Episode 32: Mark Kearney of Ascent CFO Solutions on Using Finance as a Strategic Growth Lever

Episode Transcript

Shiv: All right, Mark, welcome to the show. How's it going?

Mark: Good, Shiv, thanks for having me. I appreciate being here.

Shiv: Yeah, excited to have you on. So why don't we start by sharing your background and what Ascent does and we'll take it from there.

Mark: Great. So I am a fractional CFO. I work with an organization called Ascent CFO Solutions. And we are a, exactly what it sounds like, a fractional CFO service that engages with clients around just really the strategic finance needs of the clients. And those are typically businesses that are maybe in a growth stage. So they're kind of past the startup stage and they're into growth and they're at a can appoint in their maturation where they're looking for a larger C-level financial strategic guidance. And that could be involved around deployment of capital from a funding raise, looking at acquiring IP or mergers and acquisition, or establishing good practices around accounting and finance, as well as forecasting, budgeting, strategic planning. And we do that with our clients, but on a kind of part-time basis. So most of those organizations oftentimes don't need to fund a full-time CFO, which can run you anywhere from kind of $250, $350K at a minimum for a full-time CFO. Or we can do it at a fractional cost and you're not paying for kind of additional air time that you don't necessarily need from a business. But our business, go ahead.

Shiv: Is there a particular stage of companies that you guys focus on?

Mark: Yeah, I would say our kind of sweet spot is going to be companies that are really kind of established a customer base and a viable market product. So typically it's going to be something in the neighborhood of two million in revenue up to about 50 million in revenue. It can go larger than that, particularly in this space, like around SaaS solutions. If it's not an overly complex business, oftentimes we can run into even a hundred million in revenues before an organization is really looking at and seeing the value of bringing in our full-time CFO.

Shiv: Understood. Yeah. And when you come in, what do you see as the biggest problem areas in terms of tracking? And does that vary by stage? Where do you see the biggest opportunities from a finance perspective?

Mark: Yeah, there's usually, there's kind of a number of different scenarios. And it's usually around some level of kind of sentinel event in the business, which is they've got a product to market, they're generating revenues, and now they're looking for scale of the business, which requires a lot more kind of financial planning from the business in terms of managing cash, looking at how we scale, how we add accretive dollars on the top end to the business. And those are, that's kind of one general scenario that we see, particularly as it relates to kind of startup and growth businesses. 

Other kind of events are typically our fundraising. Oftentimes when an organization has done maybe some friends and family type of fundraising, and then have gone into some small seed rounds and now are looking for kind of larger investments in the business and are willing to really put out their equity in the business to those investors and really need to (A) make sure that all the kind of financial houses in order before really talking to those investors and have good accounting and financial processes in place to be able to manage that capital once that capital comes in the door and deploy that. Oftentimes, organizations bring that capital in and it's certainly worth kind of a celebration and a relaxing of the guard a little bit, knowing that we've got some money to grow the business, but it quickly turns into we've got to basically be financial stewards of those dollars and making sure that we're deploying them accurately along the lines of the strategic guidance of the business and the investors and making sure that we're handling that money. 

Shiv: On the finance side, especially when there's an event like that, the world looks very different than when there isn't an event like that, right? Because like you mentioned, they've now added a ton of cash to the balance sheet or there's another investor at the table. So how does that change the priorities for the finance organization?

Mark: Yeah. So it could be what's the strategic priorities of the business. And that's one of the first things that as a fractional CFO, I want to know when it come into a business or even when we're talking with a prospect before we bring them on board is knowing what's the strategic priorities of the business over the next 18 to 24 months. So if they're not in a fundraising motion or say they're an established business, that's oftentimes the case as well as it doesn't have to be necessarily a growth business. It could be an established business that's on a lower growth trajectory, but is looking to, for example, go out in the market and acquire another business or acquire some IP. It's really understanding what are the strategic goals of the business. And I would say secondarily is operational efficiencies. And so if I'm an established business, I'm not looking at tremendous growth or I'm not bringing in significant investment into the business to affect the top line and top line growth is, how do I make sure that I'm running a very lean and efficient business on getting that operating leverage? So I'm reducing my cost of goods, so I'm getting a good gross margin compared to industry standards and then I'm deploying that money efficiently and creating a bottom line.

