CJ Gustafson started as an M&A Advisory Associate at a Big Four firm digging into the finances of big tech or healthcare firms for large buyouts. This was followed by a switch to a large private equity firm where he “learned financial modeling to marry what I learned in consulting.”
However, his stellar FP&A SaaS career (“moving from the funder to the funded”) began as he moved to a $500m-VC backed backup and data management platform. He set up the company’s first FP&A function. Though he would soon become a leader in FP&A SaaS, he first had to ask what the function involved. “I was like, ‘What’s FP&A? What do I do here?'” However, he soon understood the power of the role: “It puts you in a great position to get into that room. You’re the one with the keys to the operating plan. You have the analysis as to how things are trending.”
In a follow-up role at another rocket ship startup, CJ joined as Director of financial planning and analysis, and later Director of Investor Relations where he oversaw a rise in headcount from 150 people to almost 1,500 people and a valuation of $8.5 billion. His FP&A team was forced to constantly evolve as the company needed to forecast its needs with growth. The SaaS FP&A achievements included working closely with their recruiting team hitting ambitious targets for hires without breaking the operating plan; enhancing board reporting as they learnt over time what investors found most helpful; and adding more and more reporting as new leaders climbed to the top of the organization (sales, marketing, product).
Overall, CJ built FP&A teams of up to six people. His strategy? “ I first started by hiring financial athletes – people who could just dig in and do multiple things. Then I expanded the team to include people with specific skill sets – like systems or revenue. The biggest challenge is always to make decisions with 80% of the data you wish you had. We need to put a stake in the reforecast at some point, even if we would have liked a few more days to run more analyses. The other challenge is that you’re constantly changing tires on the car while it’s in motion. There are no pit stops in the hyper growth SaaS world. So if you need to, say, move from google sheets to an FP&A tool like Datarails, or move from QuickBooks to NetSuite on the accounting side, you have to do it while in motion, and not sacrifice any accuracy.”
He has now realized a long term goal of becoming CFO, starting in September 2022 as CFO at PartsTech, a tech ordering platform stopping the hassle of professionals buying auto parts.
In this episode of FP&A Today CJ talks to Paul Barnhurst about his journey from private equity to SaaS mastery, and ultimately his CFO role. In this essential episode for anyone interested in SaaS for FP&A he discusses:
- His motivation for creating the fast-growing finance newsletter Mostly Metrics, an irreverent and analytical spin on metrics which has crossed more than 10k subscribers (and growing!)
- The best way FP&A can create impact for M&A activity
- 3 absolutely essential SaaS FP&A metrics based on his experience at rocket ships
- The one thing he is most scared of in his new CFO role
- The painful FP&A mistake that CJ made that changed his entire approach to financial presentation forever
- The differences between his roles in FP&A and investor relations
- His strategy for moving from FP&A to CFO
- His boxing career
- His most inspiring advice for anyone in FP&A
Paul Barnhurst:
Hello everyone. Welcome to FP&A Today, I am your host, Paul Barnhurst, aka the FP&A Guy, and you are listening to FP&A Today, brought to you by Data Rails, the Financial Planning and analysis platform for Excel users. Every week we will welcome a leader from the world of financial planning and analysis, and discuss some of the biggest stories and challenges in the world of FP&A. We’ll provide you with actionable advice about financial planning and analysis today. This is going to be your go-to resource for everything, FP&A. I am thrilled to welcome today’s guest on the show, CJ Gustafson. CJ welcome to the show.
CJ Gustafson:
Thanks for having me, Paul.
Paul Barnhurst:
Oh, you know, we’re really excited to have you. So, CJ, a little bit about him. He runs the website Mostly Metrics. He has a newsletter. He’s worked primarily in the SaaS industry. He’s done a little bit in M&A little bit of investor relations and FP&A. And from my understanding, he’s, you’re getting ready to do his first, uh, CFO gig. So congratulations on that.
CJ Gustafson:
Thanks, Paul. I’m excited to, uh, take it to the next level.
Paul Barnhurst:
No, that would be great. It sounds like that will be a really good opportunity. So maybe we could just start with, can you take us a little bit through your background and how you ended up, you know, working in FP&A and just a little bit of how you got to where you’re at today?
CJ Gustafson:
Yeah, absolutely. So I’m a Boston area guy. I went to Boston College. I majored in finance, as well as American History, something that you don’t really see much from numbers people like myself. And so I worked for a big four accounting firm out of college, and I was in their consulting branch. And so we worked on due diligence as assignments for large private equity firms. And you know how that is, it’s kind of four days away you take a plane to wherever you’re going and you do your reports. And, basically we looked at, you know, tech or healthcare firms for large buyouts, and we dig into the financials and head count and report back what we found. And that gave me a lot of reps at analyzing different business models, which I think we will come back to later when we talk about FP&A and just learning how companies monetize their products and how good CEOs organize their resources for success.
And so I did that for about two years. And, then I got a chance to go over to the private equity side. And so I worked for a large tech buyout shop in their valuation and analysis department. And so this was another thing that was like foundational to moving to FP&A. So I was responsible for valuing eight to nine tech firms each quarter. And I also helped with their fundraising efforts as they raised new capital. And so that was where I really learned , financial modeling to kind of marry with what I learned in consulting. And so at most PE shops, it’s kind of two years and you either go get your MBA or you’re out, and I was kind of at a crossroads there. And so I built up a lot of momentum. I didn’t really wanna pause and go back to school at that point.
