Attempt to have two years of money available to outlive COVID-19, Bessemer Enterprise Companions CFO Emeritus Jeff Epstein says. If you cannot provide you with that, it is time to change your plan, the long-time finance govt and former Oracle CFO stated this week in a CFO Thought Leader podcast.
“Our recommendation the primary week of the lockdown was, ‘We do not know the way lengthy that is going to final or if there’s going to be a second wave, so it’s best to attempt to get to 2 years value of money,'” stated Epstein, Bessemer’s working accomplice. The enterprise capital agency was an early investor in a number of the largest names in know-how, together with Pinterest, LinkedIn, Shopify, Yelp, Twillo and Twitch, and right this moment is an early-stage investor in some 90 startups.
Epstein advises CFOs to divide the quantity their firm is shedding every month into their money and, if it comes out to lower than 24, it is time to name their distributors to get decrease costs, cease making discretionary purchases and take a tough have a look at layoffs.
“The primary precedence needs to be preserving the corporate,” he stated.
If you happen to make pay cuts, supply your workers an fairness possibility in return, so when enterprise returns to one thing near regular, they’ll reap the advantages as a reward for his or her sacrifice.
“A few of my corporations needed to take a 20% pay minimize for all of their workers,” he stated. “Executives took a 30% pay minimize. It’s going to in all probability save the businesses. We have really helpful corporations give fairness to workers who’ve given up money so if the corporate does properly, they’ll truly earn more money over time.”
Epstein additionally recommends taking advantage of favorable situations within the inventory market to boost capital in case your metrics inform an excellent story. “The inventory market’s at an all-time excessive regardless of COVID and traders are keen to take a position and rates of interest are low,” he stated.
Play your place
Irrespective of the kind of group you are in, Epstein stated, the CFO’s primary job is to be the c-suite’s arbiter of threat.
“Each govt in an organization must play their place,” he stated. “So, the CFO must be fascinated by the dangers: what may go improper? The overall counsel ought to hold you out of authorized hassle. The pinnacle of gross sales ought to determine the way you develop. Head of promoting must be saying the way you develop. The product individual must be saying the way you develop the product. If the CFO is saying, ‘Let’s develop as rapidly as we are able to,’ you’re not taking part in your place and also you’re not giving the CEO the steadiness the CEO wants.”
The function of straight shooter extends to the CFO’s relationship with the board. Which means offering members the monetary info with out embellishment and sharing dangerous information as quickly as it.
“Past the moral query of openness and honesty, the second precedence is not any surprises,” he stated. “In fact, there at all times are surprises, however basically what you wish to do is attempt to share with the board all of the issues that may go improper prematurely after which if one thing does go improper, allow them to know instantly. Essentially under-promise and over-deliver. And you then construct credibility with the board. When one thing goes improper later, you’ll be able to draw on that credibility financial institution you invested in.”
Board room agenda setting
The CFO additionally performs a task in setting the agenda for board conferences, a task that may disproportionately impression an organization’s fortunes.
The standard board assembly has a three-part construction. The primary covers compliance. The CFO updates the compliance committee on the corporate’s threat points. Within the second part, the board is up to date on the corporate’s initiatives — what Epstein calls a form of present and inform. The third is the strategic half. This part is when the chief staff presents the board with selections to be made, and it’s right here the place the chief staff mines the enterprise expertise of the members to enhance its selections.
“When you’ve got a five-hour board assembly and also you’re spending 4 hours on present and inform and solely an hour on selections you haven’t but made, you are doing it improper,” he stated. “It must be the opposite manner round. It must be an hour on present and inform and 4 hours on the important thing selections.
“You employed the board not just for governance compliance but additionally as a result of presumably they know one thing as businesspeople. Their expertise will help you make higher selections. And in case you do not inform them till after you’ve made selections, you then’ve given up on one of many key worth added alternatives of the board,” he stated.
Know your CEO’s priorities
In any group, crucial relationship for the CFO is with the CEO, Epstein stated, and the CFO should know what the boss needs. He recommends CFOs take the lead by asking the CEO what, throughout the subsequent efficiency assessment, would make them glad they employed them.
What three issues would make the CEO pleased? “It makes it crystal clear what your boss expects of you. Usually, your boss will know, and so they’ll let you know, and typically your boss actually hasn’t thought of it. Getting them to consider it and articulate it’s actually useful. As a result of in the event that they have not thought of it, you do not wish to know in six months they nonetheless have not found out what your priorities must be.”
It is also an excellent query to ask in case you’re interviewing for a CFO function, he stated.
“Think about I am employed for this job and also you’re doing my efficiency assessment a 12 months later,” he stated, describing a query you’ll be able to pose to the CEO throughout an interview. “You say, ‘you are so glad you employed me since you’ve completed the next three issues.’ That’s the query I like essentially the most.”