SaaS Interviews with CEOs, Startups, Founders
Is Forecasting a Waste? CFO with $123m in Revenue Tells All
11 Jun 2024
Chapter 1: What is the main topic discussed in this episode?
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Chapter 2: How did mFiles grow from $10 million to $123 million in revenue?
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Yeah, so my role as the CFO and COO of the business started when we were really starting to scale the business. So I think I was asked to share my lessons learned, and the challenge was boiling it down to nine. All right. So, yeah, what I'll cover is basically kind of three categories. One is in terms of the team and people.
Obviously, you know, the work is really, for a position like mine, it's really about building the team and then enabling them to obviously do what they do. So I've got some thoughts on that. In terms of tooling, sharpening the axe, lots of lessons learned.
And in terms of just the intangibles for a company that's growing as fast as we did, which I'm sure that's of interest to everybody, clearly lots of kind of leadership mistakes and lessons learned there. And I promise none of this is going to be that earth-shattering, so it's really just based on kind of practical experience. And hopefully some of it will be useful.
So maybe tell you a little bit about mFiles. We're a knowledge work automation company. Our core platform is a document management platform that automates management of information, workflows, and compliance. So the story starts way back and started in kind of the 2000s. kind of early 2010s, if you will, in terms of actually becoming a recurring subscription SaaS business. Welcome. Yeah.
And so today we're doing, you know, somewhere in the neighborhood of 130 million, something like that. And so it's been a great, great ride and definitely lots of change throughout, but especially in the last kind of three to four years. And happy to tell you about some Very real stories. I'm sure every story, every company is a little bit different.
So happy to tell you about mine and to the extent that's interesting to you, hopefully. But yeah, we're basically kind of at the stage of scaling the operations, really getting better. The blocking and tackling is kind of behind us, I hope. So it's really about optimizing things. things like margin and the metrics. That's our stage.
So in terms of the first category, kind of the people and the teams related lessons learned. So number one for me, it's really just making sure you fit kind of your team to the stage, right? And so I've definitely made a mistake. Happy to admit that, you know, early on when I first got to MFOS, I said, well, the first thing I need is a,
just a killer controller that just done public company stuff. I want someone who's just up here.
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Chapter 3: What lessons did the CFO learn about team dynamics during scaling?
And at that stage, it didn't work out because that's not what we needed. We needed someone who's gonna be able to roll up their sleeves, work with the teams to build some basic things. We didn't need to go from zero to 100 miles an hour, right? We needed someone to get us from zero to 20. And so that's my lessons learned in terms of fitting to the stage.
Cultural fit, where M-Files is also a Finnish company. So we have a unique culture. So obviously you know all about that, but that was very critical for us. And I can admit we've had some misses there. And then just in terms of speed, the scale and how fast we were growing, we just needed to move fast.
And if I made a mistake with teams, which again, I have plenty, the worst thing you could do is try to make something work that's not gonna work. Just fail fast, move on, get better. I won't spend too much time on this. I'm sure you've seen probably hundreds of pyramids in your career. This is sort of my thought process when I think about stage from a finance and operations standpoint.
What's the basic stuff? Early on, you're worried about maybe just making sure you can collect cash, making sure you can close the books and report the financial statement. And then Eventually, you can work on things like how do I get my reporting, get my budgeting straight. And then you can even get into things like, okay, forecasting and so on and so forth. But figure out where you are.
When I started M-Files, we were probably lower on the pyramid than I'd like to admit. In terms of the key... Sort of things I worked on, I thought this might be interesting to just, again, every company is different. But for us, early on, it was really about fundraising. Can we close a month? That was actually not easy at first, right? Are we compliant?
Do we have basic things like SOC compliance, ISO compliance? Most of our customers were asking for that. That was not a given. We invested in IT. I invested in a controller to really get accounting to the next level. Then we went to FP&A, really getting about budgeting and analysis. Then we built out the legal function. We were using outside counsel. We invested in an internal team.
Then forecasting. So it kind of gives you maybe a progression. Relatively recently, hired a CISO, Chief Administrator. security officer, built out a cyber security team. Every company at scale is going to need that today, obviously.
And then we're kind of working on things like optimizing the business now, you know, pricing, deal desk, how do we get more out of the deals, how do we make sure we do good business, right? So maybe that gives you kind of a sense for the sorts of initiatives that you might have. Hardly scientific, but my I'm happy to admit my personal failures.
So these are, I would say, I'll just say this is turnover on my team throughout the years. And if I just did a quick, again, not scientific, my sense for what didn't work, was it a performance skill set issue or was it a lack of culture fit? Almost always for me, it was culture fit.
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Chapter 4: What are the critical elements of effective forecasting?
Things like can't keep up with the pace of business and change can't collaborate with the teams, can't sort of keep up with the business initiatives changing and so on and so forth. So just really critical. The other thing that I'll highlight is that, again, not scientific, but sort of recently I'm learning myself. If things aren't working out, make a decision, move on, fail fast, right?
So that's my kind of wrap up of the first kind of teams, people section is really fit everything, culture, as well as what stage you are as a business. And then again, just moving very fast. Speaking of fast, I'll try to keep us moving, get us back on pace. So the second section is really about tooling and systems related. Probably no surprise, again, I'm
Like I said, nothing earth-shattering here. Really designing everything for many years ahead, especially when you're a growth company like we are. Investing really early on in forecasting, that's something that takes practice. And it's so important.
When you get to 100 million, let's say, and if you haven't already been building your forecasting muscles, when you get there, you're in trouble, right? Because at that point, you need to be really good. When you can forecast this quarter, next quarter, you need to be on Right. And so you need to really start that early. And then less is more is sort of my way of trying to rationalize.