And so I went over to the software side to do strategy where I got a big backup and recovery software vendor. And so kind of went to the other side of the table from, from the funder to the funded. And so I’ve had numerous roles on this side. And so from strategy to business development, uh, to chief of staff, and then eventually to FP&A. And so the CEO and the CFO saw that I had this knack for building business plans and figuring out how much different initiatives would cost versus return. And I think like a light bulb went off and they said, Hey, can you actually build out our first FP&A function? You know, I was kind of a little bit like, Well, what’s FP&A? What do I do here? And I was actually surprised Paul, because the company had almost 3000 people and no FP&A this point.
Yeah, it had been, it wasn’t called FP&A really, it was like geographic at that level within the accounting department. So it wasn’t really defined or centralized at that point. And so I did that for a couple years and then moved over to a startup in the cybersecurity space. And so I came in as an FP&A director. I helped them raise four rounds of funding. And then I moved over to work on investor relations as we got bigger and had more specific things to do, and initiatives with our investors. And so hyper growth, amazing experience. And I recently accepted a CFO role at a series B startup, which, I’ll be embarking on in about a week.
Paul Barnhurst:
Well, like I say, congratulations on the CFO and it sounds like you’ve had, you know, quite the journey and a number of different finance roles. And I don’t know if you’ve ever heard of Bryan Lapidus, but he runs the Association for Finance Professionals and he shared how one of their members shared a presentation. He calls it the finance passport. As I listened to, that’s what I thought about. He talks about how, you know, if you wanna get to that CFO, you have to punch different things on your passport.
CJ Gustafson:
I Love that
Paul Barnhurst:
Like just knowing FP&A isn’t enough, like in your, you know, you’ve talked about the investor relations, the M&A, the strategy, you know, the chief of staff role, Right? Having a diverse background, so you understand how all that plays together.
CJ Gustafson:
Yeah, totally. And I, I kind of look at it too as, you know, stacking your talents. So maybe I’m like B+ in Treasury and, you know, maybe I’m an A- in FP&A, but like I’m going to help be a general manager to hire the right people and know each kind of division well enough to help the company scale. And, um, that’s what I’m most excited about. I think with moving to the CFO role. It’s getting to work with smart people who are domain experts and using what I kind of picked up along the way, like you said, at those train stops or passport stops to help them succeed.
Paul Barnhurst:
No, that’s great. Yeah. Now you’re, you’re really focused on helping others succeed in shaping the company. So speaking of that, and then I’ll come back to a different question I had here in a minute, but talking to the CFO part, what, what keeps you up at night? You know, thinking you’re now going to be in charge of all of finance, Is there, you kind of certain area that really has got you a little nervous as you get ready for that role or anything?
CJ Gustafson:
It’s funny you ask. So I’ve been on vacation this weekend. My wife was looking over my shoulder and she’s like, What is the cash conversion cycle? And so yeah, I’m pretty boring, but I’m not a CPA by trade. Like I know my way around the balance sheet. I’m comfortable with the restatement modeling, but I’m not as experienced with day to day accounting operations. So I would say that’s what I need to, you know, really brush up on. And like day one, what I know I’m going to have to do is hire a Rockstar controller to help run the operational side of the accounting depart department. And that’ll be really my partner in crime as we scale the business and make sure that we have a strong accounting function in house.
Paul Barnhurst:
Yeah, no, and that’s great that you recognize that and you know what you need to go out and get. That’s also an area that, you know, I’ve had some experience in, but I’m not a CPA by trade. I didn’t, you know, do an accounting degree. So I can relate to that of wanting to have that person that that’s where they’re really strong in, so they complement you. Makes a lot of sense.
CJ Gustafson:
Yeah, totally.
Paul Barnhurst:
So I know you run the website called Mostly metrics. You have a newsletter, I think if I’m right, you have about 5,000 subscribers. Can maybe talk a little bit about, you know, how that came about and what is it all about? Just tell us a little bit about that. Yeah,
CJ Gustafson:
Sure. So Mostly Metrics. It’s like the title says it’s mostly financial metrics and some other business stuff. And you know, it’s, it’s been my passion project for about two years now. And I started it for three reasons really. The first was, you know, I was in this seat at a hypergrowth company running FP&A and I didn’t wanna forget everything that was coming my way. It was kind of like I was trying to drink through a fire hose and I wanted to document things I was learning and things that I was curious about. And I look at working at tech firms in particular, and this can apply to a lot of other industries, I’m sure is you’re kind of coming up with a playbook that you can apply later for if it’s at that company or elsewhere. And so I wanted to document that playbook.
And second, you know, I wanted to grow my network and I thought this would be the easiest excuse to talk to really smart people. And instead of asking someone for five minutes to pick their brain, which is kind of a generic thing, I could have something to say, Hey, you know, I’ll do a writeup on you, or like, I’m curious about this topic and I have this audience. And so the newsletter allows me to kind of selfishly talk to people I’m interested in learning from, whether it be VCs or startup founders. And third, I just like writing. I mean it helps me crystallize what I’m learning and it’s, you know, the process. It’s, it’s not something that I feel like is like a grind. It’s something that I actually enjoy sitting down and doing on weekends. So it’s a fun passion project, on weekends.
Paul Barnhurst:
No, that’s great. And I like how you mentioned, you know, the three things that it helps you. I really like the one of getting to talk to smart people. Like, that’s been one of my favorite things of doing this podcast is I love the variety of people I get to talk to and learn from. Like, I sometimes I’m sitting there going, am I really talking to this, this Excel MVP that’s known all over the world? And I’m sure you’ve had some moments like that where you’re like, I’m talking to so and so. Right. You know, doing an article with this guy that’s famous, so to speak in, in our realm. Right? Yeah. Right.
