CFO Weekly
CFO Weekly

Episode · 3 months ago

61. The Evolution of the CFO Role w/ Rick Smith

ABOUT THIS EPISODE

The CFO role is one marked by constant evolution. 

Not only have the expectations for the position evolved dramatically in recent years, but to succeed as a CFO, you must be willing to evolve, too, in order to meet the shifting demands of each growth stage your company passes through or the complexities of international business. 

Success doesn’t come to CFOs who sit still. 

Our latest guest proves it: Rick Smith is a CFO experienced in leading high-growth VC- and PE-backed companies with revenues in the $20M-$300M range, who has led multiple companies through successful exits. Rick’s background spans a variety of industries, including SAAS, EdTech, healthcare services, advertising/marketing, and retail. 

Having been a Controller, FP&A leader, and CFO, Rick’ expertise spans all areas of accounting and finance, including day-to-day accounting and processes, financial systems, buy- and sell-side M&A, financings, capital raising/recapitalizations, and international operations. Additionally, Rick has extensive experience managing areas such as Human Resources, Facilities, Data & Analytics, Project Management, and Technology Infrastructure.

In this episode, we discuss:

- How the CFO role has evolved over time

- How a CFO’s role evolves across growth stages

- How you need to evolve as a CFO to handle international business

For more interviews from the CFO Weekly podcast, check us out on Apple, Spotify, or your favorite podcast player! 

Presented by Personiv

https://insights.personiv.com/cfo-weekly

Welcome back to c FO weekly,where we're talking with financial leaders about how to build efficiency in their teams,create time for strategy and ultimately get results. With your host, Megan Niese,let's jump right in. Today my guest is Rick Smith. Rick isa CFO experience with leading high growth, VC and peback companies with revenues inthe twenty million to three hundred million dollar range and has led multiple companies throughsuccessful exits. Rich background spans a variety of industries, including software as aservice, education, technology, healthcare services, advertising, marketing services and retail.Having been a controller, FPNA leader and a CFO, rick is deeplyknowledgeable in all areas of accounting and finance, including day to day accounting and processes, financial systems, by side and sell side, m a financings,capital raises, recapitalizations and international operations, and Rick has extensive experience managing areassuch as human resources, facilities, data and analytics, project management and technologyinfrastructure ric thank you so much for joining me today. Oh my pleasure.Today we're going to be discussing the role of CFO, how it's evolved overtime, as well as how it evolves over the life cycle of business.Will also be taking a look at some specific challenges that some of our listenersmight be facing today or sometime in the near future. So let's get started. Sounds good. First, let's spend a few minutes talking about you andyour career progression. How did you get to where you are today? Yeah, it's kind of funny if you go all the way back to college.I always wanted to be a CFO, but I didn't want to be aCFO for a company that was super large. I always wanted to be a CFOfor companies that were more at the growth stage. In this sounds strange, but I really didn't want to approach it from the accounting side either.So, out of Undergrad and after getting my MBA from Dartmouth, I tooka variety of roles where I could focus on using systems in data to driveoperational improvements, and eventually I literally fell into a controller roll, which helpedme bulk up my accounting knowledge, and I eventually was promoted at that companyto the CFO position, and since then I've been a CFO for several differentcompanies in different industries, and I usually stick around until there's some sort oftransaction, which is often a good time for a CFO to exit. Sooverall, I would describe myself as an operationally focused, services based CFO FORVC and P back to companies. Yeah, wow, it sounds like you've hadsome great experience. So as you look back throughout your career, aretheir particular stories that stand out in your mind as turning points? Yeah,as I said, my background was much more on the financial operations in FPNAside, and one day I interviewed with a sixty million dollar in revenues companyto be their controller and I had never done a journal entry or an accountreconciliation in my life. But somehow I went through the interview process and theydidn't ask me the right questions to figure out if I was a good accountantand I ended up getting the job. And is it turns out. Asit turns out, I'm a good accountant. You know, maybe that company duringthe interview process saw this in me and I just didn't know it yet, but it all worked out very well. I was with that company for tenyears, eventually becoming the CFO, and we grew that business from sixtymillion revenues to three hundred million and revenues, we went global, we did tonsof acquisitions at all worked out really well and it was a great,great training ground for me. So, anyway, when I got there,the company's accounting was a bit of a mess. I mean they had grownrapidly and they had just done a systems conversion and had done it poorly.So I literally I didn't know anything about accounting, but I went account byaccount and I reconciled each one and it was probably hundreds of accounts and Ibasically taught myself how to do accounting.

