Spend Advantage Podcast

The Modern CFO with CJ Gustafson

February 14, 2023 Varisource Season 1 Episode 25
Spend Advantage Podcast
The Modern CFO with CJ Gustafson
Show Notes Transcript

Welcome to The Did You Know Podcast by Varisource, where we interview founders, executives and experts at amazing technology companies that can help your business save a lot of time, money and grow faster. Especially bring awareness to smarter, better, faster solutions that can transform your business and give you a competitive advantage----https://www.varisource.com

Welcome to the Did You know Podcast by Varisource, where we interview founders and executives at amazing technology companies that can help your business save time and money and grow. Especially bring awareness to smarter, better, faster solutions that can transform your business. 1.3s Hello, everyone. This is Vic with varisource. Welcome to another episode of the Did You Know Podcast. Today I'm super excited to not only bring a customer a partner, but also a friend, CJ Gustafson. I always try to pronounce his last name correctly. And CJ is the CFO of parts tech. And parts tech is the kayak of aftermarket car parts. Super excited to have you on CJ. Hey, 

U1

thanks for having me on, Victor. This is going to be 

U2

fun. Yeah, for sure. A lot of the theme of this episode is the modern CFO, and you have such an interesting background and different point of view just based on your career. So can you give us a little bit of background kind of how you started and how you became kind of the CFO now? Yeah, 

U1

sure. It's been kind of a wild ride to get to this point, and I never really knew for sure if I was going to end up in kind of a CFO seat. But it's kind of one of those things in your career journey where you go as far as you can see, and once you get to that point, you can see a little further 1.3s at the beginning. 1.5s I graduated from Boston College, and my first gig out of school was a consultant at PwC. So my job was to help with due diligence on M and A targets for large private equity firms. And I did that for about two years, and I got to travel around the country and see a lot of different business models. And that was awesome just to see how companies organize their resources and also how they monetize their businesses, especially for someone who wasn't like all that sure what he wanted to do with his career. And from there, I actually got a chance to go to a private equity firm where I was responsible for portfolio valuations on a quarterly basis. So I had eight or nine companies that I was responsible for monitoring, keeping up with their operations, and that's where I took my Excel skills from, say, a two to maybe like a nine. I may be a little stale now that, you know, I'm more in a people management role. Maybe I'm like a seven. But there I kind of learned how to build a discounted cash flow model, how to dig into a businesses operating forecast, and that's also, I think, maybe most importantly, what I learned about the world of SaaS and how technology companies were increasingly monetizing their products through cloud based solutions. And 1.9s I did that for a couple of years, and then I had this choice where I could plow ahead on the private equity side. A lot of the smart guys at MBA is, and it kind of seemed like I would need to go to grad school. If I want to continue down that road or I could kind of get what I call my real world MBA and move over to the operating side. And that's actually the path I chose to do. And 1s since then, I guess the rest is kind of history. I've been helping scale startups from the finance and strategy angle since then. 

U2

Yeah. And again, I think the modern CFO, there are so many different points of views, not just on finance, but the overall business. So again, you're super busy, yet at the same time you have this blog that you have mostly metrics. How did you came up with it? And why is it something that you're so passionate about? Because you're always updating content. Right. That means you put a lot of heart and soul into it and you really care. And it's a lot of educational information about finance, about startups, about metrics, about data. Right. But on top of everything you already have going on, why kind of do that? Yeah, 