CJ Gustafson:
Yeah. I’ve had meetings with some people that like you know, if you’re like a finance dork like me, you may read their newsletter or their podcast and I’m like, I’m talking to the Michael Jordan or Kobe Bryant of like, you know, finance topics right now. And, it, it’s just cool to be able to, you know, talk to them on a one-on-one level and you feel like you almost know them. Like when you talk to someone who has a podcast all the time, and, you know, conversations with people who have seen more than you always gets me energized as to what I can do at the next step in my career and learnings and foot faults that they’ve made along the way that I can apply.
Paul Barnhurst:
Yeah, no, that’s, that’s great. And I, and I totally agree with you and you mentioned the Michael Jordan. I remember telling one guy that I was interviewing, I go, I have to tell you, I’m a fan boy. Like, you know, he’s kind of like, he goes, No, no, you’re an equal. You don’t need to think of me as a fan boy. You know. So it was just kind of funny cause I was like talking to this guy that’s written four books and he’s an Excel MVP and you know, I love his content.
CJ Gustafson:
Said that too. I said, I don’t know if there’s such thing as like a newsletter fan boy, but I’m definitely one of them
Paul Barnhurst:
Well, that, that’s great and that’s great that you’ve done that also just to, to help you learn. And, you know, it sounds like you’ve done well. I mean, you got nearly 5,000 followers, so obviously your audience likes what you’re, what you’re sharing. I know I went out and looked at the site and there looked like there’s some great content out there. I remember reading one of the articles, I’m trying to remember what it was, what it was titled, but I remember kind of, you know, browsing through it was, and it looked like a lot of great stuff. And I reminded myself, I have to go back and look a little bit more.
CJ Gustafson:
Yeah. And it’s all really just stuff that I was googling five years ago when I was like in a manager or analyst role, and I would Google it 10 times to learn it. And I was like, I should just write about this, this point. Or, you know, I have younger siblings and sometimes I’ll talk to their friends about like what they’re working on day to day. A lot of them are in finance or sales, and they’ll ask me questions over a coffee or a beer, and it’s like, why isn’t someone just right about it from that point of view in plain English? And I think that’s what’s resonated with the audience so far. And, you know, it doesn’t come across to me when I write it as like I’m forcing and it’s just like I’m having a convo with a friend about a topic that, you know, I, I do at work every day.
Paul Barnhurst:
No, that’s great. And I can relate, you know, different little bit of medium, but similar type thing writing on LinkedIn every day. Right. Trying to share that knowledge. And it’s really crystallized my learning because a lot of times I’m researching to try to figure out kind of what’s going on, what the research is saying out there in FP&A and finding ways to summarize articles and, you know, things that will help people. And it’s like, I’m confident if I went into an FP&A role tomorrow, I would be better than I was a year ago because of those learnings because of that crystallization. So it really does, I mean, I’ve, I can relate to what you’re saying.
CJ Gustafson:
For sure. Yeah. In, in self-directed learning is fun. It’s not like you’re just following, you know, a course in school that someone’s making you do this econ assignment or something. You’re digging into stuff that you know, actually peaks your interest.
Paul Barnhurst:
Well, and that’s exactly it. You have enough passion about it to actually want to learn and, you know, write about it versus you mean I gotta, I gotta write an English paper about Shakespeare that’s 10 pages long or whatever it might be. Yeah. I probably shouldn’t pick Shakespeare. I’m sure I’ll hear from somebody, but you get the idea. Well, great. Now that’s exciting and we’ll, you know, definitely would encourage people to go check that out. So, you know, another question here is, I know you’ve worked a lot in tech work for SaaS companies, so obviously SAS companies are a little, you know, a little different. You know, subscription is always important. We always hear about SaaS metrics is the big thing you hear about. Oh yeah. So what, you know, can you talk to our audience a little bit about some of maybe your favorite SaaS metrics that you like to track? How you kind of think about it and what you like to look at for a subscription business?
CJ Gustafson:
You know, that’s a hard one. As a metrics fan, I think I can get it down to three for you though. I would say CAC payback, period, net retention and gross margin. Those would be my, my top three. And I, I’ll, I’ll give you kind of a blurb on why. So CAC payback, some of you may know it’s a derivative of customer acquisition costs. So t tells you how long it takes you to break even on the cost it took to get that new customer. So it’s quoted in months in the last number of months, it takes you to get your money back, the better. And so this smart friend of mine, he said, you know, low CAC payback period, that means our customers fund our growth. High CAC payback period means VC’s fund our growth.
And the last part of that sentence isn’t as sustainable. The next one that I really like is net retention. And this is a huge one in software in particular. So I think it’s just so powerful when you can embed growth right into your business model. So a net retention of 130% that essentially tells you that you could go on vacation for a year and still grow at 30% year on year. And so I say that kind of half in jest because you do need to take care of your existing customers and make them successful, but still, when you can keep customers around and expand them through either more licenses, more usage, or more products, that’s going to free up so many resources for you to invest in other parts of the business for growth. And the third one that I mentioned, gross margin. So that’s really a litmus test as to how scalable the business is in the long run.