Shiv: And when you look at the different types of companies that you've been in, have you seen, I'm sure you've seen patterns, right? Like we see it with our clients, over time, I can spot the same marketing pattern at different stages of companies or different problems that they're facing. So on your side, like, what do you experience as the most common areas that you likely need to address on the finance side?

Mark: Yeah, I would say the first thing that we typically see when we come into the business is, you know, oftentimes, particularly if it's a growth business is the operators have been, and the leaders of the business have been so focused on getting product developed, getting it to market, acquiring customers that they haven't, they're really kind of heads down into the, just the overwhelming operational moves that they need to make just to keep the business going on a month in, month out basis. And they haven't spent a lot of time, nor oftentimes a founder of business doesn't have a finance background. So they've done enough to be able to kind of manage the business going forward, but they don't have the expertise to really start thinking about the accounting motion and making sure all of our financials are accurate so that that becomes a non-issue and that we're using that data and focusing on looking forward in the business. So the main things that I see coming into business is, do they have a mature budgeting process? Do they have a mature or an in-place forecasting process? And are we reporting actuals against that on a regular basis in the same format so that we're making decisions, we're looking at KPIs and metrics, and we're making decisions based on that criteria.

Shiv: So it's not just like being GAP compliant and having all your books in order. That's like, it's almost like table stakes. You need to get that in order. And a lot of founders, I would assume, are skipping past that, like you mentioned, but then there's also the fundamental operational elements of getting a sophisticated finance organization in place.

Mark: Yeah, that's exactly right. The accounting side is, it ultimately is, you should just be making sure that you've got processes in place, you're following GAP regulations, you'd be prepared or have entered into an audit process to make sure that everything is flowing appropriately. And you've documented all of those processes. People leave organizations and everything, you want to make sure that you've got kind of no stops in business on the accounting side, that that continues to move forward. And it's producing accurate data that you then you can use to support all of the rest of those, those motions of the business, which is really looking forward. The accounting piece is really looking at what happened. The finance piece is really looking forward and how we manage the business going forward.

Shiv: What does a mature budgeting and forecasting process look like?

Mark: Yeah, great question. I personally like to see a forecasting budgeting process that is originally oriented around the operations of the business. What are the key non-financial components of the business that drive the financials? Financials are ultimately a result of what we're doing in terms of operations. So it is things like understanding our sales motion, understanding our sales cycle. What's the volume of salespeople and deals that we have from a funnel standpoint? And what is our conversion rate? So if we fill the top of the funnel, what can we expect from a conversion rate to translate into contracts, products sold, et cetera, that ultimately generates the revenue of the business? 

Similar things for the rest of the portion of the businesses. Ultimately, we're building a financial model of the business from a budget standpoint that reflects how we're operating and how we want to operate in the future. So I think a great kind of budgeting process is anchored in all of those kind of good operational metrics of the business. And it is a participatory exercise with the leaders of the business. So if you've got department heads that are running customer success, R&D and development, sales and marketing, admin and overhead, is that they're participating in that budgeting process. So ultimately, generally when you go into a growth business and we're putting a budget together, it has some level of increase up into the right from a business growth standpoint, top line revenue growth. How are we supporting that? So the department heads that are running their particular functions of the business need to understand what are their components in contributing to that success. 

And so, when I run a budgeting process with an organization, it often involves multiple meetings with departmental heads for their input, going through their historical numbers and looking at making and collaboratively putting projections together that gets consolidated and culminated into an ultimately a budget for the business. That we sit down and review as a holistic leadership team, iterate on that until we refine into what we establish as the goals for the next year.

Shiv: How deep are you going with department heads and let's use sales and marketing as an example here where there's just so much data to go through. There's territory planning and quotas and looking at overall marketing efficiency and demand gen budgets and like how deep are you getting into those metrics to really understand if the forecasts and the budgets are accurate?

