“I last came on FP&A Today before I started my new CFO gig, and I was pretty nervous. I was talking a lot in theory of what I thought it would be, and now I can tell you a little bit more of the reality. So it’s been quite the ride.”
Returning guest CJ Gustafson–master of the hugely popular Mostly Metrics newsletter–delivers in his custom funny and frank style the lessons from his first year as CFO and the practical lessons for anyone in finance (and particularly FP&A).
- His worst budget experience – working six months on an operating plan thrown away within a week during COVID (and the surprising conclusion)
- Getting stamps on my finance passport getting me to CFO
- The biggest lessons on being a CFO-as removing blockers and letting an organization go faster.
- CFO as chief psychologist, chief contract signer, and chief risk officer
- How I prioritized my finance hires
- Views of FP&A as a CFO
- How knowing numbers better than anybody else projected me to CFO
- Why BI was put under the CFO function (“it’s like putting data insights on steroids and you combine FP&A and BI”)
- Why ARR per employee is my favorite SaaS metric
- CAC payback period as the golden SaaS metric
- How I (painfully) learned about the power of the “meeting before the meeting”
- Creating a category for yourself as CFO
Sign up for the Mostly Metrics Newsletter from CJ Gustafson: https://www.mostlymetrics.com/
Check out Run the Numbers hosted by CJ: a weekly podcast about financial metrics and business models, designed for ambitious people operating tech startups https://podcasts.apple.com/gb/podcast/run-the-numbers-startup-finance-strategy-and-operations/id1704418764
Follow CJ or get in touch with him on LinkedIn https://www.linkedin.com/in/cj-gustafson-13140948/
Or Twitter https://twitter.com/cjgustafson222
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, which is brought to you by Datarails, the financial planning and analysis platform for Excel users. Every week we welcome a leader from the world of financial planning and analysis. Today we are delighted to welcome back to the show, CJ Gustafson. Cj, welcome back to the show.
CJ Gustafson:
Thanks for having me, Paul. Oh,
Paul Barnhurst:
We’re really excited to catch up with you. So let me just give you a little bit of information about CJ and then we’ll jump into it. So he comes to us from Naples, Florida. He’s currently serving as the CFO at Parts Tech. He earned his BS in finance from Boston College. He also hosts the popular podcast called Run the Numbers and delivers a weekly newsletter called Most Mostly Metrics to what is over 30,000 subscribers now.
CJ Gustafson:
Yeah, we just hit 36,000,
Paul Barnhurst:
36,000 subscribers. So he does that every week. So that’s a little bit about CJ. So we’re gonna start with a question here for you that we ask our guests before we get to know a little bit more about you. Tell me about the worst slash most challenging budget experience you’ve had in your career.
CJ Gustafson:
This is an easy one. So I was leading FP&A at a fast growing cybersecurity company in March of 2020 when, when Covid hit <laugh>. And I remember, I remember we had probably 12 to 15 large deals for us on the table with transportation and hospitality companies. They were in the pipeline and we thought they were gonna close that quarter. And it was important for us because we thought that we would be gearing up for a fundraise within, you know, the next couple months. And those deals just completely evaporated. They, they fell out of the bottom. And we also had other tech companies that were thinking about buying from us, but everybody saw how the dominoes fell. They got skittish as well and may have had to make some layoffs. And they kind of put some deals on pause. And it was the weirdest three to four month period because everyone was kind of in this pause.
It was like, Hur, hurry, hurry up and wait. But then, you know, we moved fast and we made some changes in the headcount front. We paused hiring and we made moves to extend our cash runway. I had worked probably for six months on this operating plan, and it was thrown away within a week, completely thrown away <laugh
. And then 45 days later, that major downward revision to the plan just also evaporated. So things started to speed back up. People found a new way of doing business and collaborating virtually. And now our company rode major tailwinds from this work, from home shakeup and sales actually took off ’cause people needed cybersecurity for their code. And things really changed and it surprised me. And I like how you worded it as maybe a complicated experience because it really was, it started off bad, but then it went really good, really good to the point that I had to actually then revise the plan up twice afterwards in the course of the year. So as like a younger FP&A leader, I had to revise the plan down and then up twice. So I basically did four plans in total within a 12 month period. So that was, that was something that was extremely dynamic to to manage on the fly.
Paul Barnhurst:
Yeah, I can see where that would totally be a challenge. I think many people have hinted at Covid is that, is that period, you know, for that real challenge or the kind of nightmare budget or whatever, ’cause things were just moving so quickly and changing. So what’s the takeaway? What did you learn from that experience?
CJ Gustafson:
My takeaway was it’s not the smartest person with the best plan who wins in those situations. It’s often the one who’s willing to make decisions the quickest. And I think a lot of companies got analysis paralysis and didn’t do anything until they thought they had perfect information. And what it instilled in me is that the mark of a good finance leader is being willing to make a decision and just go for it, whether it’s right, wrong, or indifferent, rather than dithering over the pros and the cons. You just have to go. And I remember I was listening to this podcast, it was Anand Sanwal on sandal of CB Insights, he’s a CEO that I really like.
He built a really cool data company and I, I think he said, you know, my company makes three major decisions per year, and on average, that’s two more than my competition who maybe makes one <laugh>. And yes, I might, I might get one of those decisions totally wrong, but I’m still making two more right decisions in my competition. And when you add that up over time, it seems to compound. And so that, that’s what I really took to heart as a finance leader who’s responsible for making decisions.
Paul Barnhurst:
God, I appreciate that. It sounds like a really good learning for you, and I like the example you shared there. So why don’t you tell us a little bit about yourself. Give us your background, you know, tell the audience more about yourself. Some will know you from your, all the other things you do, but why don’t you give us that summary of who you are.