There’s some businesses out there where revenue growth can be almost a vanity metric because they have so much tied up and costs get sold and, um, you know, it, it’ll tell you how much you have left over to pay for your ongoing customer maintenance costs. And so, like an example, a publicly traded company that I think has tremendous gross margin is Atlassian. So some periods they’ll have gross margin of, of 85%. And that allows them to do super innovative stuff on the product side, with all that money left over.
Paul Barnhurst:
Yeah, no, I, I know what you’re talking about. And you know, Atlassian, a lot of companies that gross margin can make a huge difference. You know, I work companies in the cybersecurity industry, some of them, you know, can have some really high cause there’s not a lot of cogs, which allows you to fund things you can’t otherwise, you know, if you’re looking at a 40% gross margin versus an 80%, it’s a totally different profile. Right. It changes what you can do.
CJ Gustafson:
Yeah. That’s a totally different ballgame.
Paul Barnhurst:
You know, and I worked for a business where we had SaaS components, but we also had a marketing business mixed in with SaaS. So we had many cases where, you know, we had gross margins in the 30% and others where they were 90%. Yeah. And so it was a very interesting mix of how you manage it. Cause you know, you had some real cost of good sold on the marketing side, especially when you were sending out millions of pieces of mail postage.
CJ Gustafson:
So postage, that’s a throwback.
Paul Barnhurst:
Yeah, it was interesting. It was an interesting business. It is. Most people don’t think of mail anymore, but still do lots of advertising that way. Yeah. So CAC also, Yeah, I I really loved that line. I hadn’t heard it explained that way of low CAC your customers fund it high C the VC funds it, which isn’t sustainable.
CJ Gustafson:
Yeah. And I think a lot of VCs like it too, because they can go into a business and say, you, you may need money today, but your unit economics, like, I can see how this’ll pay for itself in the future. I just think it’s one of the best ways to get your hands dirty with the go to market engine in particular. I mean, there are a bunch of other different metrics you could look at, like the burn multiple if you wanted to take a look at the entire business, not just the go to market engine, which is basically like how much cash are you burning for every point of growth. But like I said, you know, CAC for a an enterprise software company or even an SMB company, there are different, you know guardrails that you wanna stay in between to say that you’re efficiently, you know staffing your sales and marketing teams.
Paul Barnhurst:
Yeah. No, and those are all great metrics and there’s a lot of others you only hear about like, you know, like I said, the net retention where, hey, if you can be greater than a hundred percent if you’re expanding your existing customers mm-hmm. <affirmative>, you know, versus losing and churning customers, it changes the profile. It’s always cheaper to keep a customer than to go get a new customer. And that’s something I emphasize. We were dealing with a lot of churn in one of the companies I was at and I’m like, okay, we gotta find a way to invest in reducing the churn. Because it’s a lot cheaper to keep a customer than it is to get a new customer, especially when the competition comes in. They used to be the only player in the space then a lot of people that came in. So not only was their price compression, but there was some churn going on and
CJ Gustafson:
Ouch.
Paul Barnhurst:
You know, get that gets expensive in hurry.
CJ Gustafson:
It does.
Paul Barnhurst:
All righty. Well, no, that, that’s really helpful. So, you know, as we look at this current economic environment kind of speaking about SaaS, right? There’s all this fear of a recession looming. We’ve all seen the headlines of inflation. We’ve all seen, you know, kind of the headline of the party is over term, right? You know, we’ve seen it a little bit in the market of it’s all about growth at any cost, right? Just growth. We don’t care what it costs. And now it’s like, wait, no, no, we want profitable growth. You know, the VCs are kind of scaling back a little bit. Valuations are coming down, you know, what advice would you offer to companies, you know, especially VC backed in this, in this environment as we’ve seen a tightening of capital and a little bit of a concern of, you know, a recession moving?
CJ Gustafson:
Yeah, I think it’s just to watch your cash burn. Marc Lore, the founder of jet.com, he once said , I think it’s a funny quote, just the reason most companies fail is that they run out of money. And he does have, he does have a point there. I mean, like, technically you have a viable business until you don’t have any money left. But you know, in all seriousness, I think the, you know, it was like the formula for a premium valuation Paul used to be like four parts growth to zero parts profit. And it’s like they changed the recipe for the oatmeal cookies overnight. Now it’s, you know, two parts growth, two parts profit, and you know, that’s okay. But like, you just gotta have a different assessment of how you’re running the business. And you know, with cash burn a company that’s running a really expensive operation, you, you have a lot less wiggle room to mess up.
So I’d say like, as a rule of thumb, you want to have at least 18 months worth of cash runway on your hands post your most recent fundraise. And so I say that because it’ll give you 12 months to go out and make magic before you come back to the VCs with your coffers and six months of buffer before, uh, you know, just in case there isn’t an environment like this and or you need to get your house in order with your unit economics. So you know, the other thing I’d reflect on is like, don’t go from a low cost to a high cost model overnight. I think a lot of software companies in the last two years were super exuberant and excited to go out and hire massive sales forces right after raising. I look at that like, that’s, that’s totally fine. You can do that. But like maybe run a couple experiments first to ramp reps, make sure you can make them successful, that they have enough pipeline to feast on and that, you know, marketing can deliver to those reps. You don’t wanna raise, like show up to raise again and look inefficient because those investments you made were fast and furious and you just haven’t had time to show that payoff yet.
Paul Barnhurst:
That that is great. A lot of great advice in there. I think first, like you mentioned, you know, just having the buffer that burn and really watching that burn rate. But I really also liked your point about experiment. Some don’t just think you’ve nailed it and scale it without making sure you scaled the right model. Yeah. Do you really need field sales? Could it be done inside? Could it be more product led? Right. Versus just, I got cash, so let’s just get the sales and get revenue at no matter what the unit economics are. Right. Which just is a recipe for disaster if you’re not careful.