And it turns out it's all mathand much of the accounting math is actually pretty logical. I mean, whoknew right, accounting is mostly logical math and although it was a very difficultway to start a job like I never left that building for about a year. Yeah, it proved a three incredibly valuable because it essentially forced me tofigure out how Daytoday, accounting is done at a micro level, all onmy own without a whole lot of help. Now, looking backwards, because I'vedone FPNA and accounting at a nuts and bolts level, it's been veryhelpful to me. I know how the work gets done because it's some point. I've done most of the work and I think to be a good cfoyou have to bring deep knowledge on both the FPNA and accounting sides and it'simportant to know how everything works. So that variety in my background has reallyhelped me get there. You know, historically, I think a lot offolks came up the controller side to become a CFO and so they really hadthe accounting knowledge kind of nailed down, but then they would they would sitin the CFO seat and really haven't done a lot on the FPNA side orMa or other stuff, operational stuff, and so I think it's sometimes it'shard for those folks to transition from just being a great, great super accountantto being a CFO. But conversely, if you've just come up on theFPNA side and you don't bring a lot of accounting depth, I mean that'snot good either because you know probably where you're going to have problems as ifthere are significant accounting problems. So I think I'm fortunate that I spend alot of time on both sides and was able to bring that to the tableonce I got to the CFO position. Yeah, it sounds like your experienceas controller was definitely trial by fire. Yeah, it's funny looking back.I mean I literally had never done a journal entry and then just had tofigure it out. And again, super messy books when I joined a camemberleone month. But we were heading into the audit and pretty quickly was aparent. We didn't have a chance at getting through that audit and less asignificant amount of effort is put into clean up the books, which is whatI did, and again I didn't leave that building for a long time.Yeah, I imagine you didn't. So tell us about parchment. What isit that they do and what were you brought in to accomplish? Yeah,Parchment's one of those businesses you probably never think about, but it serves avery important purpose. So parchment is the most widely adopted a digital credential serviceallowing learners in academic institutions and employers to request and verify and share credentials,stuff such as transcripts and diplomas, in simple and secure ways. So mosthigh school students will use parchment to submit their transcripts to colleges and then parchmenthandles the transcripts of most higher Ed students and then parchment produces electronic or paperdiplomas for many graduating students. So again, it's a business you probably haven't thoughtabout. And if you have high school or College Age Kids, they'veprobably in some way interacted with parchment, whether or not they knew they weredoing so. But it's a great niche to be in. So, cumulatively, a hundred million credentials have been exchanged using parchment's digital platform. And we'rea global company. We operate in a variety of countries. From a sizestandpoint, I'll be vague because we are private, but our annual recurring revenuesis in the seventy million to a hundred million dollar range and we are pebacked. And how they been around? They've been around a long time. Actually, I don't know the top my head, but it's it's been a while andI've been with a company now for about eight months. And tancy,your second question, I know you asked. You know really, what did theyhire me to do and the key things they're asking me to accomplish?Our number one, to automate a lot of the reporting and get away frommanual spreadsheets being sent around. Number two, to play a key role in Ma. Historically, the the company has done some Ma and and it's goingto be m a heavy going forward. As I said, I joined thecompany eight months ago. We've already closed on one transaction and we're continue tolook at others. And then number three is more operational, but it's reallyto help the company get better as it gets bigger by driving efficiencies and scale. So, just out of curiosity is, as you look at automation, likehow do you decide what should be automated and what should not, becauseI know you know that's like a lot...

...of companies are moving in that direction. HMM. My goal is always really one thing and that is I wantthe senior team and other key leaders to have an equivalent level of knowledge asto what is going right with the business and what needs to be focused on. And so for me I'm focusing on stuff that gets pushed to leaders,so they have to interact with it and then we'll follow up with them andleadership meetings or in monthly business reviews or whatever to make sure that they areutilizing that stuff. And then whatever stuff that's getting pushed to them that they'regoing to look at, it should have drill down capabilities where they should beable to drill down and try to figure out what strategies are useful to themspecifically in their different areas to improve operations. So there's no right way to dothis. There's a lot of great software out there and a lot ofit depends on what are you wanting to spend and how applicated of a projectare you willing to take on? But for me that is really ultimately thegoal is the CFO shouldn't be the fount of of all knowledge of what's goingwell and what's not going well within the company. It should be that shouldbe distributed and shared among the leadership team in an equivalent way. That makessense? Yes, it does. That's a good way to look at it, and I know technology is a big part of it. But as welook at the role of CFO, how is it evolved over the last decade? Yeah, so, you know, decades ago the CFO role was primarilyan accounting job and in the last decade, as the CF pho job evolved,quality accounting became table stakes and the CFO was asked to implement great systemsin great reporting. And now it's funny because it's evolved even more so,having good accounting and good systems and good reporting are all table stakes. Sothe CFO must use all this to drive efficiencies and scale as the business grows. And, as I said, our investors are looking at me to helpus get better as we get bigger. And, by the way, Iwon't be successful in any of this unless I can work cross functionally. Sodecades ago the CFO and the CFO's team were off in a corner just doingbasic back off as accounting work, and now the CFO and team are frontand center and helping to drive value. So for all of my folks,they really have to be able to operate super well cross functionally. I don'twant anybody kind of operating in a box where they're just spreadscheating on their ownwithout taking inputs from leaders throughout the business. So they need to be able towork across the business to get information, kind of synthesize it and push itout, and that helps us all collectively make decisions as to how wewant to solve stuff. So it's really evolved a lot from when I firststarted to now and I'm sure it's going to continue to evolve. But,as I said, our investors are very much looking at me to be anoperational CFO and help drive efficiencies as we grow, and that just it wasn'tlike that, you know, twenty or thirty years ago. So just forcompanies that might still be operating in a siload fashion, how do you breakdown barriers between departments? Yeah, hard to do, it really is,and it depends on the culture and how willing people are and honestly, whatI'm interviewing with a company, I focus a lot on me coming in asan outsider in trying to bridge silos. How easily will that be accepted withina culture, because that ultimately could be a limiting factor for my success andultimately the company success. So I'm when I'm interviewing you know, certainly I'mselling them on me, but I'm also learning a lot about their culture andtrying to figure out do I have a shot at success here? I thinkas far as most CFOs go, I'm very friendly. I try to emphasizeto folks that I'm here to help, but the other thing I like toemphasize is is that I really am here as a facilitator and a project managerin a lot of ways. So if we can all acknowledge there's a challengehere. How do we collectively work together to solve problems? The thing Ialways say is I don't like to be most C fos are seen as theno person. You know, can I go hire more staff? No,can I go do this project now? And I don't want to be makingthose decisions. I want to assemble the leadership team team and provide them withinformation so that we can collectively prioritize how we want to invest our money next, in people or in systems or whatever. So one company I was at therereally wasn't a methodology for deciding if...

