I’ll tell you how horrible we did on travel spend then. Hell, isn’t that what the meeting is for?
But now I understand the importance of reading people in on news before you get to that point of no return. You can update people diplomatically ahead of time with information, and go so far as to tailor the way you deliver it to them based on their role. Although the essence of the message is the same (e.g., we are trimming headcount) sometimes the updates are done with a different tone and tenor depending on the person receiving the message (e.g., the CEO vs the CPO).
Pro tip: Keep the breaking news updates for Walter Cronkite.
Benchmark your decisions against CFOs you trust
Assemble your Kitchen Cabinet - a term used for the informal advisors president’s Jackson, Lincoln, Truman, and Kennedy kept on speed dial. Making real time decisions is hard. And it’s even harder when you don’t want to ask stupid questions to the people around you when they actually think you are the most likely one to have that answer.
“You have a question about macro economics?
Wait, but aren’t you like our finance guy?”
It’s invaluable to have people who are external to your firm (and your comp package) to give you unfiltered takes.
Sometimes you rely on these people just to listen to you talk through a problem. Sometimes you rely on them for their historical experience. And sometimes you rely on them for their real time reads.
Mark told a story of how one morning back in December of 2007, on the precipice of this tornado called the Great Recession, he got a weird message from one of the company’s insurance carriers saying their reseller insurance had been canceled. This came completely out of the blue - in fact, he was shocked that insurers could even cancel coverage in the first place…
Sensing that something was in the air, he called his Kitchen Cabinet, who all held similar leadership roles at tech companies. They, too, confirmed vendors were acting weird.
With 70% of the information he wish he had, but real time confirmation that others were seeing the same things, he started making decisions to insulate Salesforce from the oncoming tidal wave.
As a side note: Executives are paid both for the quality, volume and the timing of their decisions.
Compensation = (Decisions) fn (Quality x Volume x Timing)
(Note: I made this formula up)
People often undervalue the impact of the third variable: Timing. Sometimes it’s better to be timely rather than good.
Find your place on the risk frontier
Entrepreneurs are traditionally risk on. After all, saying “damn the torpedoes” and pursuing nonconventional ideas is what got them to where they’re at in the first place. It’s in their DNA.
And Boards are traditionally risk off. Thoughtfully deploying capital and making research based decisions is how they became trusted stewards of money.
As CFO you need to find your position on the company’s risk frontier, ideally somewhere between that of the CEO and Board. Picking your spot and finding your voice on the risk frontier will allow you to broker the company’s collective risk appetite, which will play out in the operating plan.
If CEOs are gun slingers, and boards are content with churning the company butter to profitability, you’ll have to find your place somewhere between the two.
Bird by Bird Quarter by Quarter
To remix a quote from my favorite writer:
“
Writing a novel[Being a startup CFO] is like driving a car at night. you can see only as far as your headlights, but you can make the whole trip that way.”-Anne Lamont, Bird by Bird
You don’t have headlights, but you have people and metrics. And when you rely on both for direction, you can see a lot further.
More on Operator’s Guild
If you’re a badass operator (cfo, coo, chief of staff, finance director, GM…) you can apply to Opeartor’s Guild below. And make sure you mention Mostly metrics when asked how you heard about OG. It’ll help you out - OG has a <10% acceptance rate…
Quote I’ve Been Pondering
“Be hard on the problem; not the person”
-Unknown