Mark: Yeah. Well, my personal opinion is I like to go as deep as I possibly can from a preparation standpoint. So I like looking at historical data to understand how we execute in the past. What data do we have available? And working with the heads of those departments to pull out what are the key components that really drive the results in the business. So, you know, it's one thing to say, all right, from a sales organization standpoint, we have five sales reps right now. If we add three more, we can increase linearly with that additional salespeople. Well, let's take a look at that. What's our execution percentage from our sales? Are they frequently meeting quota or are they not building on quota? Is there something driving that? What's our conversion percentage from going from a marketing qualified lead to a sales qualified lead?

So all of those kind of key components, distilling those down into making good decisions. They don't all necessarily at a very granular level have to make it into the say budget component, whether that's a spreadsheet or a system that we use to track that. But we want to make sure we understand all that data and are pulling out the key metrics. So I would think things like number of sales rep, execution on marketing and sales qualified leads that ultimately lead to contracts and closures from a sales standpoint are key components into measuring what are our objectives for the year. And are we building in efficiencies and gains in those metrics over time? So if we enter the year with a closure rate of (make up a number) of 30%, can we get to 31% or 30 and a half percent by the end of the year?

And then we start building strategic initiatives around achieving those goals. If we know that's something that we put as an input into the budget process for a sales organization, what are we doing from an operational standpoint to support that? It is not magically going to happen. We actually have to make that.

Shiv: Do you find that companies are actually, before you guys come in, do you find that companies are good at doing this kind of work? Because I can just say from our experience, we find that companies do the tracking, but there's not really a disciplined approach to look at the data to inform decisions on budget and team and overall roadmaps and how to hit some of those sales targets and things like that. But I'm curious from your perspective, what do you find when you're coming into companies?

Mark: Yeah, I see a mixed bag. but I would say probably more often than not, it's, it's a very similar to what you describe is there's not a, there's a, there's with technology and advancements and collecting data and stuff. We oftentimes get where we have access to that data, but nobody's really spending the time to actually analyze that data and draw conclusions from it. And that's, I think we're kind of a financial professional can help with that process. And it takes time, and it takes effort and oftentimes, you know, it doesn't, it's not a top priority for, you know, ahead of customer success, for example, to, to spend time digging into that data when they've, you know, they're trying to tackle the fire of the day for a customer or a product issue or something of that nature. So it really takes, a concerted effort, from a leadership team to focus on that. And one of the things that I've seen in organizations that will do a good job of focusing on that is, (A) they put a scorecard in place. So they have a scorecard of metrics that are usually three to five metrics per department that contribute to the overall success of the business. And they're reviewing those on a regular cadence with the leadership team. It's something that I've put in place with clients is I believe part of our monthly or weekly leadership team meeting, we should be reviewing those metrics every single time we meet.

And I found that organizations that continue on that success is they implement a scorecard and they've gone through some level of management training that has emphasized or focuses on something like an EOS or something of that nature, where there's a discipline around understanding that you have to be proactive in tracking and looking at data and make database decisions in order to drive change in a business.

Shiv: I know you mentioned that yes, these teams have other things that they're working on. I guess from my perspective, I find that the better you do at the data analysis part, the better you are actually at your function. And in fact, there's a lot of waste and spend that's being misallocated or a ton of opportunities that are being missed out on because there's not this discipline of looking at the data. So I'm just curious, like, do you hear that from companies as well? And why do you think that it's not being prioritized? Is it just a culture issue as well?

Mark: I think it is, there's probably a number, as many different companies as there are, there's probably a number of different issues that affect that. I think it can always be enhanced and driven by a top-down culture around the importance of tracking metrics. So if you're reviewing a scorecard and that is important, particularly to the founder, CEO of a business.