...we had enough money to go hireone person, where should that person go within the company? And if theCFOs making that decision, maybe it's a little bit informed. But a lotof times, I hate to say, if the squeaky will get the greeso the department that complains the most that there people are overworked and needs morepeople will probably get the next hire, and that's not a good way todo it. So I'd liked to assemble. It was every other week we wouldassemble the leaders of the company and we would really talk through all ofour potential new hires and how do we prioritize them and is there a rolewhere we can shift somebody internally into that role? And we would do thesame thing with significant expenses too. So if we had a list of unbudgetedexpenses that we had to consider spending money on, how do we prioritize those? Will let's collectively get together and do it, and that helps us getbuy and from everybody across the business. Yeah, that sounds very collaborative.Yeah, I again, I try to see myself as a facilitator and aproject manager versus a decisionmaker. It's not that I don't want to make decisions, it's just I think it's some point it's wrong for the CFO to constantlybe the yes or no person, especially when it comes to areas where theCFO might not have a lot of knowledge about. Yeah, I guess betterto empower your people to make yeah, good choices. Yeah, exactly.So how is the role or how does the role of a CFO change asa company of Alves? Yeah, it changes a lot and I've operated alot of different stages. I mean I've been with, I've been a CFOof a company as small as twenty million and as large as three hundred million. So I've seen companies that lots of different stages in the role is almostcompletely different at different stages. So let's start at the venture stage. Imean venture stage companies often have a conundrum and that is they can't afford aquality CFO and they might not have enough work to occupy a full time CFO, and so really what they often end up doing is they just try toget by with a bookkeeper, and this is a mistake. So first ofall, big accounting mistakes are often made when you have just a bookkeeper doingthe work. They're not really focused on doing the accounting like a public companywould. They're probably not getting audited. So big mistakes are probably made atthis stage. And then good records probably aren't being kept and especially if thereare systems conversions, is, you know, somebody off in a VC back.Companies often in a start on a small time accounting system and then maybethey'll move to a big time accounting system and often the records will be lostin those transitions and then you might cycle through some staff members at that pointin time and so a lot of just context and legacy knowledge will walk outthe door. So all of this usually comes to a head because it's somepoint if the company starts to grow and they get investors who are very seriousabout the quality of accounting and and if you need audited financials and if youwant to take out a bank loan and they require audited financials, it's somebody'sgoing to have to fix a real mess and they're gonna have to go backwardsfor several years and fix what's been done and again if the record keeping wasn'tdone well and context has been lost and you had a lot of legacy knowledgetransition out as folks have cycled out of the business. It's a real bigjob coming in and doing a multiyear accounting clean up. So at the venturestage I would strongly recommend, if a company can find a way to doit, to somehow find at least a parttime CFO who is super skilled,who can overseee a lot of the stuff to make sure it's being done ata high quality level. And a lot of venture firms are willing to investin that because it helps protect their investment. The other thing too, at thisstage is a CFO can help with capital raises and managing the company's CapTable, and this is all really important stuff. The CAP table is basicallya list of all the investors and that sounds like a simple thing, right, but if you have options programs and stuff like that, cap tables canbecome really complicated. I've inherited many cap tables is a CFO and I wouldsay in almost every case there's something wrong on that cap table and it's hardto find, and so those are kind of scary moments, and so havinga cfo who can manage all this stuff is super helpful. Again, thebiggest challenge here is is a small company needs to figure out how to payfor a CFO and how to attract someone who's very much willing to do alot of the daytoday work and be a...