CJ Gustafson:
It is. It is. And it can get expensive really fast. I mean, at tech firms just being on the FP&A side, and I’m sure you’ve seen this too, from your experience, like 75 to 80% sometimes of the cost walks on two legs. And if you’re hiring a field sales force and you’ve traditionally either been hundred percent channel or you’ve been product led growth, you’re just adding bodies to the mix and they’re not going to pay for themselves overnight. You know , maybe SMB it’s a three month ramp, uh, mid-market, maybe it’s a six month ramp enterprise, it could be nine to 12 months before they’re actually hitting a full quota.
Paul Barnhurst:
Yeah, no, we, uh, I had some businesses where we did the math and before they were, you know, EBITDA credo, so not hitting full quota, but actually paying for themselves and generating revenue. I think we figured in one of our businesses it was 15 months. Right. Wow. It’s a
CJ Gustafson:
Long, Okay. Yeah.
Paul Barnhurst:
It’s, it’s a long lead time. But, you know, we had big deals and it was a lot of enterprise type and so that was an interesting one. See, you know, in another place we saw a case where we had a general manager who just thought he could solve everything by throwing more bodies at it. And eventually that ended up, he ended up leaving the company and they restructured the entire organization and we were doing as much in sales with, you know, 70% of the 70 or 60% of the sales force because they had really focused on training the quality and process optimization and all those things. Instead of just thinking, well just throw bodies at it. There’ll be pipeline out there. Maybe there will be, but maybe there’ll be a lot of underperformers because you’re not thinking through the process. So lot of, lot of great information there and I’m sure we could keep talking about that one and the different things we’ve seen in that, in that realm. Because it’s hard to get right.
CJ Gustafson:
It is really hard to get right. And, you know, the, that’s why the experimentation is key. You get to sometimes try 10 things to see which, which are the top three that have the best return.
Paul Barnhurst:
Yeah. It’s always, always better to make a small mistake and then recalibrate than make a big, huge mistake and try to recover. Yeah.
CJ Gustafson:
You know? Yeah. Yeah. I agree. And I think I’ve also seen that on the M&A side too when it comes to tech. I think, um, you know, I was trying to count the other day, I think I’ve been a part of somewhere around 10 transactions over the last, you know, 10 years. And, um, the majority of them have been tech and team that kind of string of pearl strategy. Like let’s go out and get, you know, first of all, uh, great technology, second high performing people and then it’s really been third revenue as another consideration. Um, sometimes it’s almost better if they don’t have revenue because it’s easier to deal with from an accounting perspective and a legal entity and tax perspective. Like you said though, I mean, you don’t want to go out and make a massive mistake if you only have so many shots you can take with the cash you have when it comes to M&A.
Paul Barnhurst:
Yeah, no, and that’s where I like the idea, if you’ve ever read, Freakonomics of the book called Think Like a Freak, you know, when they talk about the importance of failing fast, trying different things, failing and adjusting, you know, and I think there’s a lot of value in that, in that whole idea of, you know, being able to adjust quickly, being agile and willing to take risk, you know, within certainty. That’s where finance, I think, you know, FP&A a we can really bring a lot of help is looking at that and helping them understand, look, you can go to this approach but realize it’s going to be really expensive and if you do this all at once, it may be difficult to recover if it doesn’t work. Right. We see the, you could see that financial and see where that cliff could come if you’re not careful.
CJ Gustafson:
And that’s a good way to, I think, to talk to business partners within New York too. Like, Hey, I’m not here to be the police, I’m here to help you measure it so you can decide, you know, how you wanna deploy that budget in a way that helps the rest of the org.
Paul Barnhurst:
Yeah, Totally agree. I, you know, when we be the policeman, like sometimes there’s this view of finances, the know people , and that’s, we wanna be the partner, not the, not the know police, as you said. Like if you’ve ever seen there’s a commercial by Dodge or they talk about innovation and they’re going through all these different things and then they go and you kick finance out of the room. That’s how you innovate and then they keep going and it’s like, you know, sometimes I think that’s how people view us in finance. Like, okay, how can we just get them out the room?
CJ Gustafson:
One of my buddies when, you know, they were talking about in the news, the recession that may occur and, you know, pull back and spend. He’s in sales and he said, you know, when I, when I call up places to try to land an account, they say they have to talk to their CFO now. And he said that it’s no longer the CFO. It’s the CF-No.
Paul Barnhurst:
Yeah. There’s some truth to that sometimes, Especially right now they’re definitely, tighter on those purse strings.
CJ Gustafson:
Exactly.
Paul Barnhurst:
Datarails Ad.
Well I know you’ve talked a little bit, you’ve had some experience in M&A, you just mentioned, you know, 10 different deals. So can you talk a little bit maybe about the experience with M&A and how, you know, you have worked with FP&A, how that relationship works kind of between FP&A when M&A activities are going on?
CJ Gustafson:
That’s a good one and I think it’s really the before and the after. So the before is kind of being the scout force to come up with a business case and the go no go. You know, when you’re at a company that’s under a certain amount of people, you may not have a formalized biz dev function or a strategy function that they can throw at the deal to analyze it. So a lot of times I’ve been on the end of like testing there’s one plus one really equal three here or are we fooling ourselves, um, in creating those projections. And then there’s the after where, you know, you go through with it, how are we’re going to integrate this now you wanna make sure you can close the books, you want to make sure that you can pay the people on day one. That’s a huge thing. And you wanna make sure that you have a forecast on headcount and cost and then, you know, down the road you wanna make sure that you come back and measure it. And FP&A a lot of times is a sanity check as to did we make the right decision here? What’s been the ROI? So I’d say it’s the before and the after.