And you're having discussions at that leadership team level about those. What I've found is teams that do this really well, don't come to the table with a scorecard and a metric and go, well, your sales numbers are terrible. They're not what we were expecting on it. And then you need to go fix that. That's not a productive conversation. What a productive conversation is, is creating a culture that is, these are the metrics of the business. How do we solve them if we have a problem as a unit, as a team? Not meeting sales objectives isn't the sole responsibility of the head of sales. It's the responsibility of the leadership team. And so having collaborative and supportive discussions creates a culture of being able to track those. If a leader comes to it or an organization has a leader that is, that really gets kind of the stick as opposed to the carrot, and having tracking metrics, they're not gonna wanna discuss those on a regular basis in a leadership team. They wanna be a part of a supportive environment that is how do we collaborate and understand why are we not making the goal or if we are exceeding our goals from a metric standpoint, what's contributing to that success and how do we continue to do that? It could be oftentimes, just to use a kind of a loose example, we might not be meeting a sales goal, not because of something the sales organization is doing, but maybe there's a product deficiency. Maybe we've had downtime in a system. Those type things, you know, maybe outside of the direct control, the head of sales, but it's not outside of the control of the overall leadership team.

Shiv: Right, right. Totally. I think that the culture of this, the scorecard, the way you're describing it and the feedback loops and then the accountability for different department leaders or just people in general to be able to look at those metrics and build action steps is just such a critical piece of that. And do you find that when you're coming in or just companies in general, do they connect their work to what finance needs to do? As an example, like on the marketing side, we're always encouraging CMOs and just CEOs to think about their marketing spend but then tie it to profitability and the overall projections in the investment thesis and how it all kind of connects together.

Mark: Yeah, I think it's really kind of incumbent on finance to help be that connective tissue in those discussions, which are helping the organizations. Ultimately, the heads of departments in an organization are really customers of finance. We should be bringing information and data to the table to help make those connections. So in your example, if a marketing or CMO needs to understand, you know, how are they contributing is looking at, you start at the top of the funnel, well, marketing's responsibility, generate marketing qualified leads. So if we've got an improved quality of those leads coming in and an improved volume of those leads and nothing else changes in terms of our execution to contract or to product sold, then that's ultimately gonna contribute to revenue increases in the business. So being able to have that data, have systems in place to track that data and having a reporting mechanism to do that, to be able to directly tie that to, for this example, revenue growth in the business, helps support the CMO in making the decisions and understanding how they're contributing to the overall objectives of the business.

Shiv: How does this change as investors come to the table, especially private equity, where they have different reporting needs, they have different expectations, and metrics and data-driven decision-making is even more important?

Mark: Yeah, well when PE investors come to the table they are you know kind of segmenting kind of PE from VC investors is PE investors as you know they come to the table they've done this over and over again this is their business model and so their whole kind of assessment of a business pre-, you know, investment into a business and then post-investment of business is going to be based on data. If anybody who's been through a diligence process with a PE investment firm knows they're going to come in and not just assess the overall financial performance of the business, they're going to assess every function of the business. So they're going to understand, what's the marketing and sales motion look like? How are you developing product and delivering that in a product delivery model? How are you managing the overall overheads of the business? And so they have expertise in all of those areas and are going to be able to provide lots of insights, but all of that's going to be based on data. So when they come to the table, an organization is best suited to be able to help that process as if they've thought about that ahead of time before bringing a PE in. They've got systems in place, they're looking at data, they understand their business. It doesn't have to be perfect. When a PE is coming to the table, you're bringing in a business partner that you're looking to help you grow the business. So it's not a matter of being, you know, having all of your ducks in a row, but it's at least counting the ducks.

Shiv: Yeah, really what you're talking about is transparency and communication so that everybody's on the same level of understanding about where the business is.

Mark: Right, exactly. Yeah, and give them that visibility and so that they can make a really more objective look at the business and how they can come in. So when they're assessing a business, they're looking at what's the growth potential, what's the data supporting that, and how can we enhance the growth of the business?

Shiv: How do you balance the short term versus the long term objectives? Like for example, in the short term, we may need to hit our sales projections for the year, but in the long term, you actually want to build a more sustainable business. And the reason I asked this here in the conversation is that looking at efficiencies and trying to hit EBITDA projections or targets so that you can get to a rule of 40 is something that I've seen as a mistake potentially that companies make. And then it doesn't show up in this year's financials, but it might show up two or three years down the road.