...player coach, and finding that personis not easy, particularly if you want to find someone with lots of experience, and then paying for it isn't easy either. So that's kind of thethe grow the venture stage. The growth stage is really different in the skillsets you need from your cfo becomes so much broader. So first of allthe CFO is going to need to make sure the accounting has done to avery high standard and at this point you're probably audited and if not, it'sgoing to have to. You're going to have to get to audit quality financials. The CFO is going to have to make sure the FPNA is built outin a way so that it's insightful and actionable for a broad group of leaders. And because the business is growing and it might be changing a lot interms of getting into new products or new markets, the CFO needs to makesure the systems are flexible and scalable and at this stage you're probably going tohave a lot of different systems. So if you really want to build outyour fpna correctly, how do you synthesize the data between those systems so thatyou can build out really actionable FPNA? And then at some point there's probablygoing to be some Ma and integrations, and managing those effectively is super challenging. And then at some point the company's probably going to start taking on debtand you're going to have to manage cash and the banking side are is goingto get more and more complicated and this can become a problem. I mean, if you take up too much debt and there's some volatility in the businessesearnings, then you could have loan defaults as a problem. As I said, you're going to get into new markets and product expansions and so working withacross the company Cross functionally and pricing and and just managing this whole process andcollections and everything there's tricky. And then international, if you get into internationalmarkets, the complexity, take all the items I just went through, adouble or triple your complexity. So those are a lot of operational challenges.And then it some point there may be inbound interest to buy the company anda company's going to want a good cfo to represent the company in the cellside process and cell side processes are a real unique skill set that if youhaven't done it, there's a lot to learn in terms of how do youeffectively manage to cell side process if you're a CFO. And then the otherthing is is that if the CFO has not done a good job and anyof the stuff I've mentioned earlier, that's probably going to be readily apparent toa savvy buyer and that's going to reduce the confidence of the buyer in thisprocess and it could impact the company's valuation. So again at the VC stage therole the CFO might have some variability to what the CFO has to begood at, but at the gross stage the CFO is going to have tobe good at like twenty things and the job really expands in the only wayof CFO at a at a gross stage can be successful as if they canbuild that a good team. So then the CFO can span and all thisstuff will get done well. So one thing I say all the time isif you give me three or four really good people with good attitudes, wecan move mountains. At the venture stage a CEFO can probably get by withone or two good people, but at the gross stage of the CFO willneed at least three or four good people on the team. So then gettingpast the gross stage, if a company isn't going to Ipoh, then they'remost likely going to be acquired by larger and larger pe firms and probably withevery acquisition there will be more and more debt put on the company's books andas a part of that debt and as a part of moving up to largerand larger PE firms, there's probably going to be even more MNA and theP firms are going to push for a lot more efficiencies as the company growsand then through Ma. So if stuff wasn't done well in prior stages,it all builds up and eventually it's going to come out. So it'll becomea real problem now to fix stuff that wasn't done in prior stages and it'sgoing to have to get fixed. And this will continue to become heavier andheavier lifting as the company grows, because fixing all this stuff just gets harderand harder as a company gets bigger and more complex. So the growth stageis a really challenging stage. In this stage now starts to amp things upa bit and when you factor in the amount of debt on a company's books, there just is not a large margin for error. And so because ofthis, at this stage, PE firms tend to be very aggressive about managingtheir CFOs and honestly, they're very quick...

...to switch out a CFO if theythink they need to to do an IPO. The role changes a lot. TheC NFO roll swings back to having a heavy focus on accounting and forecastingdue to public reporting requirements, and so honestly, it's a very different jobthan when a company is pe owned. So you know, I get thisquestion all the time. Could a CFO start at the VC stage and staywith the company and ride at all the way to later stage private equity ortwo an IPO? and honestly there might be some magical unicorns out there whocan do all this, but I would say the odds are probably against itin most cases. At a minimum, I would guess a company on needdifferent CFOs at the VC and early gross stag pages and then during the highgrowth and buy out stage and then for an IPO. The CFO role justchanges so much during these stages that I think it'll be hard to find asingle person who's truly best in class at each stage. And good investors they'regoing to want that. They're going to want to best in class CFO toeach stage, and so they really won't have a problem switching out cfos ifthey think they can upgrade as each stage comes into play. Yeah, itsounds like just way too many skill sets for one person possess or be goodat. Yeah, absolutely well, what about, like, you know,hiring people up around you that that can fill some of those gaps? Isit possible that one person could, if they were able to put good teamsin plays along the way. It's helpful, it's really helpful, but you know, it does kind of filter down, like the control or you have ata venture stage might not be the control you wanted a growth stage,who might not be what the control you wanted to buy out stage and whodefinitely might not be the control you wanted an IPO stage. So it kindof filters down to the teams to and I think the other thing is isthat best in class issue. So I'm a much better CFO now than Iwas ten years ago, just based on the experiences that I've had. Andso, no matter what, I think a pe firm would look at meten years ago and me now and they would have swapped me out ten yearsago for the me now, just because I bring so much more experience tothe table than I did that same person, just different experience. And again,when there's a lot of money at stake, these the P folks,they're going to want best in class and so they'll switch somebody out. Theywill. So as a CFO, you should probably not take that too personally. Yeah, you can't. You honestly can't. And I feel comfortable knowingwhen I've kind of tapped myself out. When I get to a certain pointI realize it's not what I love and it's not what I'm great at andI want to be successful every day. I want to feel good about thework I'm doing. So if something starts to get to a point where Idon't feel comfortable, I have no problem saying hey, why don't we figureout a way for me to leave and bring on somebody else and I'll godo something that's more in my comfort zone. You have to drop the EGO tostart to get to that point. You have to say, I'm nottrying to prove anything here. I want to enjoy the work I'm doing andI want to be good at it and I want to be successful at it. So maybe this isn't the right stage for me anymore. But you haveto be kind of true to yourself and and be willing to admit that there'sprobably somebody else better out there for this stage and honestly there's nothing wrong withthat. Just you'll be happy or if you move along and find something that'sa better fit for your skill set. Yeah, it's great advice. Soswitching gears a bit. So one of the fallouts of covid is that manybusinesses right now are having to re examine their office space. I know yourecently spend a great deal of time on this yourself, so what advice canyou offer? Yeah, it's funny, much so. My Company, Ijoined eight months ago. We have five leases under our belts right now andby the end of the year all have redone in some way, all fiveleases. So dealing of real estate matters is a much bigger portion of aCFO job than anybody would ever think. But in covid has really thrown awrench into things. So with covid some businesses are saying that they're going tomove completely virtual. And will this work over the long term, especially asa company grows and changes and acquires other companies? I know lots of peopleare pushing the hundred percent virtual thing,...