U1

it's my passion project and writing is something that I've always loved to do. I know people said CFOs are numbers guys, but I think growing up in school, English and writing was actually my favorite subject. Something kind of odd for, like I said, a numbers guy to say. But I was in this period in my career where 1s the company I was at and helping to grow, it was truly hypergrowth triple digit growth each year. And I was kind of looking around and saying, wow, everything is moving so fast, I don't want to forget this playbook. And I think a lot of us realize that in the startup world you often work with the same group of people in a tight knit setting and 1.6s you're very loyal to those people in the network, but you may go on to work at a different company, probably with them as well at another point. So it's kind of how do I write down this playbook so when I have a position to be a CFO down the line, I have some good notes on it. And second reason why I started it was an excuse to talk to smart people. So everybody is asking people, hey, can I pick your brain for five minutes? Can I buy you coffee? But this was kind of a chip that I could say, hey listen, I'm writing about something that's relevant to your industry. I look at you as an expert, can I interview you? And then the third thing was it was just how I remembered things and something that I enjoyed to do, like I said. And I figured if I wrote it down, it would help me catalyze my thoughts. 1s I think why it caught on Victor and we're approaching 20,000 subscribers now, which is pretty wild, 1.5s is because I was writing about things that were extremely relevant to what I was doing day to day. I wasn't just writing about the news I wasn't just writing 1.3s satire pieces or something that was, like, interesting. I was writing about how companies make money and intern, how people can get ahead in their careers, and many of the things that were the subjects of these pieces. Were things that I Googled like 50 times and couldn't find an answer myself. And I thought there's probably a group of people like myself in similar roles who are looking for the same stuff. And I think that's where I found what I like to call like, audience market fit. It was people who were like minded, who were looking for the same answers as I was. And I was just maybe the first to put some of these things down in one spot and offer to send it 

U2

out. Yeah, and I follow a lot of obviously newsletters and blogs and things like that, but I would say there is less than a handful that I actually pay for because you can just get information anywhere on the Internet now. Right. And again, I'm not saying this as a friend, but more so, I even learned a lot. Obviously building a startup, there's so many things you got to learn and just really got a lot of value from your content. And you're always updating. That's the great thing is you're always updating. So no, that's amazing, man. So the next question we have for you is trying to get your views on obviously you were on the VC side, as you mentioned, and then you work for fast growing startups Unicorns, 2.1s and now becoming a CFO in another startup. How has all those point of view, what lessons have it gave you? Maybe top one or two tips or lessons that you've learned from kind of all these different points of views? 

U1

Yeah, so like you said, I made the switch from working on the funding side of the table to the funded side. And I think it's quite a shock when you realize how hard it is to make the trains run on time. It's easy to be kind of a spectator and being like, hey, the financial results were a little low, or the costs were a little high. But once you're in the trenches doing it, you're like, wow. 2.4s Especially if you're growing at 100% year over year. I always like to say forecasting anything in life that's growing at an exponential rate is incredibly hard. I think the biggest thing I learned was how to make decisions with 80% of the information that I wish I had at the time. So startups, they move fast and if you sit around and wait for the perfect answer, you're going to be waiting forever or you'll wait until the market opportunity is passed. So, like, being comfortable with making decisions and ambiguity. And I think I also learned how to organize resources effectively. And what I mean by that is you only have so many dollars to go around. So when you do allocate them, how do you take those dollars in one department and link that to the dollars in another department? You want to create scenarios where I like to say one plus one equals three and you want to get rid of scenarios where you're funding two initiatives that are working against each other. So kind of having that higher level view of how costs in Iraq to drive revenues throughout the business. And a lot of this was built too, like in my first few years working at St startups where I got into an Fpna role. And this is kind of the third thing that I've learned. That's to say no to things. It was probably something I wasn't really good at early in my career. I think I still work at it every day, but it's really important as a CFO now, and it sounds kind of silly, but you have to say no to more things and you say yes to and by doing that, it makes the things you do say yes to more impactful. 

U2

Yes, it's that's actually a perfect segue to our next question, which is how do you kind of approach this CFO role in your company now? 1.9s Meaning, do you see a difference 1.3s from a year ago to now? Economy is changing, there's a lot more uncertainties, all of those things. Does that impact how you approach being a CFO? And yeah, what do you think? 

