Date : 16-04-2015 Platform/Online Media:: Your Story Source
CFOs: Dhonis Of The Startup World
It’s the last 10 overs of a 50-over game, India is bowling first. The batting team has already crossed 250 run mark and are advancing steadily at 10 runs per over. India will have to bat exceptionally well to chase down the run mountain and win the ODI. The bowling changes are critical and the fielders have to be at the right areas. Senior players are chipping in with words of advice and there needs to be a constant check on the over rate. Bowlers need to stick to the plans. He needs to keep a hawk eye for each delivery bowled as he is the wicket keeper, he has to go down and wait for the ball, stand up after the bowl is bowled and run up to the stumps to create a run out chance. All this, and surely much more.
How often have we seen Dhoni do this during the slog overs? Keeping the wickets and being the ‘finisher’ in the batting line up while successfully captaining the Indian team is a true mark of an all rounder. Dhoni took up all these challenges from 2007 when the Indian ODI cricket team was in transition. With the senior players no longer at their peak and new teammates still settling in , the ODI team then, can be tagged as more of a ‘startup’ in a corporate terminology. It required a leader, a true all rounder to lead from the front and elevate the team from a startup to the world champions in ODI and T20.
The role of modern day CFOs in a typical startup environment is somewhat similar. A start-up demands that the CFO wear multiple hats, as the business negotiates its way through uncertainty, an ever present cash crisis and the operational demands of a rapid scale up. Restricting themselves to their ‘finance’ domain is not only sub-optimal for a CFO in a start up, it can be downright dangerous to the health and even the survival of the organisation. So, what should the CFO of a start up be thinking about?
Cash, Cash, Cash: At a startup, cash flows (and not necessarily profit) are the make or break factor to determine whether the enterprise will survive. Demand, sales and revenues take time to pick up and the enterprise needs to be able to predict its cash burn accurately. Whether the startup is in the ideation stage or an in early growth phase and whether it is making ends meet or has got the initial round of funding from VCs / PEs, the CFO plays a critical role in fund raising, in monitoring the end use of funds and in tracking the cash flow runway to ensure that the Promoter/ CEO is not out of fuel (cash) in the lead up to achieving profitable scale.
Forge a winning partnership with the CEO: Like a good ‘finisher’ in an ODI game, good CFO plays two critical roles for his/ her company. One, he plays according to the situation and two; he likes to stay till the end to see him team home. Promoter/ CEOs vary a great deal in terms of experience, ability, temperament, commercial awareness and response to risk. A good CFO needs to bring in aggression in the though process if the Promoter/ CEO is naturally conservative or as is often the case, bring in conservatism, if the CEO is of an aggressive mindset.
A CFO also sees the team through to the end, by measuring progress against plans and ensuring that red flags are highlighted on time for corrective actions to be taken. Since most start ups have a very limited runway, helping the CEO to improve ability to spot, identify, define and correct mistakes is a critical role of the CFO. CFO - the new #2: Where the CEO is busy building the business, acquiring customers and ensuring good customer experiences, the CFOs are taking on larger roles in start-ups and acting as the virtual #2in their organisations.
This is a massive responsibility for the CFO to carry, as he has to share the same passion as the CEO, needs to have adequate experience of working in start up like situation, be functionally competent, command the respect of the operations team and help the CEO generate value from the enterprise. To build credibility and earn respect from fellow workers, a start up CFO needs to be hands on problem solver, not afraid of rolling up his/ her sleeves to ‘fix the plumbing’. The ability to help the CEO see the big picture (macro), yet zoom in to fixing the detail (micro) is not easy to find in one individual. In fact, MyCFO was born to fulfil this ‘hard to meet’ expectation of a start up CEO, of having the CFO as a sounding board and operational problem solver, while being functionally competent in the finance domain.
Going beyond the ‘F’ word : Start up CFOs are usually young, passionate, all rounders who are curious and are proactive about being part of the solution. Wanting to get involved with everything that is to do with the growth of the startup and not be restricted to the ‘F’ (i.e. Finance) word is the hallmark of a good start up CFO. The CFOs for the start-ups have to be the C'X’Os; individuals with the ‘X’ factor and individuals whose presence can improve the ‘X’ (valuation multiple) for the business. The CFO brings strong execution will to ‘make things happen’. He is the go-to-person for solutions to practical business problems, not all of which are finance issues.
A good start up CFO in involved in deciding monthly office overhead spends (admin role), designing an ESOP or defining a performance management scheme for senior managers (HR role) or in recommending whether allowing some freebies to customers to retain them or attract new ones is a good strategy (business development / marketing role), measuring the effectiveness of the sales process (sales role), having brain storming sessions with the Product Development team to provide his view on how a layman would perceive the product at the current price point (acting as dummy customer to the Product Team) and in chalking out medium term to long term strategies with taking responsibility for financial goals of the startup (board role).
An all rounder CFO is what start-ups need. Good CFOs are adapting to this world of uncertainty and opening up to avenues way beyond finance and accounts. It’s time every start-up answers an imperative question “Do you have the Dhoni in your team?”
The author, Anam Dhila, is a Chartered Accountant (CA) and Chartered Financial Analyst (CFA - US) by qualification. Anam works as Project Manager at MyCFO