CJ Gustafson:
So I think you write your story in reverse, so I’ll give you the story that may sound better, but I just want everyone out there to know that I’m just another guy making it up on the fly. So you know, I started out,
Paul Barnhurst:
I’ll vouch for you, you’re just another guy, <laugh>,
CJ Gustafson:
I’m making it up. I don’t know, I’m trying to learn from you. So outta college, I had a finance degree, didn’t really know what to do with it. So I got lucky in the sense that I went to a really big company, PWC, PricewaterhouseCoopers, and learned how to be a professional. So there are a ton of things that they don’t teach you in college. Like, you know, how to staple a PowerPoint deck correctly so you can flip it the right way if it’s on both sides, how to write a business email, how to have conversations at dinner that are work appropriate. And I got to work in the division where we went around helping with spin outs and acquisitions, doing the due diligence largely on the tech front, and also figuring out how to staff business models. And so I did that for about two years and I got a lot of reps at, like I said, learning to be a professional and also learning what different business models were.
And that was the first time I was introduced to SaaS, which comes into the story later. And from there, I got a chance to go work for one of the private equity firms that we were doing due diligence on behalf of. So for two years I worked in private equity and I was responsible for valuation within the, the company probably for 12 eight to eight to 12 companies on a quarterly basis. So marketing ’em to market within the portfolio. And that’s where I got, I think, the technical skills. So first I started off with the research and interpersonal skills, then I got the technical skills. And then I was kind of at this crossroads where I was like, I think I need a real world. I, I think I need an MBA in order to go any further, but I didn’t want to give up a salary to be a little bit greedy.
And you know, I felt like I built up a lot of momentum and I didn’t wanna lose that just by going back to school. So I went over to the operator side of the table, flipped roles, and that’s where I think I found my groove. I think I was maybe like a B minus B private equity guy, but I, you know, I’m hopefully an A minus or so operator. And so I started out by working on the strategy and ops side, helping to build quota deployment models at a backup and recovery company. Then I went and worked as a chief of staff for a while, and something you’ll notice is that I had stints in different departments along the way. So then I went to go build out the first FP&A group at the company. And that’s where I started getting stamps kind of on my CFO passport along the way. And ever since then, I’ve been helping high growth tech company scale.
Paul Barnhurst:
Got it. Well, I appreciate the the background there. So why don’t you fill in our audience what you’ve been up to over the last year. I think we had you on around this, see, was it this time last year? Probably. It was about, it’s been about a year now. I think you were just getting ready to take your CFO job, if I remember you just accepted it.
CJ Gustafson:
I spoke to you, Paul, the week before I started it, and I was pretty nervous at the time. It was my first CFO gig, and I think I was talking a lot in theory of what I thought it would be, and now I can tell you a little bit more of the reality. So it’s been quite the ride. And what I’ve enjoyed the most, I think, is the ability to help impact the culture of an organization. I think for a long time I saw myself as just purely a finance person, and now I’m looking at myself as more of a leader who can contribute to the company’s overall look and feel. So yes, you have to make important decisions, but you’re also dealing with people day to day and helping to make what what I think is really just breaking down barriers for people and, and being, you know, someone to help with the removing blockers within new organization to go faster. And I think that’s been one of the bigger revelations for me. It’s, it’s less about, you know, the numbers day to day, which I am extremely close to. It’s also about helping people get things done faster, and that’s what finance can do.
Paul Barnhurst:
So is that a, was that a surprise for you? How much it was about people? Did you expect it to be more about numbers or maybe start there, what’s kind of been the, I guess, biggest surprise for you so far?
CJ Gustafson:
First surprise was the higher up, I think you get in an org, the more you become a psychologist to people, <laugh> or almost like a guidance counselor in a lot of ways, whether it be for your peers or for the people on your team, because at organizations, a lot of times it’s not just about how the numbers are adding up, it’s about how people are interacting with one another. And for the longest time, I just wanted to be the best in the room at the numbers. Now I’m learning that the EQ part is actually probably gonna get me further in my career than the iq.
Paul Barnhurst:
I really appreciate you saying that. And when you mentioned, you know, part like therapists, psychologists, I remember Carl Seidman when I had him on the show, he mentioned with some of these turnarounds, he goes, you know, there’s a little bit of finance doing, but I’m like part therapist part, you know, counselor and all those things that you don’t think about, which is a lot of the EQ and the relationships and you know, as you said tearing down barriers and things like that.
CJ Gustafson:
So that doesn’t surprise me. But I mean, there, there are some other surprises as well. I think the first one was that you have to read all the contracts, you sign. And it sounds funny just to say it out loud, but the reality is, I mean, as CFO, you’re also the chief risk officer in a lot of ways, right? So there’s no backstop. If you sign up for a crappy deal, it’s on you, man. Like, no one’s gonna bail you outta that. And I think realizing that there’s less of a safety net than when you’re under a CFO is it’s, it’s both frightening and liberating in a lot of ways. You’re kind of looking at the situation like, wow, this is on me. This is cool. I have a chance to succeed or fail, but I have to make sure I make the right decisions for the company and I have to do my research.
So as a CFO, there are a lot of boring things you have to read and sign, but it’s important because if you’re not gonna read it and put the time in, then, then who is ? That’s been a big one. And then I think the second one is, I thought when I got to CFO, I’d just be talking to people who also reported to the CEO all day. But the most valuable information I get are actually from the people who report to my peers, peers, not from my peers themselves. Look, I, I love talking to them and, you know, we, we have great relationships, but I think talking to the people on the ground in the weeds, you just get these nuggets of information that, that you wouldn’t get otherwise. So I try to get out into the org and not only talk to other departments, but talk to people at different levels of the departments. And so that was a big, that was a big unlock for me.