U1

So when I came to Parts Tech, I was lucky to step into a business that was running incredibly efficiently. So they were doing more with less already. And I want to keep that theme up. We didn't and this was before my time, didn't lean into massive fundraising rounds. Over the last two years, we raised what we need to hit our goals, and I think that creates a lot of focus of how to figure out how to put people in the best place to succeed. 2.4s Constraint drives focus. I think what we saw over the last couple of years is there was a surplus of cash that companies had taken in. And when you have that much money, you start saying yes to the B and C projects. And you may also hire people that are B or C players in that particular role. Maybe they're not a great fit. So I think what's changed the most is you have to really have your eyes and ears out for what the A things are that you want to say yes to and making sure that you double down once you find something that is working. Well, a big thing that we try to do is to run smaller experiments with costs. And that way we don't go from a low cost efficient model to a high cost model overnight. We want to test things, incubate them, see the results, and then, like I said, double and triple down on the things that are working. 

U2

Yeah. So something you brought up that I want to ask you about is especially, again, this episode is all about kind of getting to the insights of how what the CFO thinks, right? So you talk about a projects, b project, C projects. How do you determine or how do you evaluate a project as an A project versus, like, a B or a C? 

U1

Yeah, it's hard. And I'll level with you. A lot of the things we buy, I don't fully know what they do, and I'll be the stupid one in the room. So someone was bringing up, are we going to buy stitch or five trend for some of the engineering and analytical work we're doing. I couldn't really, truly tell you the ins and outs of those products. But what I can confirm is there's a business case that they have to present as to why. Why we need each tool, which has to be supported by an executive who's putting their name to it and will be directly accountable for results. So we trust Execs, and I really trust them to make decisions on what tools they need to get the most out of their teams. And I look at finance or the CFO or Fpna and accounting, not as software or project decision makers. In most cases, sometimes you have to kind of weigh in with an opinion in, but more as like a broker between the business unit and the company PNL and the vendor or the hiring manager trying to get something done. 

U2

Yes. Make a lot of sense, easier to get than done. But what are some of your main challenges that you face becoming a CFO now, especially with all your previous experiences? What are some of the main challenges you think? 

U1

Yeah, I get a lot of requests that come across my desk for us to procure things. And the finance job, or my job really is to understand a couple of things. So first, what type of tool it is. And I like to separate tools into how my simple mind works. I put them into like four or five buckets. So you got like your critical infrastructure, you got productivity tools, you have communication tools, and you got security tools, and you got some other GNA stuff. And then what I try to do is I try to figure out how we pay for it. So it's going to be usage based, is it going to be headcount based, how am I going to expect this to go up or down in terms of cost over time and then understanding when we pay for it? So it's going to be annually upfront, is it going to be monthly in arrears? Is it going to be quarterly, et cetera. So I can plan out the cash flow that I need to fund this and then, and this one's more, I guess, like philosophical. But what are the unintended consequences of this? So do we have the bandwidth to implement it, and are there any other tools that this takes the place of? So I would say 1.1s it's larger than just procurement and it's not necessarily a problem. It's more just like a challenge that you need to understand to make sure you're making a good investment decision and wrapping your arms around why people want to buy something and what the company is going to get out of it. And like I said before, saying no to things can be hard. I'm getting better at it over time. And it's saying no to the right things. You can say yes to the right things. 

U2

Sure. So one thing that we're big on at least, or what we believe in is data or visibility. Right? I think you have visibility on your people. You want to know if they're doing well. There's KPI of people and all of these things but a lot of times all these services you're buying whether technology or not as you spend so much money on it but you might have the financial payment data because you're paying invoices but then all these other visibility what type of data do you feel like? And again maybe talk through it from currently the CFO but then also in previous fast growing startups because is what we found is that whether you're a large company or small start up they all lack visibility. 1.5s What are maybe some data that you feel like you're missing 1.1s about these things or buying, or just overall data that you feel like you like to get more visibility of? 