...but at this point I'm a bitof a skeptic. I do think that there are challenges and maintaining your culture, particularly as you get bigger and if you're aquisitive, and it's very difficultfor new employees or young employees who need mentorship and visibility to be a hundredpercent remote all of the time. So said another way. You know,there are things you can probably do when you have a hundred employees that won'tbe as effective as when you have a thousand employees or when you do someMa and try to mix together some different cultures. So again, I knowthere's a lot of companies out there saying, Ay, we're going on a hundredpercent virtual. I think you can do it when you're small. I'ma bit of a skeptic that when you're really large it will be effective foryou. But as far as covid affects your real estate strategy, it's stillsuch a fluid situation that, you know, I think a lot of companies areputting out bold proclamations like we're going to be virtual for forever. It'sstill, to me, a very fluid situation and it's really hard to knowhow this is going to play out over the long term. So, twelvemonths from now, will covid have a major impact on our daytoday lives?It may or it may not, and I'm superhesitant to make a long termdecision on something that may or may not impact us over the long term.So for now I'm kind of trying to be a little bit cautious when dealingin real estate matters, but at the same time I'm still pursuing a strategywhere I've got to think about the long term kind of goals for the business, and so I'm still kind of managing real estate stuff as if covid isnot going to be a long term issue. So because of that, let's discussall of this exclusive of covids impact. And, as I said, youknow, when you think of the CFO role, who thinks about officespace? Right? I mean it's it definitely is important because, unless you'resubleasing some another company's unwanted office space, you're going to have to build outspace within a landlord's building. In that landlord will probably want you to signat least a seven year lease. Sometimes you can sign a five year lease, you'll pay for that privilege. So most leases are seven years and someare as long as ten years. The hard part is is you really don'tknow how much space your business will need five, six, seven years fromnow, and you might not even know how much space you're going to needin a couple of years in building out office space is an expensive project.So if you screw it up it can weigh down your financials big time foryears to come and getting out of a lease that you signed is almost impossible. Buying out a lease is extremely expensive and subleasing your space may or maynot be successful. So, all in, as a CFO, you know amongscary things that I do, signing a lease. That's that's very scarystuff. So ideally, when I think about real estate I try to findall the flexibility I can within the situation. But some of that also depend endson what your investors goals are. So naturally a landlord will charge youless in monthly rent in exchange for a longer term lease. And then alsowhen you've build out space, the build out costs gets spread across the termof the lease. So all in, if you sign a longer term lease, your monthly expenses will be lower, but you'll have less flexibility to getout. So if your investors want to drive Ebit and that's their soul focus, they might be fine with signing a long term lease to focus on drivingdown the monthly expense. But then you're locked into a long term lease,which is scary. And when investors go to sell a company, a buyermight not be excited to take on a long term lease. So at theend of the day, it really is up to the investors. Do theywant low monthly expenses and little flexibility or higher expenses but some flexibility? It'sup to them and a lot of their thinking on this topic will likely bedriven by how long they plan to hold on to the company. And it'sfunny, you know, how you might approach a lease could be very differentif an investor as looking to sell the company within twelve months or within twentyfour months. I mean you might have different strategies right there, and soreally understanding what are their goals and aligning your real estate strategy with that isimportant. The other piece of it is, though, forget the LEA stuff.It's no matter what. When you design and build out a space,you should always think about what happens in both upside and downside scenarios. Soregarding upside, you know, what are we going to do if we outgrowour space? Ideally, when you sign a lease, you know a lotof companies find a quaint to find like a cool hip house or old buildingor warehouse space for the for the company,...