Paul Barnhurst:
Appreciate you sharing those, those are some great lessons in there. So I’m curious, when you first came in, I’m sure you had to do some things to build out the team, figure out, you know, how you wanted to structure it. I know you’re a growing company, so maybe talk a little bit of how you built it out. What was your, you know, first hire when you came into the role? How have you thought about FP&A? So just talk a little bit about building out the team, that whole experience.
CJ Gustafson:
Yeah, so I was extremely honest with what I knew and what I didn’t know. And I’m always the first one in the room to say, I’ll ask the stupid question. And I didn’t like doing that early in my career, but now I feel like people respect me more for it. And people will pinging you and be like, oh, I had that same question. I just didn’t want to ask <laugh>. But I, I’m a little off track, but the first hire I made was to find a kick ass controller. I’m not a CPA, I’m dangerous enough with a balance sheet, but I’m not gonna be in there closing the books correctly. So that was by far my first hire that I wanted to make. So
Paul Barnhurst:
I remembered, right? Yeah, because that’s what I had guessed. You, you were gonna say is controller.
CJ Gustafson:
Controller for me. And I think like if I had the accounting background, it would be, let me find a FP&A person first. Mm-Hmm. <affirmative>. But I, I could make the first operating plan which, which I did. And then I hired an FP&A person who he is amazing, has a skillset that even I didn’t have when I was leading FP&A teams. And he’s supercharged our insights. So for me it was crawl, walk, run in the sense of, look, cj, you have to get people paid on time, you have to make sure you don’t run outta money. And then after you progress through those levels of like Maslow’s hierarchy of needs, then you can start to get to the analysis and the cool stuff. And that was like the third piece. Now I inherited a, a business intelligence team, and that’s where the really neat takeaways seem to happen. And we’re getting to that. I don’t know if we’re running yet, but we’re definitely walking and outta the crawl phase.
Paul Barnhurst:
I like how you said the hierarchy of needs and mentioned the different things, you know, you know, getting the right people not running outta cash, getting into insights, right? You have, you have to start and build those building blocks, especially in a scaling company. I know you guys are what series C? Is that where you’re at Series B? Yeah,
CJ Gustafson:
We raised series C after I was about five months in. And so that helped me sleep at night too. Just knowing that if we do things right, I’m never gonna have to cut head count and just be responsible so we can control our own destiny.
Paul Barnhurst:
Yeah, I bet Having that additional cash to extend things and allow you to really be in control probably helped you. Like you said, sleep a lot better at night. Made a big difference.
CJ Gustafson:
Yeah. Yeah. And I need that now ’cause I have a new baby and I’m not sleeping much. So the cash in the bank helps Paul.
Paul Barnhurst:
Yes. And congratulations. How old? A week or two.
CJ Gustafson:
Thank you. Four days now. Four
Paul Barnhurst:
Days. And you’re already on a pa, man. I’m not sure how you do it, but congratulations is what I’ll say. That’s, that’s awesome for you. Thank you, sir. Number two.
CJ Gustafson:
Number two, fellow girl. Dad.
Paul Barnhurst:
Love it. I only have, I only have a daughter, so we, between three of us, we’ve got three girls. There you go. We got the girls covered.
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Well, fun. So, you know, you talked a little bit about kind of the biggest surprises, what was different than you expected. What’s maybe, you know, not so much the surprise, but a lesson you’ve learned from that first year that you could impart on others or something you’ll take, you know, kind of with you to other jobs. Not so much the surprises, but just those things that’s learned that you think have made you a better CFO today.
CJ Gustafson:
I didn’t expect the feedback loop to be this slow of what I’m doing right and wrong. And I’ll, I’ll maybe elaborate on that a bit, but when you’re in FP&A and reporting to A CFO, you hear really fast if you got a number wrong or if something you presented didn’t work for me, things I put in motion, I don’t always get feedback too quickly, right? Because they’re longer term decisions that will impact the operating plan. Maybe not even this year, but next year. So I think just having the self-confidence to say you made the right decision. You’re probably not gonna know if it was the right decision though, and get to validate it for a while, getting comfortable with that. And I won’t call it silence, but it’s just, there’s less, there’s less, yeah, you’re doing a good job or that was the right call. And just being able to say, you know what, we’re on the right path here. And I think we did that right. And I’ll, I’ll hear eventually
Paul Barnhurst:
It, it sounds like one of the biggest challenges, something to get le get familiar or get comfortable with is the lack of feedback for some decisions, knowing that they’re gonna be long-term and you just have to feel comfortable with, all right, on the whole, we feel like we’re going in the right direction, I believe this will pay off. So was it getting comfortable with not having the feedback that was hard or is it the idea of maybe I made the wrong choice, or kind of what about it was,
CJ Gustafson:
I think it was just not, not having the feedback of what you did today for tomorrow is, is going to be Right. And in all the other roles I’ve been in, like even if I go back to, I don’t know, strategy and ops for a quota deployment, I would figure out on a quarterly basis if I set the quota right. So maybe I was waiting three months with a lot of the moves that I’m helping make now as a CFO, as to like our hiring plan or what geographies we wanna hire in that isn’t gonna just, you know, be right or wrong within three months. That might take three years for you to figure it out. So part of it’s probably also my personality just to be more transparent that I’m, I’m, I I kind of run off of you know, positive validation, I think. And I’ve, and that’s been something that I’ve relied on in my career just to say, CJ, you’re doing good here. And that doesn’t always come in the same form that you would get. Like, I guess the CEO’s, your boss, they could always tell you that, but just having, you know, that group around you at when you’re an in individual contributor where you get more of that validation day to day. So yeah, I think that would be my, that would be my observation or surprise.