U1

Totally. What keeps me up at night are what I would call orphaned applications. So those are things that we buy and are really good at that time when we buy them, but people stop using them over time. That keeps me up. So being able to see and I'm not sure, there may be some things out there that give you this visibility, but can you link it to that person's account and see who in the company is using that application? The other thing that keeps me up at night are there are certain applications out there. I won't talk dirty about any companies, but basically when you share something, it essentially eats up a license to whoever views the project. So, like a proliferation of licenses over time that you didn't expect, and then the next thing you know, you started out at one cost. You thought your app, you've expanded to so many licenses across the that not just the product department is looking at to see their projects, but now finance has a license too, and that's running up costs. So I would say orphaned apps within the worries me. And also apps that proliferate in licenses to like a level that you didn't anticipate. 

U2

Yeah. So another 1.1s thing I want to get your take on is 1.3s kind of the relationship. And again, especially now, like you said, you have to say no maybe a lot more than maybe before. Maybe the economy and a lot of other companies, I'm sure are facing the same. They feel like they have to say no a lot more. How do you kind of manage that, even from the people and relationship with stakeholders perspective? Right? Because obviously, look, it's hard for you to say no, but also for the purse on the other side. When you keep saying no, it's like, well, 1s how can I do my job better? You're not giving me the tools that I need. There's always that kind of relationship that you also have to maintain. Right. So how do you kind of find that balance? How do you kind of deal with that? 

U1

I think it's aligning people to the same goals. So a lot of what we talk about as execs is what's our Q One goal? What's our Q two goal? If we exceed this, can we use some of the excess to fund something that we're asking for elsewhere in the business? We start with an annual plan in mind, but let's be real, if you're growing fast, you're updating that plan every single quarter and every single month. Even. So, you always want to have the latest view on the company and then having conversations with everybody and being completely transparent, like, listen, this was the goal we set for top line. This is where we are we think we're going to come in at X, Y or Z and then saying, what does that free up within the to do 1.4s elsewhere? I think it's keeping people accountable to what they said. And it's not like pointing a finger and saying, hey, you didn't do this or that, but just saying, Listen, guys, we've put this on paper. Are we going to achieve that or not? So I think that makes this conversation. Is a lot easier. And I try to be transparent with people too, in terms of I'm not going down to the dollar of how much cash we may be making or burning, but I like to give a good temperature check so everybody's on the same page. I think where the conversations get harder is people think you're doing a lot better or a lot worse than you really are. You want people to have a degree of understanding of how close you are to those goals any given time, because then the decisions make more sense. From a human perspective, you can see why people are making those choices. 

U2

Yeah. 1.2s First of all, that communication is especially the bigger company. You get it's harder and harder to have this communication and transparency, but I think that's critical. So what do you think CFO needs to do for the company in 2023 and beyond? Yeah, 1.2s

U1

I'm by far not a CFO expert at this point. I'm learning on the fly and doing the best I can. I think at the end of the day, in 2023 and in any other year, it's really all about the people. And I say that not because people are 75% of our costs. I like to joke that like 75% of costs. And software companies usually walk on 2ft. But you need to hire the right people to hit the goals and put them in a place to succeed. 1.5s You see a lot of layoffs that are going on in the tech world, and I think that's just because a lot of companies got over their skis, not just in hiring, but also maybe not managing the right people out over time, and you kind of have a talent debt that accumulates. So making sure you make the right hires and making sure you put people in the right place to succeed. 1.4s Something that I make as a goal for myself is to bring a higher degree of, I guess, EQ to the table. I think IQ can get you only so far, but to understand what motivates people and how to align incentives across the company to get the most out of everyone. And you want people to feel like they are contributing in a meaningful way to whatever the goals are. So I think what companies 2.7s may kind of fall off the path that they want to be on because the goals aren't really aligned to what people feel like they can contribute to every day and see a tangible impact. I think that's going to be even more important, particularly in 2023 as we run more efficient companies. People want to be able to see that they're contributing to that efficiency and productivity over time. 