Paul Barnhurst:
No, that’s great. And I’ve been involved in a few, few M&A deals and I did the modeling for some and also help be the coordination for, you know, hey, what’s the plan? Like how do we take what you’ve done for this M&A deal and operationalize it into our budget? And so, and that’s really important because you start getting into it. It’s like, well did you think about this? Um, no <laugh> what about this expense? You know, as one guy that I had on the podcast mentioned, he’s always, always make sure you have a little bit of buffer in there and make sure as an FP&A you’ve really checked the assumptions so that you don’t get handed something that’s impossible to achieve. Right. And we’ve all seen it one plus one equals six when it really equals three.
CJ Gustafson:
Yeah. You know, and, and I think people get starry-eyed and I love working with optimists. I think that’s one of the most fun things you can do in tech because tech is, you know, by its nature and optimistic place of trying to create things. It didn’t exist before. But at the same time when you look at transactions you have to be pretty honest as to like, you really think we can hit that sales target within 12 months. You know, do how much work is this going to have to take to retrofit it to fit it on our platform? Questions that you just wanna raise? Not because you have the answer, but you just wanna make sure people are, you know, stress testing it
Paul Barnhurst:
Correctly. Yeah, no, that’s, that’s exactly it. It’s not that you wanna shut it down, but you also wanna make sure they have a realistic view. Because Yeah, you don’t, you don’t wanna, you never wanna discourage an optimist, but you also have to sometimes bring some realism to it to help temper can be a balance for sure. So I know you’ve also mentioned you’ve worked a fair amount in investor relations. So maybe talk about, you know, in your role in investor relations, how’s that alignment between FP&A and investor relations? I know it’s different in every company, but kind of how’s been your experience?
CJ Gustafson:
It’s funny because, you know, being FP&A, I saw accounting kind of as the input where they were closing the books and helping to get the financial statements in order. And I was kind of on the receiving end. And now when I moved over to IR it was, uh, a similar kind of structure where FP&A was the input to what IR needed. So in order to be good at IR you have to understand the business metrics from both internal and external perspectives. FP&A, they’re going to be your right hand group to help you understand the internal view of what’s going on. And then you have to take that work and form a narrative as to what the overarching story is. Not just for financials, but for the whole firm. You know, FP&A will give IR a million metrics and signals to look at, and then IR has to synthesize it down to metrics that we’re comfortable with releasing externally and comfortable reporting on consistently going forward.
So what I think a lot of people don’t realize is that once you give or say a metric, say net retention like we talked about earlier, the public or your investors are going to come back next period and say, Hey, you know, you said it was this last time, how’s that metric trending? And that’s why talking to FP&A is so important. You wanna understand the underlying business drivers as to why net retention may go up or down before choosing to disclose it publicly. And you know, if you are in that position where it does go down, FP&A is going to be the first group that I call on the phone to fill in the gaps as to why it happened and provide that color commentary.
Paul Barnhurst:
I really like the way you explain that. I’d never thought of that way, but I love the first part of, you know, FP&A is an input to IR. Yeah. And so, you know, along those lines, what advice would you give to somebody in FP&A, how can they best support it? Like what, what makes a good F&A support when you’re working in investor relations? What do you wanna see from that department?
CJ Gustafson:
I think it’s trends in storylines. So not just a metric as a point of time, but how has this changed since you’ve been working in FP&A and then why has it changed that way? Did we add more products? Is that why it’s going up or down? Are we investing in our salesforce, which is, you know, going to have a blip in CAC for the foreseeable future? So, you know, metrics in a vacuum aren’t as helpful as metrics with a holistic story behind them. And FP&A and a gets to have a lot of, I’d say privileged conversations with people in the business that inform that view. They’re meeting with marketing every month they’re meeting with R&D. IR may not be having the exact same discussions, but they’ll benefit from what FP&A gain in those convos.
Paul Barnhurst:
No, that, that makes a lot of sense. I really like you said the story. Because you know, I don’t know if you’ve seen FP&A Trends, but they’re a website that does a lot of research around FP&A. I think they have over 600 articles and you know, they did, did some research about the different roles in FP&A and one of the five key roles they list is storytelling. Right? Really being able to tell that story, right? Like, we’ve all been there where you just get a report like, well what does this mean? Okay. Like, I see these metrics, can you give me the, the detail behind it? Why did it go from 12 to eight? What’s the story? Right? And so that, that’s great. I mean, I know I’ve definitely had times in FP&A where I’ve given numbers and not known the story and they come back like, Well what is this? Let me go dig into it. You learn over time, figure it out before you just give the number.
CJ Gustafson:
Yeah. And I think I’ve got burnt before just telling a CEO what a number was and I knew it was an accurate number and then he turns back to me and say, well why did that happen? Or what was it before? And I’m caught flatfooted and it’s like the job wasn’t done yet. CJ like, you have to go one step further and have the color commentary around it.