Paul Barnhurst:
Got it. Well, send me your CEO’s name. I’ll send him a note to let him know. He needs to email you words of affirmation more often.
CJ Gustafson:
Oh, he’s, he’s the best. He’s always, he’s always texting me saying the things that I’m doing are great. I actually need him to knock me down a couple notches every once in a while.
Paul Barnhurst:
I can do that as well. Just, you know, send,
CJ Gustafson:
I’ll do either one. You already do
Paul Barnhurst:
<Laugh>. So I’m, I’m curious, you know, now that you’ve been in the role for a year, how has your view of FP&A changed from being a CFO? Would you say it’s the same or it’s changed? And if so, how?
CJ Gustafson:
It’s so funny you asked this because I was thinking about it the other day when I was asking my director of FP&A to pull something for me. What’s, what’s different is I’m now the one asking fp and a for stuff. So I’m kind of the customer in a lot of ways, and I think I value that team even more than I did when I, I was the one doing it. And it’s not that I had a self inflated sense of importance as an FP&A a leader back then, but I think it’s a critical function to everything the business does. And it’s very different to be on the receiving end of the information for once and FP&A is by far my right hand team for anything that needs to be done very quickly and accurately for decision making. So I look at that as kind of a decision making team, not just a forecasting team.
And I talk to them the most on a day-to-day basis. And part of, I think what makes the relationship between me and FP&A work so well is that I, I did it so I know what language they speak and when, when I say that, I mean I know how to phrase questions to them so they can get to setting it up and actually doing the work faster. Whereas I think if I came from a strictly accounting background, I may be giving them pieces, but they’d have to, you know, put it together to, to figure out what the best way to go about it was.
Paul Barnhurst:
Got it. And I appreciate that. So it sounds like a couple things I heard there. One, you have even a greater appreciation than you did before, you know, two, they’re, they’re your customer. And the third thing I like there is you mentioned how they’re a decision-making team. Can you give an example of that when you say they’re a decision-making team?
CJ Gustafson:
Yeah, so I ask my FP&A team for whenever they send me something to give me your opinion with it. So like, first definitely state the facts just so I can read it on my own, but I don’t just want numbers. I want your insights because you’re seeing a level of detail that I’m not. And I want people with an opinion. I don’t wanna hire people who are just going to give me some flat numbers and I have to do the analysis. Like, give me what your thoughts are, and I may not agree with you, I may ignore it, but
Paul Barnhurst:
<Laugh>,
CJ Gustafson:
I need people who have strong opinions held loosely.
Paul Barnhurst:
I love that quote, the strong opinions held loosely. You gotta be willing to change your opinion, but you want someone who can give you their reasoning and, and hold to it when it makes sense.
CJ Gustafson:
Exactly. So,
Paul Barnhurst:
No, that’s great. I I appreciate that one. So I, I’m curious if we have someone out there listening in our audience who, you know, wants to be a CFO, they have aspirations. I’m sure we have some out there. What’s the advice you’re gonna offer to them? What would you tell ’em?
CJ Gustafson:
First and foremost, know the numbers better than anyone else at the company. When I was in FP&A, I would make it a game to memorize the quarterly, this is how much of a nerd I am to memorize the quarterly numbers before, like the second day after close. And that was a gateway drug for me in a lot of ways because once I realized that I knew the numbers better and other people knew that CJ’s the person to go to for those numbers, they started bringing me to calls that I probably didn’t belong on. And that expedited my learning curve because the CEO or CFO could be like in last quarter, you know, we did this many in addition, CJ what was the exact number on that? And I would just chime in from the background. So even though I wasn’t giving an opinion on those calls, I was what I’ll call the safety blanket. So there’s an analogy in in football that, you know, a lot of times the tight end is the safety blanket that you check down to Mm-Hmm <affirmative>. So I was the one that they would check down to on calls to pull a number out of the hat to, to make it seem like, you know, this team knows their stuff. So I would say know the numbers better than anyone else.
Paul Barnhurst:
Good, good advice. I appreciate that advice and yeah, I can remember many times being asked numbers and general manager always appreciating, yeah, the number is this or that, knowing them off the top of my head or being able to quickly get to ’em if I didn’t know them right. Being able to provide that insight. So that’s really solid advice for anyone in finance that wants to be a CFO.
I actually, now, now that you got me thinking, Paul, I’m, another incredible thing that FP&A people can do is to take notes on any call they get invited to. And a lot of people say, oh, taking notes, it’s like a menial task. Like I’m above that. No, if you have the notes, you have <laugh> the record of what went along on that call and people will need it later and they will have to come for you. So you are a gatekeeper of information and if you can distill that into takeaways for people, you will keep getting invited to things that may have taken a lot longer in your career to get to. So take notes.
Love that. A lot of good reasons to take notes. You remember things better as well. And yeah, when someone can go to you and say, all right, hey, do you remember? And you can look it up and be like, yeah, it was this we were talking about, or this was the number or whatever. So I’m gonna guess you’re a note taker?
CJ Gustafson:
Oh my, my, I have a, I have a notion Encyclopedia Paul. It goes way back.
Paul Barnhurst:
I I figured you had to with all the writing you do, I know you, I’ve seen enough and, and when we’ve been together of you taking notes to figure you’re a voracious note taker. So I’ll just come to you when I need information.
CJ Gustafson:
I take notes on you, Paul, I take lots of notes on you.
Paul Barnhurst:
That’s scary. We won’t, we won’t go there. <Laugh>. One other question. You mentioned the BI team, so analytics recently that that was put under your umbrella. Wh why was that? Maybe talk a little bit about the thinking of having analytics under A CFO and and your thoughts of that.