...but I would advise against doing that. My advice and it sounds super genericy, but try to find spacein the biggest building you can find with the biggest floor plate, which meansthe size of each floor. Then if you need more space, there mightbe adjacent space that you can least that you can connect to, and ifnot, there may be space directly above you, or there may be spacedirectly below you that you can connect to and if not, as a finalfall back, there may be space elsewhere in the building. These are allbetter options than having to spread your business across different buildings. If you're growingin a downside scenario, you should design your space in a way that aportion can be easily carved off and sub least if you need to, andyou should design that space in a fairly generic style so that a broad groupof sub less ores might be interested in that if you have to go andsub LEASA space. So overall, I like to look at this and Isay it's a lot like getting married. Nobody wants to think about what happensif things don't work out like you had planned, but the reality is thatthings might not work out how you had planned, so you need to havea downside plan. Yeah, I imagine that a lot of starnups want todo that cool hip space to ultimately there disadvantage in the long run. Yeah, and look, I know employees allow it. Here's a funny thing,though, is a lot of times a company will take cool hip space withoutfactoring in how long it takes for their employees to get to that cool hipspace. And I'll bet you if you surveyed employees, most of them wouldsay I'd rather have a shorter commute to more generic e space than a long, crappy com you to really cool space. Absolutely so, switching gears again.So, as a CFO who's had to work through Internet international acquisitions,what advice can you offer those out there who might be grappling with this rightnow? Yeah, that's funny. As a business student, you know,I everybody wanted to do to major in international business. Right. It soundssuper glamorous and I'm sure listeners are envisiting first class flights and expensive meals inParis and that all sounds great, but the reality is that when you're buyingsomething outside of the US, take the complexity of a US based acquisition andeasily double or triple it. So with every global market you go into andlet's say you buy a company that's in a bunch of global markets. Youneed to understand the specific details of each country's labor laws, data privacy laws, taxation. In some companies or in some cases you might be able tofind a global bank that you can use in multiple countries, but otherwise youmight have to find an inmarket bank. And I got to tell you it'sgotten very difficult to remotely open up bank accounts in foreign countries due to thethe fear that governments are worried about fraud and money laundering and God forbid ifyou want to accept electronic payments or cash payments in those markets, those typesof accounts are they've gotten really difficult to open without flying to that market andmeeting in person with the bank. I mean I'll tell you one funny story. I was CFO of a business and we work going to open something in, I think it was Singapore, and we work in a channel. Alot of volume through the account, maybe two hundred thousand dollars, and whenI talked to so we're going to have a small business essentially in Singapore,and when I talk to the bank they said, well, you have twooptions. Number one is you have to fly to Singapore and meet with usin person so that we can get to know you and make sure you're legitimate. And I said, but this is going to be a small business forus. I mean the cost of me taking a week of my time andflying to Singapore that's going to exceed the amount of eat. But we're goingto get from that business for a year or two. And they said fine, your other option is you can deposit two million US dollars in our bankas kind of a form of security. And I said, did you getthe decimal right? Two million dollars? I'm going to Channel Two hundred thousanddollars in revenues through your bank. No, no, you need to deposit twomillion dollars. Okay. So neither of these solutions was very viable.The other thing you have to think through is you do have to set upinner company agreements between all the countries you're operating in, and you have tokeep your accounting properly between all these countries, because a lot of these countries arenervous about are you doing stuff to minimize taxes and and naturally each countrywants to collect the amount of taxes that...

...their own. You you have tohave an accounting system that can handle multiple currencies, and I mean honestly,I could go on and on and on. There's so many things to think throughhere and in time zones. Don't forget about time zones. So werecently we bought a company who has employees that are in Europe, in Australia, and so if you if you measure the time zone span between Australia,Europe and us in the US, it's about a fifteen hour time span.So it's almost impossible to schedule a call. We're folks from both location and fromEurope, and Australia can be on the calls due to the time span. It's really, really complicated. So how do I not navigate this stuff, because at some point most companies are going to go international and you're goingto have to find ways to to navigate it. The first thing I do, honestly, is I set the expectations for everyone that it will be difficult. I let our investors know this is two to three times more challenging thanbuying a company in the US. I let our leadership know, just becauseI don't want anybody to go in and think it's going to be easy.It won't be. And then having prior experience with specific markets certainly helps.Like I've operated a lot in the UK, so if we open something in theUK, I generally know what needs to happen. But if you don'thave that, the one thing that helps now that really didn't exist fifteen ortwenty years ago is there are a lot of third parties who help companies operateglobally, and again, these did not exist before. So, for example, now you have a lot of global peos. So these are companies that, instead of you hiring staff, they'll hire staff for you in the market. They're not going to pick the staff, you're going to pick who they hire, but it's going to be on third payroll and then they'll handle allthe local filings and taxes and stuff for those individuals. So there are alot of global peos now who, if you need to hire and pay justa couple of employees in a country, it's a lot easier than going countryby country and trying to set up your own payroll and your own filings andstuff like that. So let's say I need to hire sales people in abunch of European countries. Let's say five people in five different countries, soone person per country. It's a heck of a lot easier for me topay a global peo to handle the payroll for each of those individual people infive countries then it is for me to figure out how to get it doneor to contract with like a lot of times you have to use like alocal payill firm or local accounting firm to do peril and a country. Heckof a lot easier to deal with a single global peo to accomplish all thisthen to try to approach it individually like that. So if you're going tohire fifty or a hundred employees in a country, you might take a differentapproach because you'll pay for the privilege of using a global peo. But youknow, if it's a small number of people, there are options are outthere that will help you save a lot of time, money and effort.So I honestly, when I go into a foreign country, I looked outsourceas much as I can just to keep it simple and then if we're goingto get size and scale and a given market, then I might look ateach different kind of accounting or finance function and figure out if I should bringthat in house. I am very overt with investors and with our leadership.We're I'll say, it'll take me more time to figure out how to getone e employee WHO's working in Rome set up and paid then it would takea hundred people who are working in Phoenix to get set up and paid.So, just given how complex it is to go international, when is itthe right time to make that jump? Yeah, it's I would push itout as much as I can. If you have runway in the United States, I would focus on that first and then there you know, there aremarkets that are probably easier to enter if you're located in the United States,something like Canada. A lot times the English speaking countries are a little biteasier. But I was at a company where we were twenty million revenues solelydomestic and we started to prospect a lot more in Europe and when I joinedthe company that was one of the first questions I asked is, why arewe doing that? And we ended up not doing it. We ended upputting a stop to that because, I said, there's a lot more runwayof the US and operating in a foreign country with data privacy issues and stufflike that, it's going to be really challenging for us. So at oursize and scale it really did not make sense and that's why we stopped doingthat. Again, I would focus on growing the United States for as longas I can before I would get into...

