What separates the GOOD CFOs from the GREAT CFOs?
I asked 11 experts. Here are their answers.
Next week we’ll begin our February series on Treasury & Cash Management.
Part I: What bank accounts should I keep my cash in? (NEXT WEEK!)
Key Themes, by Startup Stage
Part II: How do venture debt facilities work?
Revolvers vs Term Loans
Typical Venture Debt Covenants
Key Negotiation Points
Venture Debt Players and Sizing
Part III: Understanding the Fed's Impact on my Business
How are interest rates determined?
How does fractional banking work?
How do changing rates impact my company?
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In the meantime, I wanted to share some incredible answers I’ve received on the Run the Numbers Podcast to a simple, but powerful, question:
What qualities separate the GOOD CFOs from the GREAT CFOs?
Here are the best answers I’ve received so far:
“The great ones own the numbers and are great story tellers. The good ones also own the numbers, but have a hard time being strategic - story telling, and designing the future of what the numbers will look like. It’s a slight difference but it’s no different than being a professional QB or college QB or a high school QB; it’s still a QB but there are different ways of being crisp and story telling”
-Jim Cook, founding team at Netflix, and CFO at Mozilla
The ability to empathize
“The ability to empathize. It’s honestly easy to start with a spreadsheet… You can easily look at the numbers and say hey if we increase the price of the product this will increase the margins by x percent. Empathy for actually selling the product is key. And that comes from spending time outside of the finance bubble”
-Sruthi Lanka, CFO at Public.com
“A lot of the CFOs who haven’t worked out are those who seek to get their power from rule creating. They say we can’t violate this, we can’t violate that. They invoke some GAAP regulation and say we can’t go into this business because of this recognition problem blah blah blah. And those people don’t last long.
It’s the ones that are flexible and say yea, let’s see how big we can make this thing. And we’re going to mitigate our risks, here are our risks in doing this, and if I see the risks increasing I’ll let you know. And it might be that we have to change something later on but we’ll get to that…let’s just get going. Go Team.”
-James Currier, Founding Partner at NFX
Getting to the why
“Asking why in a way you that you can get to the detail. Because once you know, you can move forward.
Finance can be considered a role where you are coming at it with an accusatory tone, but you are really trying to understand the business. It’s a skill to ask why in a way that gets people to open up. I’ve learned over time you want to do it in a way where people open up and share, and there’s a method to doing the “why”…
And the theme here is trust - you have to have the trust when you ask why - how do you build the trust? You go deep, you add value, you’re talking to them constantly, you understand their business, and as you do that you build that trust. And that gives you the license to ask why in those situations.”
-Rohit Divate, Head of Finance at Gusto
Understanding the world outside your business
“Great CFOs spend time understanding the world outside the business. People who come up through the finance org, and it’s natural, the whole goal of that function is to really understand and create a mathematical model that describes the machine that’s being built in real time.
The great CFOs are both able to understand that and what’s happening to the business in its financial context - what’s happening in terms of the public markets, what’s happening in terms of multiples, what are the benchmarks of other businesses, how do we compare, what innovations in the finance world could be interesting.
In a zero interest rate environment, is debt the right financial instrument to finance the business as opposed to equity? What should we be doing in terms of treasury management? How do we position ourselves vs our competitors to have a better financing? Do we cut spend or increase spend to make ourselves more attractive? That’s a really important step and the distinction between a good CFO and a great CFO.”
Tomasz Tonguz, Founding Partner at Theory Ventures
“Communication is pretty high up on the list. Being able to model the financials is table stakes. But what separates great CFOs, and I’ve learned from a lot of great CFOs, is they were tremendous communicators. It’s not only what you deliver, but how you present information. And I’ve found spending enough time, both internally and externally, what’s happening to the business and how you break it down, and making it as simple as possible so everyone can feel a part of solving whatever problem you are trying to highlight is really critical. And that comes back to - can you communicate in a written form, in a presentation form, in verbal form, - that’s a critical piece of it. And there isn’t a lot of training around this in the finance career path.”