It's way too easy to get into analysis paralysis. So just really need to try to avoid that. If I go back to our revenue growth, obviously just conceptual, but for us in 2018 is when we did a big system rebuild, went to NetSuite and brought on some other solutions. We clearly designed the business though for looking three, four, five years ahead.
We were probably in the 20, 30 million range when we were doing it. And we intentionally, all the requirements were based on, hey, when we are $100 million business, this is what we need. And obviously that's what we built for. And that's certainly working out for us and couldn't say that more strongly how important that is. In terms of forecasting, so
Again, fairly straightforward stuff, but to me, just critical. Number one is, again, start early, but have a very clear cadence. So what we do with our forecasting, and we've been doing this for a long time, is on a certain given day of the month, you start your collection effort, and that's when the business areas know they have to give us their input.
Engineering knows that's when they need to give us their hours. Sales knows that's when they need to give us their sales forecasts. So we know we have very clear dates and cadence. Then we collect it. We roll it up. We have very clear review cycles. And those are all calendared. Just super important to get that going. And then the business gets used to it.
And then that leads to the second point, which is you don't want the forecast to be your forecast. It's not my finance forecast, right? That's got to be owned by the business. So if you happen to miss, the whole business is accountable, right? And that's not where we started always, I would say. But that's where we are now, which is great.
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Chapter 5: How should a CFO set up a plan B for unexpected challenges?
Don't buy into the hype. I love our salespeople, but they're internal optimists, so you have to kind of take a grain of salt with what they say. So be objective. Don't try to forecast too far ahead. We're pretty rigorous. We always look at this quarter and next quarter, and that's it.
If we're asked for something two, three quarters ahead, you know, we can get some ballpark estimates, but we don't know. I mean, that's just, to be honest, that's just too far ahead, right? So we can admit that. And then again, very important point, you don't want the forecast to be your number. That's got to be the business's number, okay?
Moving on to tooling and reports and financial analysis, analysis paralysis. Does your desktop look like that? Because mine did at one point where I had so many Power BI dashboards and so many different versions of them, and I couldn't make sense of anything. And I'm easily overwhelmed, so that was definitely the case for me.
But also, for the business, you're just tough to get true insights if you're trying to do too much. And then, obviously, just administratively trying to manage all of that is really, really difficult. So as much as possible.
I'm sure you all obviously look at this, but just try to boil down to as few metrics as you can, what are really important, fairly basic things that you can track very easily. We learned that pretty early on. So that's sort of the wrap up for the tooling. Again, just looking ahead, when you look at systems, forecasting, make sure it's a well-baked practice process.
And then in terms of metrics and analysis and reporting, less is definitely more. All right. And then the final section, talking just generally about leadership, I think especially when you're a high growth company and let's say you're doing less than 20, 30 million, 40 million, something in that range, the company does need a lot of leadership. And I think
You know, the CFO, the CEO position is really key in providing clarity to the organization. You can't have mixed messages. It's tough to say things that are too nuanced because folks will read into that what they want to read into. So just very clear communication, very clear goals, strategy, and just being very, very, again, very clear and simple and straightforward.
Collaboration is key, obviously. I would actually boil that down and say, be nice. Because I think that actually does come back to bite you if you're not. And stuff happens, so you need to have a plan B. So a good adage I like, if you want to go fast, go alone. If you want to go a long way, go together. So certainly for us, our company, I think we collaborate really well.
And it's very, very important. finance and operations for us, and I suspect it's the same for most organizations, it's kind of a function that works with everybody. And we have to play nice. And when I talk about cultural fits and misfits for our group, that's where you might fall short.
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Chapter 6: What role does culture play in a high-growth company's success?
I don't know, but we're prepared with the plan B and we've had to use it. So pretty basic stuff, but those are my lessons learned. Hopefully that was, you got at least one or two things in there that were useful. And thanks for your attention. Thanks, Justin. Yeah. You talked about culture early on. Sure. How do you approach trying to change the culture with, like, a fully remote team?
Yeah, that's a good point. Culture is difficult with the remote team. I would say I wouldn't try to change the culture. For my experiences, the company culture is kind of what it is, and it's really just making the most of it and trying to get the teams that can kind of work within that culture.
In terms of shaping it, you can obviously shape it in terms of like for us, our focus has been around making it more performance oriented, right? And you could do those things obviously through kind of making sure goals are clear, folks are held accountable, things of that nature, but sort of the intangible aspects of culture for a business I think for us, it's a strength.
Our culture is a strength. So I wouldn't want to change it. I want to just make the most of it and leverage it. From a remote standpoint, tech companies, I don't know. I'd love to hear if others think it's a challenge. For us, the remote aspect hasn't been a challenge because everyone's sort of professional. They do what they do.
So really, it's about just holding people accountable that, hey, if that's your commitment to do something, and if you haven't done it, and if that happens to be because you're remote and you're not in person, you know, that's sort of beside the point. You didn't meet your commitment. So that's the way we manage it. Thank you. Yeah. Thank you.
What would you tell yourself 10 years ago that you wish you knew, that you know now, but you wish you knew then? I like that question. Yeah. What I would say I would have given myself advice 10 years ago would have been probably to maybe be a bit more laid back.
I mean, I'm pretty laid back already, but I think you have a tendency to maybe drive a little bit too hard and you're losing sleep at night and things have a tendency of working out at the end if you're kind of focused on the right things. So really just providing also from a leadership standpoint, providing leadership through calmness and poise, I think that's really important.
And if you're sort of maybe frazzled and trying to do too much, I think that definitely shows. So that's what I would say. Yeah.
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Chapter 7: How can companies avoid analysis paralysis in financial reporting?
All right. Thanks, Justin. All right. Well, give Justin a hand. Appreciate it, Justin. All right. Thank you, everybody.