CJ Gustafson:
For our group, it was time to insights. That’s what we were going for. So getting to insights faster and our CTO did an incredible job getting the group off the ground. The first phase of any BI team is to get the infrastructure set up. So get Snowflake going as the data lake, get Sigma going as our, you know, BI tool or maybe you’ll use Looker you know, get talent or stitch set up as the way to transport the data. And that is a lot of engineering work that I am not qualified to do. I’ll be the first to say that. What I do have a good view on though are the metrics that are most impactful to the business. And my BI person and my FP&A person are tied at the hip. They work together probably more than anyone else in the finance department.
And I would say to whoever’s listening, if you’re in either one of those roles, get to know the other one. Because you are a powerful duo together. It’s like putting data insights on steroids and you combine FP&A and BI. And since we’ve made that move, I think we’ve moved a lot closer to what will be most impactful in decision making that can be interesting and less so what’s interesting. And then can we use it for decision making? So a lot of orgs when they first start out with BI, I’ve noticed go after what’s the sexy stat or what looks cool, you can do that, but it also has to be something that you can digest and use to make a decision for the business.
Paul Barnhurst:
Great point about it needs to be something that you can use for the business. You know, if insights don’t aid decision making, they’re not a lot of value. They’re nice, they’re kind of like you mentioned like the sexy, the, you know, follower metric or views. Things that don’t necessarily drive the bottom line, but they look nice when people see them. You really want what helps me drive the bottom line? What are important insights that are gonna really allow me to move the business forward to make a difference?
CJ Gustafson:
You nailed it.
Paul Barnhurst:
And so with that, just one other thought, I wanna get your thoughts. So, you know, we had Casey Woo on the show. I know we both know him, you know, he is been a CFO multiple times. He made the comment that you can tell if A CFO is what he called a modern CFO because they’ll have BI or data analytics report to them. He’s like, you comment, you see that a lot more today. Any thoughts on that quote? What’s your take on that?
CJ Gustafson:
Oh man. Casey’s the homie. I gotta agree with him there. I think it should, it should go under whoever’s digesting the signals from the business the most. So it could go under a COO, it could go under a leader from product. I think also a way to differentiate is if the data you’re looking at is more financial data, so it’s linked to sales in some way or is it more production data? And what I mean by that is it linked to the product, like number of searches. And so that was a big consideration that we made before we moved the team. We looked at it and said, day-to-day is more than 50% of the insights coming out related to what the product itself is producing or is it related more towards the financial and dollar aspect of it? So it really depends on what your company’s business model is, but for, for us it, it made sense to be aligned in this way.
Paul Barnhurst:
Got it. I really like the point you made there of aligning it with the business model. I think, you know, at the end of the day, that’s the most important thing and there’s obviously many different ways to do it and your business and your leadership will help dictate that. Key is that you’re driving insights and they’re getting getting to the right people. All right. So next question I have for you, because this would not be a CJ episode without this as you know.
CJ Gustafson:
Oh. Okay.
Paul Barnhurst:
Saas metrics, you know, when I hear SaaS metrics, I think a CJ So tell our audience, now that you’ve been a CFO for year, what are your three favorite SaaS metrics and why?
CJ Gustafson:
First of all, that’s the kindest branding I’ve ever got that when you think of SaaS metrics, you think of cj. So I must be doing something right here. Paul
Paul Barnhurst:
<Laugh>. Thank you for that.
CJ Gustafson:
This is like ask, this is like as if, if I had a bunch of kids and you’re asking me to pick my favorite. Yeah.
Paul Barnhurst:
Pick out of the two you have right now. <Laugh>,
CJ Gustafson:
<Laugh>, both my, my all time favorite metric and me and you have gone back and forth on this is ARR per employee. I bet you were hoping I would say this and I think it’s because it cuts through all the noise and it speaks to the company’s overall efficiency and in most SaaS companies, you want to demonstrate leverage in your business model. So am I getting more for the dollars I’m putting in and in most of those companies, I mean 70 to 75% of the dollars you’re putting in to resource the business are people they walk on. Yep. Two legs. So I think, I think it tells you if you, if you’re getting more efficient over time.
Paul Barnhurst:
Yeah. And I, I think historically we look at it, definitely it can provide some efficiency. I’m not as big of a fan on per head probably. Because I’ve seen some SaaS businesses that are, have a lot of transactional and are very messy. And so I don’t know that it’s always been as applicable as I think it is in a pure SaaS play. So I’m a little, I there’s some other metrics I prefer, we’ve had this discussion before I figured you’d say ARR per head, but I definitely can see the value of it. I get what you’re saying, especially when you’re looking at it historically and you’re looking for leverage, it can be a quick way to see if you’re getting it. So I can appreciate that wouldn’t put it top of my list. But then, you know, it wouldn’t be, wouldn’t be any fun if we didn’t have some differences. Right. What’s the other two? You listed one, but what’s your other two metrics?
CJ Gustafson:
Net dollar retention. So it shows up as either a dividend or a tax on the business.. And it shows you what you could hypothetically grow your company to if you packed up and went on vacation for a year. So 130% means you would grow 30% year over year if you didn’t bring on another customer. And I think that’s, I think that’s pretty powerful.
Paul Barnhurst:
Yeah, I, I’m a big fan of net dollar retention. I think that’s a really good one. And just like you said, it helps you know where you’re funding your business and it are, are your customers helping you fund your growth? What’s the third one? I can tell you’re thinking there.