Mark: Right. Yeah. I think this is where they're kind of the long range planning and having that discipline in place to start at least with a budgeting process, but then expanding on that into a three and five year planning cycle. So, I often, with clients, and companies that work in the past is really be an advocate of doing at least a minimum of three year planning. in the case of a small growth business that may be looking at external investment from PE fund is it demonstrates that you're thinking about the business long-term and not sacrificing that long-term for the short-term, to your point. And you bring up a great metric of the rule of 40 is not a great short-term metric. It's for the listeners, the rule of 40 is what's my growth percentage and then what's my EBITDA percentage? And is that 40% or better? And you know, if we're mashing the gas pedal and we're growing it a hundred percent, then we can have a lower EBITDA percentage as long as we're kind of over that 40%. But that's not a great measure quarter to quarter, even month to month. It's a better measure of looking over a longer period of time, six months, nine months, 12 months. And are we making progress over time? So that we're thinking about how are we putting strategic initiatives in process or in place, they're going to drive our creative dollars to the business. So over time, if our growth flattens, maybe we hit a real peak in terms of growth, then our growth flattens out. What are we doing operationally to create that efficiency on that even a number of the bottom line so that we're still gaining and making progress through that rule of 40 over time? 

Those are kind of a typical metric that, you know, that is something that you want to look at and build into a financial model that is for looking out in the future. And so ultimately in terms of transparency and sharing that with a PE investor is being able to go, okay, if we can grow at this rate and make these efficiencies in the business and we see that metric improving over time, that's going to be something that's going to be at least transparent and visible to a PE investor to go, okay, you're thinking about this from a long-term standpoint and it's not just about what's happening this quarter.

Shiv: How much data analysis are you doing inside this? Because as I'm hearing you speak about the rule of 40, I'm also thinking about other metrics, like LTV and payback periods and gross retention, net revenue retention. How much are we expanding existing accounts? What the churn rates are? And within existing segments of customers, you might see higher churn than others. A lot of this data that, especially in the companies that I've seen and come into and advise like the data exists, but nobody's really analyzing that and turning that into action items for different departments. So I'm just wondering like as a strategic finance role, how much effort are you spending there? Because there's almost, there's all this insight that would potentially change the strategic plans of different departments if that is funneled back to those people.

Mark: Yeah. So particularly as it relates to a SaaS business. So I've been involved in for SaaS businesses for a handful of years and in software development organizations. And one of the great things about that business model is there are a lot of tools that are out there to help support that. So if you're a billing out of a particular system, oftentimes those tools have that data inherent in them and can provide you that data. Now, I haven't found one that specifically tells me I can push a button and get the kind of exact dashboard that I'm looking for in terms of those metrics, but the data exists. And so to me, I've always built in terms of a business model, a number of different metrics, particularly as it relates to a SaaS business, that are all kind of key metrics that are industry standards around how to manage and effectively a SaaS business. It doesn't necessarily mean that they all make it onto a scorecard that the leadership team is involved in, but the owner or the kind of where that metric is resident in the, in the business is it's important for that head of department or that head of function to understand it. 

So for example, you know, we talked about churn or kind of expansion inside of your customer base, typically something that falls in terms of a customer success manager or head of customer success, is something they should be intimately familiar with. And it can be segmented by your customer profiles. So if you've got, say, a self-serve business motion where you're looking at PLG-led growth or product-led growth in that business, that has a completely different strategic initiative in terms of improving those metrics versus maybe an SMB or a mid-market type of motion. So understanding your kind of churn in those individual market segments is really key for that head of customer success to know where do I deploy my resources and customer reps to spend time, say, doing business reviews with those customers, or how do I affect the churn in those individual markets? And what should my expectations be? So in expectations for a self-serve market, churn is going to be different than it is for a mid-market.

Shiv: Totally. I'm thinking about you brought a benchmarking there at the end, but across the board, like even if you look at different cohorts or segments and you see that churn rates are higher in one segment versus another, that's information for the marketing team or the sales team to target different folks at the top of the funnel so that we're spending money on the folks that are going to actually stay with us longer. And then another one that came to mind is just pricing. And I feel like pricing is just one of those one of the main initiatives priced into value creation plans. And a lot of this data work is essential to figure out how to roll out pricing increases to different segments, to your grandfather and folks, what's your expected churn rate gonna be inside those circumstances as well. So it's really critical that somebody is actually looking at those numbers before those decisions are made.

