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Business Class

09 January 2018

How a Startup CEO and CFO Can Work Well Together

Alexandra Cain

Writer, Cain Creativity, Inc.

Summary

CFOs typically aim to instil financial discipline into a business. Navigating the relationship with the CEO can contribute to the success – or failure – of some early stage ventures.

Entrepreneur Mick Spencer has established a solid relationship with CFO Danuel Rebecca – and the pair found some innovative ways to make the startup CEO-CFO connection a success.

Spencer founded ONTHEGO, an online, custom sports apparel company, after dropping out of university at the age of 21 with just $150 in his bank account. Since launching in 2012, ONTHEGO has kitted out more than one million people in 10 countries.

The company recorded 130% revenue growth in the 2016/2017 financial year and has achieved 300% year-on-year growth since June this year.

To achieve this rapid expansion, ONTHEGO relied on having a Chief Financial Officer with particular skills in managing high-speed businesses – and Spencer believes it was also critical to have a functional and productive relationship between the CEO and CFO.

Danuel Rebecca performs as Spencer's CFO on a part-time basis. Rebecca is also CFO for a number of other emerging businesses through his business CFOPartners.

“We had a contract CFO prior to Dan, but as the business was going through huge growth and also raising funds, we wanted someone who understood technology and scale - and that's Dan's experience," says Spencer.

The company had an internal, full-time finance function and really needed a CFO, but couldn't afford to pay a full-time CFO salary, Spencer says.

“Dan was able to deliver what we needed at a high level for the business around governance, as well as rolling up his sleeves to look at our day-to-day operations," Spencer says.

“He has also made important observations around what has to change for us to double or triple growth year-on-year," he adds.

Making it work

The fluid nature of the relationship is what makes it successful, says Spencer.

“Dan contributes a certain amount of hours a week, but we can talk to him at any time. He comes into the office each week for face-to-face time about critical things and he also sits in on board meetings, which are held every six weeks.”

“Dan also works with my teams across commercial, sales, finance, [and] merchandise so we get that top-level finance input to whatever's going on," he explains.

The business is currently exploring acquisitions as well as getting ready for capital raising. To support this, the team is hiring a Finance Manager who will operate under Rebecca's guidance, but can in the future move into a Finance Director role.

The new Finance Manager will be responsible for managing technology, cross border transactions, as well as global customers and manufacturers.

Dodging difficulties

In such a fast-paced environment, conflicts could arise. Spencer and Rebecca say successfully negotiating these situations comes down to open communication so they can talk about issues impacting the business or themselves.

“If we do have a problem, we just pick up the phone and have a discussion about whatever that issue might be. The idea is to aim for a quick resolution because if it carries on, that can turn into a very nasty relationship quite quickly," Spencer says.

“The key is for Dan and me to have a clear idea of what success looks like for both of us," he adds.

Spencer says Rebecca's experience is unique. “You can find people who have Dan's qualifications and experience but they're very conservative and they don't understand big ambitions. Or you get people who are too in the trenches, who can't see the strategy. Dan is the whole package."

While Rebecca's role as CFO at the moment is 80% operational and 20% strategic, Spencer sees that relationship inverting over the next 12 months so that Rebecca spends the bulk of his time on strategy.

“As we grow, the finance function will grow. I don't have pre-conceived ideas; I'm more about outcomes," says Spencer, who fully appreciates the value of having an experienced CFO in his business.

“It's very important founders spend time finding the right CFO and also become financially literate themselves. Sometimes people say, 'Oh you've just got to hire people smarter than you', - and you should. But it's really important founders understand the fundamentals of business finance as well."

Outsource advantage

Lisa Callaghan, Director of Interactive Accounting, is in a similar situation to Danuel Rebecca. Her business also provides outsourced CFO services to emerging businesses. She says the relationship between CEO and CFO will often depend on the former's financial acumen.

“Some of the first-time founders require a lot of education about financial concepts and understanding of what the CFO does," she says.

Callaghan says one of the greatest benefits of having a CFO in place is that investors can have confidence in the robustness of the financial accounts.

“It is easier to attract funding when you have third parties who validate the story the CEO is telling. Talented CFOs, CTOs, CMOs in key roles in the business validate the founder's ability to attract really good talent," she says.

She adds that getting that validity extends to the people who are on a company's board, and the make-up of existing investors.

“The more you can surround yourself with people that have a good network and a good reputation, the more your ability to raise money improves - and the higher the company's valuations will be."

Having a great CFO also allows the CEO to focus on his or her strengths.

With the CFO ensuring the 'hygiene' of the financials – setting up the admin, financial and reporting systems - the CEO can concentrate on attracting customers, developing strategy and building new products.

The partnership between a CEO and their CFO may not always be easy, and conflict is common in a fast-paced environment. But if the right parameters are put in place from the start, this relationship can be a successful one.