U2

Yeah. And again, you being a CFO numbers guy like that's, or maybe specialty or expertise or experience or passion, but a lot of stakeholders have their own areas of expertise. But I think what you've kind of shown to me throughout time is like the leadership. The way you answer things, the way you look at things is very much about leadership. Like you don't look at yourself. Maybe just as a finance guy. 1.4s You look at a lot of business impacts, people impact and I think that's that's why we have you on right on this topic about the modern CFO. Yes, but the last question as we kind of get wrapped up here, so how can the modern CFO think about the overall business as a whole instead of only looking at the finance side? And you kind of alluded to it throughout kind of this conversation. But if you were to 2s explain to other CFOs out there, or maybe people that's been doing being a CFO for 20 years and maybe know only one way of doing things, but what would be kind of your suggestion or insights into how do you look at the business as a whole more than just the finance? 

U1

Yeah, I think you got to get outside of your bubble and talk to people throughout the and be willing to ask questions that may make you feel uncomfortable at the time. I heard a quote the other day, and I'm probably going to butcher it. But it was 1.7s practice and theory are the same thing. Except, of course, in practice. And a lot of things theoretically sound good that you should do. Like when you sit back and think about business strategy. But you got to go and see how it actually works. 1.1s An example of that would be you can't just throw technology at a problem like say you need help with scanning documents and getting terms of a deal out. You can't just buy that and think that the problem is going to go away if you don't actually have a personal line to use it day to day and you haven't thought through how humans and technology interact. Don't just buy systems just to buy them. I think a big mistake that software companies make is just buying more software and not thinking about what the interaction is between the people and the technology. You can't just pick them in a bubble. 1.1s The other thing I think that helps orgs 1.1s run better is like forcing people from different departments to talk to each other and I'll admit the first couple of years of my career I stunk at this. I would stay in my bubble within sales officer strategy and sometimes I talk to people but I'd retreat pretty quickly back to where I felt comfortable. Now I think what helped me get to this level is being willing to go out and talk to the product team, maybe reading a couple of articles beforehand on something I wanted to ask some questions on and preparing for those meetings and asking them about what makes their business tick. I think the modern CFO is someone who's going to be willing to understand from soup to nuts how the company makes money and how each department is aligned to doing that. You can't just approach it from a finance function. It's got to be like a business wide function. I was talking to a CFO who was much more experienced than me, and I was asking him for tips on as coming in as a firsttime am. CFO, what's the main change in mindset you have to have? And you say. It's no longer you just being a finance person, and it's not the CFO, it's the CPO, the chief Performance officer. You have to be responsible for the company's performance as a whole. And that's really understanding what every department brings to the table and how they interact. 

U2

Yeah, that's such a great insight. The last question that we love asking our guests is, again, you've seen a lot, been through a lot. If you were to give either one personal advice and or business advice, and again, you've given out so many golden nuggets throughout this conversation on the business side, but if there was one personal and or business something that you're really passionate about, like advice, what do you think you would want to give the audience? 

U1

I would say to stack your talents in whatever you are passionate about and whatever you feel you're good at. I think if I look at myself on paper, I was probably 2.2s a B or B plus in valuations from a private equity standpoint. And then if I was to look at how good I was at Fpna in particular, 1.2s maybe I was like, I don't know, a B or B plus again. But then I bring writing to the table how much I like storytelling. And I think that allowed me to stack my talents, to kind of create a career at the intersection of the funding and the funded. And I think you can do this at any job or profession you may have. I heard this story about the guy, Scott Adams, who created the comic Dilbert, and I think he said I was like in the 80th percentile for drawing in like, art. I was probably in like the ninetyTH percentile for writing, and I was also probably in like the 75th percentile in terms of storytelling and humor. And he said, well, when I brought all three of those things together, it kind of created a killer combo. But if I was to try to do just one of those things on my own, I would have never made it to the top tier. And I kind of look at myself in the same way. How can I combine things that I'm interested in and good at to create one package? And I think there are a lot of people out there that are sitting on a lot of talents that could get them to the next level if they kind of find a creative way to stack them in the right direction. 

U2

Yeah, well, no, thanks for being the modern CFO and thanks for being on the show. It was great to have you. CJ 

U1

thanks for having me on. Victor.