Mark: Yeah. And it's, it's a matter of looking at the numbers historically, but also doing the qualitative research on those. And so, particularly if you're a SaaS business, that is kind of, you've, you've got a customer base that you have frequent touch points is, is gathering the information. So when you lose customers doing exits, interviews or understanding what are the reasons, for canceling so that you know, what are the themes that come out of that data? So if you've got, you know, 500, 1000 customers, you've got enough data there so that when you start to see maybe a two or a 3% month over month churn in your SMB market, what are the reoccurring themes of why your customers are leaving you? Could it be, and then how did that will distill? Is it pricing? Is it functionality? Is it competitive pressure? Is it lack of use of the tool? Whatever those might be. And so that you're building from a customer retention strategy standpoint, motions that are built off that data and that qualitative data. So somebody's looking at that data, distilling it down, creating themes and creating action items coming out of it.

Shiv: Yeah, it's really interesting to hear you talk about all this because I guess in a way what you're describing is turning, not looking at finances like this cost center or like necessary evil to run an organization, but more turning it into a strategic growth driver that is actually connected to all areas of the business that looks at the data, that brings insights, that changes how operations inside the business are prioritized.

Mark: Yeah. Yeah. you know, like I said, kind of going back to kind of my earlier comment, we're a good finance, motion should be supporting the rest of the business. the kind of the, the regulatory stuff around, you know, closing the books and doing the financial statements and reporting out to investors and all that stuff are really, really the kind of infrastructure, but it's not the value add that a finance leader is going to bring to the table. A finance leader really needs to be a part of the strategic conversations, be armed with that data and help make collaborative decisions with the rest of the leadership team. I've been a part of the organizations that they don't spend enough time focusing on where they're pointing dollars in capital appropriation in terms of initiatives. But when you sit down and have a conversation around, all right, when we look at our growth in a SaaS business, insurance is a major factor in why it's suppressing our growth, then what are we doing to improve that in terms of the business? And what are the kind of data and metrics ultimately translates into dollars of the business? So a churn is not just a percentage, a churn is a dollar rate. So if I know that I'm churning an X percentage and I've got a base of customers, I can tell you what we're losing on a monthly basis from a client standpoint. So it's really going, from there it becomes very easy to do a return on that investment. So if we know we're losing X amount of dollars, if we can quell that churn by half a percent, I can tell you exactly what that impact is gonna be to the business.

Shiv: 100% agree. How do you see cash flow fitting into all of this? Because I'd say there's almost like three different areas, right? Like you mentioned, like the foundational infrastructure work, then there's like the strategic planning stuff. And then there's fundraising and cash flow and making sure you have enough on the balance sheet to continue operations and, and thriving as a business. So how do you look at that?

Mark: Yeah, it's a key component of any good kind of management of a business. And it's something that probably doesn't get the due attention that often gets particularly as it relates to a small business or a growth business. The one of the challenges that a typical organization will face in terms of forecasting cash, understanding cash and forecasting cash is, there are three main financial statements. There's an income statement, balance sheet, and cash flow statement. And a cash flow statement is just math between the other two. And so it means in order to do an accurate cash flow forecasting for business, is oftentimes businesses will focus on the income statement side. What revenue am I generating? What are my costs to generate that revenue? And what is my bottom line? But in order to do cash flow forecast, that means having to do a balance sheet forecast. And that is not something that most organizations, unless they have a seasoned financial leader, will oftentimes do. And that means that's projecting a balance sheet, predicting a balance sheet is inherently more difficult than projecting an income statement. And oftentimes it gets missed. 