CJ Gustafson:
The third one. Probably NPS score. No, I’m just kidding. I think that’s like the nickelback of SaaS metrics. I think that’s the worst metric ever. I would say
Paul Barnhurst:
<Laugh>,
CJ Gustafson:
I would
Paul Barnhurst:
Say. So you like Nickelback, I take it
CJ Gustafson:
Some people like Nickelback, I would say CAC payback period. I think CAC payback period on a trailing 12 month basis is really good. I do like LTV to CAC, but I think that’s like the most compound of compound metrics. It’s just to steal a term from the great Dave Kellogg because it’s, it’s too hard to point to one person in New York who owns that and there are too many inputs for LTV to CAC. But CAC payback period is really powerful for SaaS companies who are trying to figure out basically like I put a dollar out into the world, you know, how fast do I get that back?
Paul Barnhurst:
I remember that was a big part that helped us guide our commission plans.
CJ Gustafson:
Ooh.
Paul Barnhurst:
In whatever business that was. Pure SaaS is trying to think about, okay, how much are we paying out? How long is it gonna take to recoup that? You know, and looking at the commissions ’cause that was one of the biggest costs that went into that CAC. We didn’t, we didn’t have a huge marketing budget. A big, big part of it was an inside sales team. And so we looked really closely at okay, how much we’re paying them, how much do we get paid back? How does that impact our overall CAC? And making sure we were sent incentivizing them correctly but we weren’t putting ourselves in a bad situation. And it impacted some of the things like, all right, you know, clawbacks and some of those type of things in, you know, sales plan. So I’m a big fan of CAC. I think there’s a lot of areas where if you use it strategically and really think about how you incentivize people, there’s a lot you can do a round cac,
CJ Gustafson:
We use it religiously at everywhere I’ve worked and I love that you tied it back to commission plans. ’cause I think a lot of people forget to link it to how much you’re paying reps. They’ll just look at it like overall sales and marketing and I’ll lag it by one quarter. It’s like, no, you gotta go down to figure out how much you’re willing to pay per registration per lead per deal. And then to go down and say, well what’s the derivative of of this CAC payback period? And a lot of times I’ll look at what my effective commission rate is that I’m paying out to the force to make sure is that more or less than what I bargain for?
Paul Barnhurst:
Yeah, no, I love looking at all that cost. I also like taking, okay, what’s the total salary, their total travel, the all in cost versus the sales I generated that year. You know, what’s it costing me to add every dollar? And then once you figure out how long that dollar stays, there’s just a lot you can do with with you know, separating the sales and marketing and then looking at ’em combined for cac. I think as you drill in you can start to figure out, okay, where’s the problem? Where are we overpaying or what’s not delivering on the, you know, causing an issue with our CAC.
CJ Gustafson:
I mean I’ve looked at it before at other places where we had a heavy field sales team and they’re flying all around the country. All around the world. And you step back, you’re like, if we reduced travel by 25%, we would take two months off this thing. So like you said, Paul, you can’t just stop at this, you know, this amalgamation of just sales and marketing, you gotta go down another level.
Paul Barnhurst:
Yeah. And it was a real challenge ’cause the, I think what was unique about the businesses I had is we had a high account management team there was heavy, they had to visit the dealerships every single quarter. So we were really more of service with software as I like to call it, than a true SaaS player service
CJ Gustafson:
With software. I love that. I’m gonna put that on a bumper sticker.
Paul Barnhurst:
And so that’s what I called us is service with the software because we had such high cost of visiting the stores every quarter and providing recommendations. And so we had, we had a big account management team, we had a field sales team, we had inside sales team and you know, you can imagine a lot, a lot of cost there.
CJ Gustafson:
Yeah. And you gotta be honest, like if that’s your model, that’s your model. There’s nothing wrong with it. But, and if you have feed on the street, just, you know, put that in. Don’t, don’t call something, don’t, don’t call yourself something that you’re not, you gotta be honest with with how you’re actually generating revenue.
Paul Barnhurst:
A hundred percent agree. You really have to know who you are. Sometimes everybody wants to call themselves SaaS.
CJ Gustafson:
That’s really SaaS. There’ve been so many companies, there’s so many companies that have done that and they’re really like professional services organizations and how you can tell is, does this scale linearly by throwing people at the issue? Or do I actually get some leverage in my model once I get to a certain point? Because if you’re just saying, you know, I need to keep putting widgets in which are people in order to scale revenue. I mean that dog doesn’t hunt in the long term.
Paul Barnhurst:
Yeah. And that’s probably why ARR per head hasn’t been as big for me as I’ve been in companies that aren’t really true SaaS for the most part with the account management, all the different things. So there’s different things I’d look at beyond just that.
CJ Gustafson:
Yeah. Different, different weapons for different battles
Paul Barnhurst:
Without a doubt. Alright, so you recently launched a podcast called Run the Numbers. I know you talk a lot about SaaS and SaaS metrics like we just talked about. So tell our audience about the show and kind of the experience you’ve had so far doing that.
CJ Gustafson:
Sure. So the podcast plunge, it’s been fun. It’s been more work than I bargained for but it’s been, my goodness, you didn’t tell me that Paul. It’s, but it’s been, it’s been,
Paul Barnhurst:
I didn’t wanna scare you away.
CJ Gustafson:
I know. And now that I’m in, I can’t stop. It’s been the greatest life hack in terms of networking. So getting smart people to pick up the phone and have conversations with me that maybe otherwise I couldn’t have reached. And it’s accelerated my own personal learning curve. And what I found out in the process is like I’m kind of my ICP or ideal customer profile. I think at first I was going to try to create a podcast, same thing with the newsletter for like a fictional person, a fictional, smart, ambitious person that was out there. And I just started asking questions that were relevant to what I was going through at the time or what I was going through five years ago. And so a lot of that, you know, plays out in me interviewing CFOs on their decision making frameworks and how they’ve approached problems in the past and how they’ve built out their teams for scale and how they’ve built relationships, I think with their peers.