Paul Barnhurst:
Yeah, no, it’s great. I really like the analysis. We had Jack Alexander who wrote, it’s actually this book right here, Financial Planning and Analysis. And he said he would have, you know, analysts come into him when he was a CFO and VP and they’d put something on his desk and they’d go, Here’s the analysis you’d wanted. And he goes, I only had to do this once. I’d pick it up and I’d look at it. He goes, There isn’t any analysis here. What’s the takeaway? Yeah. And they’d be like, Well isn’t this what you wanted? He goes, No, this is a report I asked for analysis. He goes, I would say that once I’d walk him through it and it never happened again. Yeah, right. They realized he wanted the story, he just didn’t want the report.
CJ Gustafson:
Yeah. Gimme the sound bites.
Paul Barnhurst:
So that’s that. That’s great advice. And I really, I really like that. So, you know, as you look back at your career, you know, we’ve all had a few of these. I know I’ve had plenty, we’ve all had some failures and opportunities to learn is, I like to refer to it. But Maybe as you look at, you know, maybe it’s around an analysis you did, something you tried to implement. Is there a failure and experience you’ve had where something went wrong that you can share that really helped you in your career that helped you, you know, kind of learn and grow?
CJ Gustafson:
Yeah, one comes to mind. So one of the software firms I was working at, I’d done this contribution analysis by geography because we were global. And basically I did billings, less attributable costs for sales and marketing and even GNA. And so the result of it came out to show that one geo was basically subsidizing the other two. And, you know, I presented it to all the sales leaders and I thought I was really slick and smart. And two of the leaders were, were not fans of me. And so what I thought was this illuminating piece of work actually rubbed some people the wrong way. And it was a wake up call. Because I need to work with these people day to day. And you know, it, it, it devolved into an argument then over assumptions used and less so about the fact that two of the geos were underperforming.
And you know, whenever you’re in an argument about assumptions or definitions, like you’ve totally lost people at that point. Like, that’s like the point of no return. And so from then on, I’ve always had it in the back of my head, like, when I finish an analysis, let me think what their perspective is going to be on it. Because you don’t ever want to act like you’re showing up anybody in the business. You want to be objective voice of reason showing what the results are and helping them to improve the business. Not to put anybody on the spot.
Paul Barnhurst:
No. That, that, that is great advice and yeah, I, I know what you’re talking about. You really want to think about how do I present this in a way that moves the business forward versus right now having two people that hate me.
CJ Gustafson:
And at first, like, I took it personally. I did. I was like, you, you, but the numbers are right. This is what it is. And then I had to say, go one step further. How does this make people feel? They feel ownership over that part of the business. You should be there to help them improve it. Not, you know punch them in the nose if, if part of the business, you know, isn’t performing as they’d like it to.
Paul Barnhurst:
Yeah. And so, you know, as an example with that analysis, we came and say, Hey, we’re seeing some underperformance here. This is what’s going on. We think there’s some opportunities to improve. We have some suggestions, here’s some things we’ve seen. You know? Right. And take it to that level where it’s coming across as you’re trying to help. Versus you, like you mentioned feeling like they’ve just been punched in the nose.
CJ Gustafson:
Yeah. Yeah. Not a good feeling.
Paul Barnhurst:
No. And I think we’ve, I’ve, I’ve been there before, so that, that that’s a good one. I can, I can relate for better or worse. So yeah, we have a few questions. This is one question we like to ask everybody. It’s kind of a personal question that we ask is for everyone to share something unique about them, something we wouldn’t find out online.
CJ Gustafson:
Ah, okay. Uh, well, speaking of getting punched in the nose, I was an amateur boxer in my younger days, got punched in the nose a lot. I still do a lot of boxing workouts, stay in shape. Um, I also try to be a somewhat competitive 5K runner, so you can catch me and,
Paul Barnhurst:
And what’s competitive? What’s your time? I’m curious.
CJ Gustafson:
I recently broke 17 minutes, so I’m in the high 16 minutes.
Paul Barnhurst:
Awesome. That’s
CJ Gustafson:
Good. Yeah, I mean, I’m not winning any medals or anything, but, you know I can show up to a, uh, a, a church 5K or, uh, charity 5K and, and do okay. So it’s, it’s fun for me to see improvement.
Paul Barnhurst:
No, I ran, so I ran cross country in high school and I think, I think the fastest I ever probably did at 5K was low seventeens, maybe high sixteens. You know, I’ve run some marathons, so I, that’s why I asked the numbers. I can, I can relate to all that stuff.
CJ Gustafson:
I’m over 30 now, so it’s you know, you’re not going to see me, you’re not going to see me tearing it up on, uh, any professional circuits or anything. But you gotta do things I think that you’re passionate about and have fun with and that keep you fit. So it’s always good. And I my first child, uh, recently and so congratulations.
Paul Barnhurst:
Thanks
CJ Gustafson:
For, for Father’s Day. My wife got us a jog stroller, so that’s been fun to figure out. And it wasn’t that hard to set up either.
Paul Barnhurst:
Good. No, we, we, we got one of those when my daughter was little. We actually just recently gave it away, had been sitting in the garage collecting dust and we’re like, Why do we still have this, you know, she’s nine years old now, so it’s been a while since she’d been in it. And so I can remember doing. That’s a lot of fun. And I, I understand what you mean, not carrying it up. I’m, uh, I’ve hit mid, you know, I’m in my upper forties now and the body doesn’t hold up like it used to as all say when it comes to running.
CJ Gustafson:
I hear you.
Paul Barnhurst:
So I could appreciate that. Well, that’s great. And the boxing. So how long did you do amateur boxing for?
