“To me it’s kinda funny, the attitude showing a n*&#a driving
But don’t know where the fuck he’s going, just rolling”
—Easy E, “Straight Outta Compton”
Years ago, I remember yelling at my CFO Dave Conte. He built a financial model that produced a higher revenue number than the previous one by adding more sales people earlier, but with no other changes. I said: “Goddammit, Dave, the spreadsheet is not the business!” My frustration came from the fact that there were so many other things that went into increasing the revenue to an exact number: the quality of the reps, the comprehensiveness of onboarding and training, the strength of the competitors, the quality of our sales enablement and marketing, the number of leads, and on and on. Just like the map is not the terrain, the spreadsheet is not the business.
But the truth is Dave should have yelled at me right back. He should have said, “Ben, you cannot run around the terrain without a fucking map and expect to go anywhere good.” This is a lesson that I wished that I had learned earlier. As a startup CEO, you are overwhelmed with the question of product/market fit until you find it. In the meanwhile, the business is simple enough that a) you really don’t need a map and b) the map that you have is always so out of date that it’s almost a waste of time. However, as you grow, the business becomes more complex and it’s impossible to keep it all in your head and even more difficult to keep everyone on the same page as well. That’s where the map comes in. A good map will provide you with the straightest path to a much more valuable company long term.
In a well run company, the CEO typically owns the terrain and the CFO owns the map. But in order for things to work well, the CFO must have a great understanding of the terrain and the CEO must comprehensively know the map. This is why the relationship between the two is so special, important, and intimate: there must be a constant dialogue. It’s great for a CFO to know the ideal target metrics for things like R&D as a percentage of revenue, sales efficiency, and the like, but if she doesn’t also understand exactly how that maps to the terrain of her company, she might give very bad advice. In the same way, a CEO might know the exact competitive strengths and weaknesses of her product, the quality of her people, the mindset of the prospects and customers, where the product really fits and doesn’t fit, but if she doesn’t have a sharp understanding of how all of that might translate into a valuable business down to the most minute detail, she might make costly tradeoff mistakes and drive the company into a wall.
So if you are a CEO who is hiring a CFO and you don’t know what you are looking for, you might want to start there. Which one of these candidates can I trust to map my business with great accuracy? More importantly, who do I want to review every single number in a giant financial model with and explain to her where her assumptions are right and where they are house of cards? Most importantly, who will I trust when they say I am headed in the wrong direction?
On October 29th, Ben has a new book coming out, What You Do is Who You Are, which tries to answer a question crucial to every organization: how do you create and sustain the culture you want? Ben explains how to make your culture purposeful by examining four intriguing models of leadership and culture-building well outside the usual business case studies. Go here to learn more and pre-order, or you can find it online wherever books are sold.