...international markets. The one good thingif you buy companies in international markets is you know a lot of investors lookat market size and Tam and so total addressable market. So they're going tolook at you and they're going to get more excited about you if you werein markets that have a lot of growth potential, and so if you thinkfrom an investor valuation standpoint that'll help you a lot, then it could makesense to go into international markets earlier rather than later. But if you're asmallish US based company, there's a lot of runaway here for you to growand you're not that great at operating executional details in the US, it's onlygoing to get harder and harder to do it outside of the borders of theUS. So I would defer that as long as possible. Great Advice.So, as a CFO, what are your greatest concerns these days? What'shappening you up at night? Yeah, I mean it's funny it. Thissounds an air key, but it really is always making sure that I havethe right team working on the right things. I literally get pulled in twenty differentdirections in any given day and the only way I can be successful atall this is if I have the right team who can make take the balland run with it and we move super fast. And you just have tobe able to run super fast and honestly, you have to have a fairly thickskin, because you might put in a lot of effort on a projectthat will change directions on because something is materially changed, and you have tobe willing to roll with the punches, not take a personally and say,okay, all right, what's next? It's finding that great group of generalists, kind of like Mede a lot of ways, generalists who are just reallywilling to take on random projects the pop up because they will and are focuseda lot more collectively on what are we trying to accomplish as a group andnot as individuals, and really focusing on our broader success rather than individual success. I really try to look out for my people in terms of titling andcop and stuff like that. So I want to I want them to notfocus on that next promotion, that next title, that next rays. Iwant them to have confidence in me that if everything is going super well,I'll absolutely, a hundred percent take care of them and if they're a greatmember of the team, I want them to work with me for forever.I'll handle all that stuff. So they have to worry about the career stuff. But in return what I need from them is that great gelling with otherfolks on the team, that willingness to step in when random things pop up. They have to focus on nailing the details, because I don't have thetime to check people's work and they just have to be an overall kind ofgood participant in good good contributor to the team. That stuff is super importantto me and, as I said, if I have three or four amazingpeople, I think we can move mountains. The hardest part is finding those threeor four amazing people who want to join you on the journey of buildingsomething awesome and honestly, there's no ego here. I'm not focused on anythingelse. All I want to do is build something awesome with a great groupof people and then look backwards with that group of people and say, myGod, can you believe what we just built over the last three years orten years or whatever? So it's a generic response. Right, building agreat team. Everybody'll say that, but guy really mean it. I meansystems projects and challenges will come and go. Accounting challengees will come and go.We can beat all that stuff with a great group of people. Ifeel super comfortable with that. The second thing is is that, you know, in my world there's always a lot of acquisitions and being successful in MNA. It sounds glamorous and it sounds easy, but it's really a difficult road that'sfraught with risk, and it's even more difficult in the current era wherevaluations are sky high and you fund a lot of deals with that. Youjust don't have a lot of margin for error. And when Ma goes well, it can result in just a magical transformation for a business. It canreally help you quickly accelerate into new products or new markets. But when Managoes sideways, a situation can devolve into being a big distraction and a financialdrag and it also a roads the confidence from your investors and, as witha lot of things, emana. It sounds super glamorous, but success isreally found in executing the details, and there are plenty of studies out therethat show that the majority of Ma leads to negative value created. Yet whenyou close on an acquisition, you are a hundred percent certain that it wasa good move. So reconciling between the excitement of closing the deal and actuallyrealizing positive value from the deal is when...