And so, but if you can do a forecasting of a balance sheet, looking at what do I expect my payables to be? What do I expect my receivables to be for my customers? What capital investments do I need to make? All of those are contributors to understanding where the cash ins and outs are going to happen and looking at that. And in a small kind of business, particularly a startup business, oftentimes that cash flow forecasting may go down to the week or even the day. Because oftentimes a small business may be running really lean early on. And so they may have cash runway that's measured in weeks and not in months or years. And so it's very important to understand when is payroll going to happen? When do we need to pay vendors? When, what's my typical collection period from a customer? And so implementing that as a part of your forecasting process, it's oftentimes that component of the business is not going to be something that I'm looking for contributions from the operations team, it's having an intimate understanding of what's our financial motions in the business and translating that into a forecasted balance sheet so that I can look at what are my cash balance is going to be over time. Because it oftentimes what happens, particularly after a fundraise for business is how do I and oftentimes there's a thought process around how long that cash influx is going to last in the business. It's not unusual for a PE firm to come in, put $10 million into a business and go, that's going to last you three years. Well, if you get a year and a half in and you're 75% way through your $10 million, that's problematic. And so it's building that discipline in the forecasting process and looking at the cash trajectory and then when to invest in initiatives and making sure that you're tracking that on a regular basis. It's not unusual for founders to come to me as head of finance and go, I don't know if I can spend on this or not. I need your help. And that's writing that insight is really helping them in terms of managing that cash.

Shiv: What are some best practices around this? And I can just tell you what we do. Like on our side, we are, I always forecast our cash on hand. We look at receivables, look at payables, and we make decisions with the baseline of saying that our cashflow runway, assuming we have zero revenue is at least 12 months. And based on that, we make additional investments. And so I'm just curious, like when you're looking at companies, because the answer would be different for a founder owned and operated business versus a VC firm that may be comfortable burning capital every year versus a PE firm that's maybe driving to a rule of 40. So I'm just curious how you think about those three scenarios.

Mark: Yeah. so it's really going to be establishing what is the strategic priorities of the business and understanding, I would support all of those scenarios with a doing scenario analysis for each one of those. So, part of what I like to do in terms of a budgeting and forecasting process is have the capabilities and building a model. And I do stress the term a model. It's not a matter of kind of putting numbers on a spreadsheet together to go, all right, that looks about right. It's building in the variability of inputs into that model to understand, okay, if we make a capital investment in something that's going to grow the business, is looking at what does that do to our trajectory of cash burn and our cash runway? Or do we have other options and scenarios that we can look at and come do a comparison? So if my goal is never get below 12 months of cash, is what's the scenario that I can create in that model that satisfies that requirement for the business to making sure that we are enough cash that we can make payroll for a certain period of time, et cetera. And so that we're not embarking on things that we may later have to pull back or put on hold because A, we haven't seen the return on that investment in the timeframe that we want. And that's another kind of scenario is looking at the risk analysis of that. So for each of those scenarios is what are the risks that are inherent with making that decision? And so, you know, when I think about scenario analysis, it's not just a matter of I'm going to spend this and I get back is I want to potentially spend on this initiative and what's the band of what are the possibilities that is going to produce in terms of return and how does that impact the business and ultimately the cash flow.

Shiv: I think that's great. And again, it's just coming back to this idea of that finance is a strategic growth driver and strategic finance should be at the table when you're making plans across the board and factoring it into all decisions. So I think it's something that founders miss and it is a blind spot. So appreciate you coming on and sharing that. And with that said, I think it would be a good place to end the episode. But before we do that, just if people are listening, CEOs, founders, investors, what's the best way to get in touch and potentially work with you?

Mark: Yeah. So you can reach out to us at ascentcfo.com or you can reach out to me directly at [email protected]. Happy to have a conversation. What I tell kind of people that are thinking, Hey, I might need some strategic financial help. Chances are you do. And it's worth having the conversation, you know, just reaching out and having conversations is not creating any type of obligation or anything, but what we want to do is be a business partner and a consult to you to understand, are you in the right position to be able to bring on a strategic leader of the business from a finance standpoint to help make those decisions and demonstrate these are the things that we've been talking about. These are the good processes that should be in place for a business that's looking to be proactive about how they're spending their money and how to reduce the risk of actually the growth and how they're deploying that capital. So, yep, definitely reach out to us and we certainly can be of help.

Shiv: I think that's great. We'll be sure to include all those links in the show notes. And with that said, Mark, thanks for coming on and sharing your wisdom. I think there was a lot of great takeaways for everybody that was listening for their respective organizations on the finance side. So appreciate you doing this.

Mark: Yeah, I appreciate it. It was great to be on the show.