What makes a good CFO?
I have been asked many times. What makes a good CFO? There is no clear path to being a good CFO. A finance professional with extensive audit experience can be a great CFO. A Tax expert with industry specific experience can make a great fit as well. Whether you come from a controller background, or you have been doing FP&A all your life does not really matter. Not to say all roads lead to Rome. All roads lead to Rome, except those that don’t! I will explain.
Over the past 15 years, I have had the opportunity to work with Africa’s most impactful entrepreneurs, successful business magnates, and C level executives who have transformed their businesses into category leaders, and impacted the lives of people massively. I have seen ideas collapsed, businesses grind to a halt, stuck in the valley of death. I have seen the CFO and the CEO takeover the CTO position amid a people management crisis, sit on the floor with engineers, and successfully revolutionize the technology market in a given country. I have seen strategy in execution, turning a business from multi-million dollars cash loss into National and regional pride. I have seen tax authorities revisiting there assessments, reversing already lock decisions in favour of the taxpayer, at a time when tax advisors and consultants had drop the ball. Front and centre was the CFO.
I wrote somewhere and reiterate it here, the CFO of today is very agile, forward-looking and forward-thinking. In my opinion, regardless of where you are coming from, it only gets easier to fit into the CFO role when you demonstrate:
- Grit;
You have got the grit to align your thoughts and actions with your Organisation’s Playbook. Grit is the ability to persistently bounce back (with adjustments) from failures until successful in a specific task or set of tasks. Imagine your first year in business. You are being fraught with regulatory headwinds on one side. On the other side, the market is working like a form of cartel to keep you out from the pie. You’ve been thriving to survive till year two in a way that you can just say you are not defunct yet. Running costs are mostly fixed, and you are barely covering a third of your costs. Year 3, same story. Year 4, inflationary pressure kicks in, cost ramping up, but revenue is barely catching up. Burn rate shows no slow down. Investor confidence starts drying down. Your wild card is your killer product. But distribution is stuck as Cartel is holding you big time. Year 5, you would have fought enough battle to earn you a medal on your grave. As a CFO, you become the Sun Tze of King Wu. Restoring investor confidence is your job. Deciphering market dynamics, tactics at play, and using competition to your advantage is your job. Balancing regulatory compliance with survival need is your job.
2. Thoughtful judgment;
You are able to give your best judgment thoughtfully and willing to take risks and understand trade-offs. Do you accept a super high risk client on your balance sheet on day 1 of doing business? In a fragmented market where trust has to be nurtured from the ground up, would you go for asset heavy approach even when hot capital is after asset light approach?
3. Learning agility;
You have developed your learning agility to know what to do when you cannot know what to do. Remember that CFO who took the CTO Cap? Little did He know anything about Software development life cycle (SDLC). But he did understand the need to be agile. Coding was rocket science to him. But he understood the potential of technology, and where can technology take the organisation. He used his knowledge gap creatively. In just 6 months, the software team was able to translate the Organisation’s vision of enabling a no-code approach to consumer payments acquiring for digital-first SMEs and enterprise merchants. This marked the beginning of a market shift in the payment space from competing on fees to competing on service/value.
4. Ownership of the numbers;
You are decisive and energising when it comes to improving the company’s bottom-line in a sustainable way.Understand at what stage your organisation is in the lifecycle of venture. Understand where your products are situated within the product lifecycle. The priority and the application of financial and non financial metrics will change depending on where your organisation sits within the lifecycle. Do not lose sight over that One Metric That Matters (OMTM) at each stage. The OMTM in the first 3 months or 1 year is likely to be different to the OMTM in the next 2–3 years of the company lifecycle. An overly focus on cost and profit at a time where the focus is customer acquisition will jeopardise growth and business success. An overly focus on subsidising customer growth without an eye on the Customer acquisition cost (CAC) benchmarks and Average Revenue Per User (ARPU) over time is likely to result in little to no value realisation when you stop subsidising customer growth. From product pricing to sales strategy execution, you intervene to dilute margin % when there is a need to build leverage and shift the balance of power.
Of course, the hard skills are not to be understated. From Capital raise to M&A and Taxation, the list of technical expertise of the CFO can be quite long. In my experience however, these alone are not sufficient to be a good CFO. For, if you think of the CEO as the King, a good CFO would be the Kingmaker.