Key Takeaways

  • Good startup CEO-CFO relationships begin with open and honest communication.
  • Dealing with conflicts as soon as they arise can reduce pain points.
  • Emerging businesses could consider appointing a CFO on a contract basis, transitioning to a full-time finance chief when funds allow.

Entrepreneur Mick Spencer has established a solid relationship with CFO Danuel Rebecca – and the pair found some innovative ways to make the startup CEO-CFO connection a success.

Spencer founded ONTHEGO, an online, custom sports apparel company, after dropping out of university at the age of 21 with just $150 in his bank account. Since launching in 2012, ONTHEGO has kitted out more than one million people in 10 countries.

The company recorded 130% revenue growth in the 2016/2017 financial year and has achieved 300% year-on-year growth since June this year.

To achieve this rapid expansion, ONTHEGO relied on having a Chief Financial Officer with particular skills in managing high-speed businesses – and Spencer believes it was also critical to have a functional and productive relationship between the CEO and CFO.

Danuel Rebecca performs as Spencer's CFO on a part-time basis. Rebecca is also CFO for a number of other emerging businesses through his business CFOPartners.

“We had a contract CFO prior to Dan, but as the business was going through huge growth and also raising funds, we wanted someone who understood technology and scale - and that's Dan's experience," says Spencer.

The company had an internal, full-time finance function and really needed a CFO, but couldn't afford to pay a full-time CFO salary, Spencer says.

“Dan was able to deliver what we needed at a high level for the business around governance, as well as rolling up his sleeves to look at our day-to-day operations," Spencer says.

“He has also made important observations around what has to change for us to double or triple growth year-on-year," he adds.

Making it work

The fluid nature of the relationship is what makes it successful, says Spencer.

“Dan contributes a certain amount of hours a week, but we can talk to him at any time. He comes into the office each week for face-to-face time about critical things and he also sits in on board meetings, which are held every six weeks.”

“Dan also works with my teams across commercial, sales, finance, [and] merchandise so we get that top-level finance input to whatever's going on," he explains.

The business is currently exploring acquisitions as well as getting ready for capital raising. To support this, the team is hiring a Finance Manager who will operate under Rebecca's guidance, but can in the future move into a Finance Director role.

The new Finance Manager will be responsible for managing technology, cross border transactions, as well as global customers and manufacturers.

Dodging difficulties

In such a fast-paced environment, conflicts could arise. Spencer and Rebecca say successfully negotiating these situations comes down to open communication so they can talk about issues impacting the business or themselves.

“If we do have a problem, we just pick up the phone and have a discussion about whatever that issue might be. The idea is to aim for a quick resolution because if it carries on, that can turn into a very nasty relationship quite quickly," Spencer says.

“The key is for Dan and me to have a clear idea of what success looks like for both of us," he adds.

Spencer says Rebecca's experience is unique. “You can find people who have Dan's qualifications and experience but they're very conservative and they don't understand big ambitions. Or you get people who are too in the trenches, who can't see the strategy. Dan is the whole package."

While Rebecca's role as CFO at the moment is 80% operational and 20% strategic, Spencer sees that relationship inverting over the next 12 months so that Rebecca spends the bulk of his time on strategy.

“As we grow, the finance function will grow. I don't have pre-conceived ideas; I'm more about outcomes," says Spencer, who fully appreciates the value of having an experienced CFO in his business.

“It's very important founders spend time finding the right CFO and also become financially literate themselves. Sometimes people say, 'Oh you've just got to hire people smarter than you', - and you should. But it's really important founders understand the fundamentals of business finance as well."

Outsource advantage

Lisa Callaghan, Director of Interactive Accounting, is in a similar situation to Danuel Rebecca. Her business also provides outsourced CFO services to emerging businesses. She says the relationship between CEO and CFO will often depend on the former's financial acumen.

“Some of the first-time founders require a lot of education about financial concepts and understanding of what the CFO does," she says.

Callaghan says one of the greatest benefits of having a CFO in place is that investors can have confidence in the robustness of the financial accounts.

“It is easier to attract funding when you have third parties who validate the story the CEO is telling. Talented CFOs, CTOs, CMOs in key roles in the business validate the founder's ability to attract really good talent," she says.

She adds that getting that validity extends to the people who are on a company's board, and the make-up of existing investors.

“The more you can surround yourself with people that have a good network and a good reputation, the more your ability to raise money improves - and the higher the company's valuations will be."

Having a great CFO also allows the CEO to focus on his or her strengths.

With the CFO ensuring the 'hygiene' of the financials – setting up the admin, financial and reporting systems - the CEO can concentrate on attracting customers, developing strategy and building new products.

The partnership between a CEO and their CFO may not always be easy, and conflict is common in a fast-paced environment. But if the right parameters are put in place from the start, this relationship can be a successful one.

Key Takeaways

  • Good startup CEO-CFO relationships begin with open and honest communication.
  • Dealing with conflicts as soon as they arise can reduce pain points.
  • Emerging businesses could consider appointing a CFO on a contract basis, transitioning to a full-time finance chief when funds allow.
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