-Charly Kevers, Carta
“EQ and enablement. For me at least, one of my super powers is the ability to understand human beings. When you’re asking people to do things, to believe, to make sacrifices, they need to trust the person who is sending that message in a big way. And I think you need to be someone they can look to and feel comfortable you are giving it to them straight. I’m a New Yorker, I don’t pull punches. You have to be transparent. You have to be real. And people need to know that your ultimate intention is to move the company forward. So I think EQ is most critical. The numbers are a given. If you are not good at numbers, you should not have this job. Like, budgeting - there are so many tools that allow you to do these things that used to be black magic. It’s not that big of a lift. If you are an organizer of people, in my case, I dare to partner with my CEO to move things forward. The great CFOs have that EQ and get people to rally around a cause and believe in the things they are telling them.”
-Sinohe Terraro, Envoy
Paving a path for the CEO’s vision
“I’ve been lucky and I’ve worked with several great CFOs. The CFOs job is to help the CEO execute on their vision. The good CFO can follow a path to get the CEO there. But a great CFO can forge that path. I’ll explain the difference.
Joe Moran at Looker built an amazing culture that blended the Santa Cruz vibe with all the things you need to do to scale.
Mark Garrett at Adobe, phenomenal CFO, helped them transition from the box software to the subscription software.
Not many CFOs say I’m going to cut revenue in half and it’s going to be a good thing.
A good CFO would go out and say, “well here are the benchmarks. Everyone else is here. We should be here. And they can help a CEO get to those benchmarks.”
A great CFO can see beyond that and understand what’s unique about their company, and their vision, and their situation, and figure out which metrics they are fine with being way outside the norms because of a specific reason.
When you are a great CFO you can forge the right path by not just blindly following the benchmarks.
-Razzak Jallow, CFO at FloQast
Being in the field and understanding the customer
“It’s not just about landing the plane. And it’s not just about being technically savy. Of couse we need to know revenue recognition and accounting standards. But that’s the basic minimum. The great CFOs are the ones who are partnering across the business. And not just the CEO. That’s an easy trap to fall into. “I just manage to my CEO.” We live up in this ivory tower. You better be in the field, speaking to your CRO, speaking to your CMO, going out and meeting customers. I’m very lucky I attend our customer advisory board where we speak to our top ten customers. I learn more from those three days than months and months of reading Q’s and K’s. A great CFO is someone who is very entrenched in the business.
-Sonalee Parekh, CFO of Ring Central
Being the voice of the market, drafting off your CEO, and the non financial skills
“The CFO is a great position to be the voice of the external world. The voice of the markets, the voice of the investor community. A key part of our job is to read the tea leaves of what’s going on around us and translate that back into the company to adjust strategy and make business decisions accordingly… wage growth, inflation, unemployment rates… very direct impact on what we see in our business.
You have to be able to draft off your CEO. You have to be the right compliment. I couldn’t have articulated this at the time I joined Chime.
The non financial skills. Turn numbers into narrative. I didn’t even know I was going to be a finance person. I’m not a CPA or a traditionally trained FP&A person. A lot of my contributions have been in negotiating our commercial partnerships, telling our equity story, making sure we make high ROI decisions.”
-Matthew Newcomb, CFO of Chime
“The ability to clearly communicate to multiple stakeholders what they need them to understand from their standpoint. And how you get the organization rallying behind those objectives. Our CFO at HubSpot is one of the clearest communicators and I always walk away with extreme clarity on what to know and how to think about it. Extremely clear communication is a superpower…
If you are visiting a rep in APJ, hearing this message, what do they take away from it? Great CFOs think about “where is this message going outside of people who understand within the finance or the ops function who are closer to the numbers, what is the broad based organization going to take away from your message?”
-Sid Kumar, SVP of RevOps at HubSpot
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