The finance team is the key to expansion in any fast-growing startup.
By setting key processes, supporting strategic decisions on fundraising and cash flow, your finance team is the backbone to successfully scaling your business. But how do finance teams successfully scale and evolve in a fast-growing organization?
Ben Murray, Founder at TheSaaS CFO and TheSaaS Academy, led a panel discussion on this very topic at this year’s Future of SaaS Festival,
He spoke with:
- David Appel, Head of Subscription and SaaS Vertical, Sage Intacct
- Sal Abdulla, Vice President of Finance, Quorum
- Sallianne Buttsworth, Financial Controller, CENTURY Tech
- Ron Gilboa, Vice President of Finance at Perimeter 81
In this snippet below the panel discuss:
- The framework they use to scale financial operations
- The biggest mistakes startups make when setting up their financial operations
- The most valuable trait they look for in a new employee
- How they’d scale a smaller team in a startup environment
Q: When you think about scaling your financial operations, is there a framework that you use?
Sal: I think it's useful to start with defining what the term scale means. I've seen people make the mistake of confusing scale with growth. Growth is essentially a linear model. It’s an operation where you're adding headcount or the same amount of resources for the same amount of work. In order to truly fit the definition of scale, you should be getting more efficient with time. An example of this is accounts receivable. If I have one AR person handling 500 clients, and I get to 1000 clients and I have two AR people, I didn't really scale, I just added more headcount. And so when I think of scaling, I think of that as like, how do I work more efficiently without just adding more headcount to the problem? And I think the number one thing to scale an operation efficiently is to have the right software and processes in place.
Sallianne: It is about scaling, rather than just growing. When you are required to scale, it means that your revenue’s growing. Something that's really important to get right is your tech stack, to be able to integrate with operations across your business, and to ensure that you can calculate some of these SaasS metrics from the get-go. Then you've always got that historical data. It's a really important role that metrics play, improving the story and driving strategy across operations, but also capital raising and exit strategies.
Ron: I think the most important thing is to work in sync with the other departments, product in particular, and especially sales. As you grow, you have more customers, more invoices, you need to have a very tight scaling operation, and working in sync with other departments is a crucial part of it.
Ben: When I look at scaling financial operations, three things come to mind as my framework when I have built out departments. Number one is people, hiring, training, who are you hiring first? The second is process, right? Because in finance we're very transactional, whether we like it or not, so you have to have good old fashioned process. And lastly, technology, which is huge now, because the business models are changing with SaaS; no longer are we just recurring revenue, pricing models are changing, we're getting more creative on how we go to market. And we've got to adapt now. Finance, accounting, and technology are a big key to that piece.
Q: What are some of the biggest mistakes that startups make in setting up their financial operations?
Sal: The key component of a great performing team is people’s processes. And I think, for me, employing the wrong people has been the biggest mistake in my career. It is really painful to not have the right people in the right seat, and I would say early on in my career, I was probably the wrong person in the wrong seat. So this is not me directing it towards other people, there are certain instances where you're just not the right person for a particular industry or particular job.
Getting that wrong, in the beginning, can be extremely painful. Taking time to build the correct team is not just about finding rock stars, it's about putting together an orchestra; mixing people who complement each other's weaknesses is really important.
Q: What's the most valuable trait you’re looking for when you’re hiring in high-growth businesses?
Ben: In smaller companies, as you scale, everyone has to contribute. So it's cliched, but you've got to be a self-starter, you have to have that initiative to tackle problems, figure things out. That's one of the biggest things that I look at in finance, that self-starter initiative to take it on, own it, and have that accountability because working with smaller teams, everyone's got to contribute, and it's hard to win when you don't have that great teamwork.
Sallianne: Someone that has an interest in understanding the operations of the business. Because finance really needs to integrate with the operations of the business and to understand what drives those operations, and become kind of entwined in all of these teams.
It will help make better decisions and bring to light some really interesting information for these business operations. But also, business operations feed into the financial processes, so if you don't link the two, you're going to end up with a lot of problems.
Q: Looking back on a time when you had 10 to 15 employees, how would you have ideally built your team?
Sallianne: I would start with quite a senior hire, someone that was at least a financial controller. I think when you have just launched your product you may not have that high transactional volume, so you want someone that isn't too senior that's been removed from transactional day-to-day finance operations - you still want someone that's happy to get their hands dirty. They still have to have experience in building the internal controls and finance controls that you need. And then you can start to look whether it’s more viable to go down that outsource route,or is it actually more viable to go through internal hires.
Ron: I'm not sure it's about the number of hires. It's more about your needs: if you need two AR’s, you know, accrue two AR specialists if your collection is low. See what value is added, what projects you have. See that your timetables are correct, see where you can improve them, and then recruit accordingly. If you need 50 people, you need 50 people.
Searching for more resources and advice?
Sign up to our free Finance Alliance Slack community and start networking with other CFOs and finance leaders today!