So it goes beyond just numbers. I know it’s called run the numbers. And then what we’ve also done is expanded into talking to business partners of CFOs. So talk to a VP of sales, talk to a CMO and see, you know, how they run their businesses, but from a finance lens. So it’s all from a finance lens. I’ve talked to a lot of smart VCs as well on the other side of the table, but it’s always been from the angle of what would be immediately useful to a ambitious finance person who’s trying to make sense of the business that they’re running.
Paul Barnhurst:
Love it. And you’re what about 15 episodes in roughly now?
CJ Gustafson:
We just released number 17 today, Paul. I it was close. We’re getting out there. Yeah. Yeah.
Paul Barnhurst:
Well congratulations and I agree with you. Running hosting a podcast is a life hack. The, the stuff you learn, the people you get to talk to, the access is just amazing. You know, I’ve talked to people, people I don’t think I’d ever meet without a podcast.
CJ Gustafson:
I still hate the sound of my own voice. I don’t know if I’ll ever, do you ever get over that? Do you like the sound of your voice?
Paul Barnhurst:
No, not really. I don’t think I’ve ever got over it. It’s got better, a little easier, but I still listen to myself sometimes. I’m like, why do people like to listen to me? I hate my voice.
CJ Gustafson:
I, I’ve been asking my wife to listen to the podcast and gimme pointers and she keeps saying, I have to listen to you all day. You think in my only spare moments I wanna listen to you more. I was like, oh, thank you. Love you too.
Paul Barnhurst:
<Laugh>. <laugh>. That’s great. There you go. Yeah. So she doesn’t wanna listen to you more.
CJ Gustafson:
No, true love.
Paul Barnhurst:
Alright, so got one more question here and then we’re gonna get into the Get to Know You section. So tell me about a time in your career when you experienced a strategic moment. And what I mean by that is you found a strategic insight that allowed you to empower change within the organization and we’ll say positive change.
CJ Gustafson:
I’ll give you one, but the way I went about it was negative. Okay. All right. So I was at a multinational software company and they had never been able to get their P&L down to geographies. So segmenting it out by geo and basically building business units and business unit P and lss. So we’d never got to that point and I was the first one to do it. And what fell out of it was that Europe was basically subsidizing the entire US operations. The US was like the least efficient of all the Geos. Asia was still in startup mode, so that wasn’t really like you could beat it up, but the US it was like we’re we’re plowing all this money into trying to make this enterprise motion. And it’s really expensive. And the CAC payback period is not that good.
Europe is a money printer. You would, you would invest in the Europe business every day of the week if you could. And it was great work. Not to toot my own horn, but I went about it in the wrong way So I presented it on a call. I remember where I was. I thought I was, you know, splitting the atom and, and presenting this amazing science project, but I was actually crapping all over one leader’s geography. And I think it upset him. I knew it upset him because I got a nasty gram after I should have approached it in, in a way that had a better soft skill approach to it. It where I went to him first, I I I gave him the insights. He wasn’t surprised on the call and there was still a change that was made in the org. I think we invested in headcount a little bit differently and we looked to get more outta the SMB and mid-market in the US But the way that I went about communicating the message was definitely a miss on my part.
Paul Barnhurst:
I’ve heard you share that example somewhere before and I, and I, what I really like about that example is a couple things. One, yes you drove change, but two, you recognize the learning from it. When I teach my FP&A course, one of the things that we always tell people is make sure you communicate before that meeting, especially if it’s bad news, you should never surprise leadership and management. Make sure they have that opportunity to chime in so they’re ready and prepared. And unfortunately it sounds like you learned that lesson the hard way by beating somebody up and him not being too happy with you.
CJ Gustafson:
Yeah. No one’s gonna celebrate your math being right if you’re surprising them. And leaders don’t like to be surprised. So in that meeting I learned about the power of the meeting before the meeting.
Paul Barnhurst:
Got it. Yeah. Great. Yes. I love that. The power of the meeting before the meeting. ’cause There is huge power in that aligning people, getting ’em on the same page, making sure nobody’s surprised and the meeting goes more smoothly than it would otherwise. So really good advice there. Yeah. Alright, so now we’re gonna note move to the get to Know You section. Got four questions for you. You get no more than 30 seconds for each answer, so we’ll keep these ones brief. First one is, what is something interesting about you that not many people know?
CJ Gustafson:
I do a lot of running, so sometimes I’ll throw it on Twitter that I did a 5K road race and collapsed and throw up in the bushes after, but I go all too hard in local 5K community road races. It gives me something to work out towards and keep something on the calendar. I would I would do something more ambitious like a marathon, but I only have an hour to work out each day. And I think my wife would kill me with all the podcasts and newsletters I’m already doing
Paul Barnhurst:
<Laugh>. Well, if you ever free up the time, I’ll run a marathon with you. I’ve done a few.
CJ Gustafson:
Okay. Deal. I’ll let you pace me
Paul Barnhurst:
Alrightyy. Sounds good. What’s your fastest time on that? 5K, let me guess. 17 in the last year. 1745.
CJ Gustafson:
I ran 1628 last
Paul Barnhurst:
Smoking
CJ Gustafson:
Last December. But I’m coming up on that time. I’ve dipped under, I’ve dipped under 17, probably four or five times, but it’s getting harder and harder every race.
Paul Barnhurst:
Th that is impressive tho. Those are good times and yes, it will only get harder as you get older.
CJ Gustafson:
Yeah.
Paul Barnhurst:
So get used to it. Alright. If you could meet one person in the world, dead or alive, who is it and why?