...reality sets in and you separate outcompanies that have developed a skill at acquiring and integrating companies and others that closedeals without a game plan or skill set to do m A. Yeah,I imagine that finding that magical m a is not the the norm. Yeah, it I have so many success stories where I will tell you it wastransformational for our business, but then I can tell you other stories where theprocess just didn't go well and for whatever reason, operationally we got bogged downand it was really hard to get value out of what we bought. It'sa lot trickier than it sounds. Yeah, I'm sure there's just a lot toconsider when you're merging or acquiring a company. Well, took a lotof things too, you know, the seller is trying to sell you onthem and why you should pay a premium valuation, but the buyers also tryingto sell the seller on why they should sell the company to the buyer.And then, if you're in an auction process, which is a lot oflarger M A, there's going to be an investment bank who's going to drivean auction process. You know, just like buying something out of Ebay,a lot of times you have a little bit of buyers remorse because you're nervouslyyou overpaid for what you ended up with, and in an auction you often dooverpaid. So kind of doing a good job and matching what you paidto what you'll get out of the deal financially. Those are tricky things tomanage and things can go sideways if anything in that process goes wrong. Sonow that we're into the second half of two thousand and twenty one, what'sone goal, either personal and professional, that you're hoping to achieve this year? Yeah, I'll give you one in on each side. Professionally and personally. So professionally, as I mentioned, I joined my current employer about eightmonths ago and we've been implementing my vision for how our FPNA should work,and I talked about it earlier, how it should be interactive. The theleadership team should should all be operating from a consistent set of information that's beingpushed to them and then we're collectively making decisions from that. We're implementing thatvision right now and I think it'll be fully rolled out by year end andhoping that that will be an active portion of our budget process. We've madehuge progress on this and so far I've been really excited. We're with wherewe're at, but you know, there's still a lot of game to beplayed and we got to finish up the project, but professionally, by yearend. That's one of the things I'm most excited to see kind of cometo fruition because I think when I was interviewing you know, everybody had ageneral idea of what I was trying to get at, but now that they'restarting to see how it actually looks, I think there's a lot of excitementand I'm excited about it too, and so again I'm excited to finish upthat project so that we can start to benefit from those efforts. Personally,this might sound funny, but I've been writing a book on exactly the typeof stuff that we've covered today, the role of the CFO, and I'vebeen working at it for a couple of years. I just do it hereand there in my spare time and I've written most of it, but I'dlove to have it finished by early next year and I'll I'll push it onLinkedin and I'm not trying to sell a million copies. I'm hoping that,you know, I'll sell a few. Two people are interested in like we'vetalked about today, but really the goal is to help educate anyone interested inthe various nooks and crannies of doing this type of job and honestly, asyou've heard me on this call, I really do try to strip away anyof the imagined glamor that people might have in the CFO role and I focuson trying to help give an overview of the twenty things you need to begood at and how to think through those things. A lot of times therearen't there isn't a single right answer. So it's really kind of weighing acouple of different potential right answers and picking a path and I want to providefolks who read the book with some just kind of some processes to think through, like real estate or ma or international stuff to think through. What aresome of the concerns, what are some of the pitfalls and how can theypush the odds in their favor to potentially be more successful? That's an amazinggoal. I had a guest on a few months ago who would just authoreda book and he mentioned that everybody at some point in their lifetime should tryto write a book, that you'll learn more about yourself in that process thanjust about anything else. Yeah, I've always enjoyed writing and for me it'sI'm trying to make it a fun read because you know, at face value, here's a cfo talking about what he does daytoday. That doesn't sound veryexciting. But I try to pepper the book with a lot of actual stories, including some that are truly wacky or...

...hilarious that have happened in my mylong career doing this stuff, because random, weird things do pop up here andthere and sometimes things don't go exactly how you planned, and so Iwant to I want to be very upfront and honest and talk about a fewof those things and tell some funny stories to keep the reader engaged. But, you know, I think folks who want to be a CFO, forcontrollers, for financial analysts, for private equity, folks who may not knowwhat the job looks like day in and day out, you know our NBAstudents. I think it might be a fun read and it, you know, won't be incredibly wrong, I think, or long. I think what I'mdone. It'll probably be, I don't know, two hundred fifty pages, but I think it'll be a good read for somebody to just get abackground us to what is the job actually look like day in and day out? What are those twenty things you need to be knowledgeable about? You willdefinitely have to let me know when that is completed. Will do rick,thank you so much for being my guest today. You'll probably I've really enjoyedit. Yeah, me too. I've loved speaking with you and hearing aboutyour experiences and all of the resulting insights, sort of all of our deaths outthere. Please doing it next weekend. Done till then, take care ofyourselves. If you're ready to boost efficiency and streamline your accounting processes atsignificant cost savings, it's time to talk with personive. Their people powered solutionshave transformed the delivery of back office tasks and general accounting functions for decades,partnering with clients to provide everything from accounts payable to payroll services. See Whatpersonive can do for you by visiting PERSONIVECOM. You've been listening to CFO weekly presentedby Personi. Please subscribe wherever you get your podcast to hear all ofour episodes. Want to learn more, check out personivecom. Thanks for listening.

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