CJ Gustafson:
I had about seven matches. I did it throughout college a couple years after. And uh, so I’ve probably done it for over 15 years now. And so I’m a big fan of the sport too. I mean, if you wanna burn some calories, it’s, it’s the hardest workout you’ll ever do in your life.
Paul Barnhurst:
Yeah, I could, I could imagine that would be a really hard workout. So fun. Well, great. Those are, those are some fun stories. So this is another question we ask everybody. This is a fun one. You know, uh, our sponsor is Datarails and they’re big, huge fans of Excel. You know, having built an FP&A platform that lives with Excel, that works closely with Excel, we like to ask everybody what’s their favorite Excel function, our formula, you know, feature nice and why?
CJ Gustafson:
Right up my alley. All right. Uh, hot take here. I think Index Match Match is way better than V lookup.
Paul Barnhurst:
I would agree. I , I like X lookup, but you also have to have Office 365 for that. So
CJ Gustafson:
Ooh, X lookup. I gotta get into that one. Yeah. Um, it’s funny because I’ve worked in Excel, I’ve worked in sheets and all sorts of things and so, uh, you know, this isn’t the formula or anything, but if I’m using Excel and helping with like a cap table, I do use Goal Seek a lot. That’s what I used to test. That’s gotta be, you know, another favorite function of mine just for doing scenario analysis.
Paul Barnhurst:
You’re the third person that’s mentioned Goal seek, that’s a popular one. So really? Yeah. That one’s been mentioned a few times for sure. Index Match has been mentioned. My favorite, we had mentioned one time as someone told us Merge Center was their favorite feature.
CJ Gustafson:
That’s not bad
Paul Barnhurst:
Yeah, it was, it was, it was pretty funny. And he is like, please don’t edit that out. Leave that one in.
CJ Gustafson:
Yeah. It’s an underrated function.
Paul Barnhurst:
It has its uses for sure. But it was just kind of funny because it’s not the answer you expect. Right. So we had a little fun with it. All right. So we have two more questions here. I know we’re just about out of time. We’ve really enjoyed, you know, having you on the show, but, you know, next question here. What do you see going forward as the biggest challenge and opportunity for the FP&A profession?
CJ Gustafson:
Hmm. Um, you know, I think they’re kind of interrelated really. I think GNA as a whole is coming under more scrutiny, uh, as companies try to reign in their expenses. You know, FP&A falls in that along with HR and other, you know, uh, administrative functions in in an org because you’re either helping to build the product, sell the product, or enable those two other groups to do what they do better. And so FP&A a definitely falls in that third bucket. And so I think FP&A is going to have to be more strategic as a result of budgets tightening and work more in those business cases. And look at the business from a longer term perspective. Earlier in our convo we talked about m and a, like the before and after, and I think FP&A going to do a lot more of the before the, the business analysis as does this fit in our company or not?
CJ Gustafson:
You know, you also said before, like where does the analysis, I think a lot of FP&A groups, uh, have, you know, big arms and skinny legs. And what I mean by that is they’re really good at the F and the P but the analysis is pretty skinny sometimes and that’s because they’re so focused on just producing good financial statements that are accurate and timely. And now it’s kind of an opportunity with budgets tightening to really focus on that A and make it a big a and not a, not a lower case.
Paul Barnhurst:
Uh, I, I like that. I hadn’t quite had it, uh, put that way. I like the analogy there, but, you know, making it a big A Yeah, so really focusing on that analysis and improving that area to help with the G and help make sure the business is spending the dollars wisely.
CJ Gustafson:
Exactly.
Paul Barnhurst:
Because you know, when there’s growth and the economy’s good, it covers, it can cover a multitude of sins, so to speak.
CJ Gustafson:
Yeah. Growth in the economy and growth in your business will cover up a lot of sins, but you know, when the, you know, rising tide lifts all ships, but when the water goes down you can kind of see who’s swimming naked.
Paul Barnhurst:
Yeah, exactly. You see all the skeletons and the bodies.
CJ Gustafson:
Yeah. Yeah.
Paul Barnhurst:
Yep. No, that makes sense. So last question here. So if someone was starting their career in FP&A today Yep. What advice would you offer that person?
CJ Gustafson:
I think this is for FP&A and it can be applied to a lot of other departments too. It’s to remember that money isn’t the scarce resource starting out. Knowledge and more specifically access is. So you wanna find a way to get into the room with the decision makers at your company. So listening to what they say and how they navigate decisions will expedite your learning career. And that’s where the money comes from. FP&A a puts you in a great position to get into that room. You’re the one with the keys to the operating plan. You have the analysis as to how things are trending. People want to talk to you. Step one is to find a way to get into that room with the decision makers. Use FP&A to do that, use FP&A. Step two is to do your homework and prepare beforehand. You have to do that on your own. So I always try to write down what my three to five key takeaways are before I get in the room, because I know I’m going to have limited time with execs and when they call on me to say something, I want to have my sound bites organized. So don’t just do the reporting. Go one step further if you’re in that room to be able to explain the so what and executives you’ll be surprised will remember you for that.
Paul Barnhurst:
That’s really good advice. I really, I really like that, you know, and especially where you mentioned executives remember that and really going above and beyond to that. So what you know, so first, getting that kind of seat at the table in the room and then making sure you’re prepared, making sure you know what you’re doing, you’ve thought through things and that you can bring value. So that’s great advice and I think we’ll go ahead and end it there and just say thank you so much for being on the podcast today. We’re really, we were really excited to have you and good luck in your, uh, new role. I hope everything goes well as you get settled into being a CFO. Thanks Paul. This has been awesome.