CJ Gustafson:
Other than you Paul? It would be, it would be Bill Simmons. So he’s a sports and pop culture writer and he’s
Paul Barnhurst:
Right.
CJ Gustafson:
Yeah, Boston too. ’cause I’m Boston. Yeah.
Paul Barnhurst:
Who Bill Simmons is.
CJ Gustafson:
Yeah. I’m a big Celtics fan and I, he, he has such a great writing style where his voice comes across in a compelling way where you want to hang out with the guy and he’s built two fantastic media businesses. Grant Landon the Ringer. And what I like the most is that he makes it cool to be a fan of what you’re covering. I think before in media, a lot of sports journalists took this super removed and emotionless and sterile approach to their coverage. And he’s like, no, this is fun. Like, let’s make it fun, let’s have some emotions. And I’ve tried to do that with writing and podcasting about business. So I’m a fan of business and I have a lot of fun with it and I try to celebrate it.
Paul Barnhurst:
Thank you. I appreciate that. And I have to say, my favorite Bill Simmons article ever was the one where he had NBA GMs around the room, like working a trade. It was like, like Isaiah Thomas and Jim Paxton and all this stuff. And he made a comment how Isaiah Thomas would basically trade his mother if he thought it would make the team better.
CJ Gustafson:
His analogies are just so good that I wish I could come up with some of them.
Paul Barnhurst:
Yeah, he had some really good analogies. I, I can’t remember like details of it outside of the Isaiah Thomas, but I just remember it was hilarious and it made a good point at the same time. Like yeah, I was entertained and I learned.
CJ Gustafson:
Right, and you remembered it because of that.
Paul Barnhurst:
Yeah, exactly. Alright, so next question. What’s the last thing you Googled looked up on YouTube or asked chat jpt slash generative AI about related to finance?
CJ Gustafson:
I used all three of ’em for this one. It was a meaty one. I was doing research on stock-based comp. There are a lot of debates online if it’s a real thing or not since it’s non-cash, but dilutive and I used it as research for a piece that I was writing.
Paul Barnhurst:
Writing. Got it. Great. So you used all three. I like it. So next one here, and I know we asked you this a year ago. We’ll see if your answers change. We’ll see how current you’re keeping up on all the changes to Excel. Favorite feature or thing about Excel?
CJ Gustafson:
I I think that it’s here to stay in the sense that the tools are just getting better and better. So Datarails is a really good one. There are a bunch of tools out there that you can be super dynamic on top of Excel and not have to lose that functionality. I think I was a bit nervous and it’s because I didn’t wanna lose something that I’d invested so much time, skillset wise and learning. And so I’m just amazed at how good the tools are getting for people who work in Excel.
Paul Barnhurst:
Great point. There’s a lot of great tools being built on top of Excel. And Excel itself just continues to get better. You know, adding Python, they just added some new formulas called Group Buy and Pivot by where you basically can create dynamic pivot tables without even putting it in a pivot table. Wow. Through formulas. They do some really cool stuff with them. I’ve, I just seen ’em, they just came out in beta recently and so it’s fun to watch. All right. Well we’re coming up on our end of our interview, so I got two questions left for you. The first is, if someone’s starting a career tomorrow in FP&A, what advice are you giving ’em? What are you telling them?
CJ Gustafson:
I may have given similar advice the first time you allowed me to, to grace these airwaves. It, it would be to stack your skills so you’re a skew of one. And this has become even more meaningful to me in the last year as I’ve become a CFO who’s trying to do it in his own kind of unique way and stay true to myself. And in writing and podcasting, what I mean by that is to take things that you’re uniquely qualified to do. So for me, there weren’t a lot of people who were writing about metrics in a way that was fun, engaging and had, you know, gif and pop culture references. That’s how you can stand out and don’t just try to be a better mousetrap or better than kind of someone who already exists. Try to create your own category and, and, and be, be cool with being yourself as you do it.
Paul Barnhurst:
Couldn’t have said it better about just being yourself. Accept who you are, you know, and enjoy it. If you’re a little bit different, you know that there’s nothing wrong with that. You wanna be yourself and embrace who you are and bring that to your career in a positive way like you’ve done with writing your newsletters. I mean, obviously if you have some bad habits, you need to work through those. Yeah. That’s not what we’re saying, but be yourself. But don’t try to, like I said, the better mouse trap or try to be like so and so because they’re highly successful when they’re totally different than you are
CJ Gustafson:
And you’re gonna get burnt out if you try to be like somebody else, you really will. You can’t keep that up forever. I remember when I first started my newsletter, it was actually called Steal My Idea and it was me trying to do my best impression of the guys from my first million, but going like a level deeper and coming up with these wacky business cases and I burnt out of it and I couldn’t keep it up and it wasn’t true to me. And I didn’t find what I call audience market fit until I just said, just, just do you.
Paul Barnhurst:
Well said. Last question. If someone wants to get ahold of you, what’s the best way for them to do that? If I remember right, your phone number is
CJ Gustafson:
My social is you can hit me up on Twitter, CJ Augustson 2 2 2 or hit me up on LinkedIn or subscribe to mostly metrics.com and then just reply to one of the emails. I get back to people pretty quickly.
Paul Barnhurst:
Alright, well thank you so much for sharing that and for being on the show, being a repeat guest. We loved hearing about your journey over the last year with first time CFO, having a little one, starting a podcast, growing your newsletter. Any other firsts in there?
CJ Gustafson:
No. I mean, being able to come on the podcast for the second time is an honor and it’s, I gotta say, Paul, it’s amazing to see your growth. I’m, I’m celebrating it with you, man. Congrats.
Paul Barnhurst:
Well, thank you. Same, same to you. I love watching your growth and thanks again for being on the show, cj.
CJ Gustafson:
Thanks.