Episode 31

Evolving Skillsets: The Modern and Future CFO’s Playbook

July 24, 2024


Randy Wootton
CEO, Maxio
Michelle Valentine
Co-founder and CEO, Anrok

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Video transcript

Randy Wooton (00:04):

Well, hello everybody. This is Randy Wooton, CEO of Maxio and your host of SaaS Expert Voices where we bring this SaaS experts to you to talk about what’s happening today and what could be unfolding tomorrow. I’m delighted to have Michelle Valentine join me today. She’s CEO of Anrok, but has had a really interesting career starting off at Stanford in civil engineering, discovering a love for computer science there that she went on to Oxford and got a master’s. And actually did coding at Airtable and then she describes, did the first version of Anrok. But before she got into product and engineering, she worked in finance and she also worked in VC. And so what an incredible background you’ve had. I look forward to chatting a little bit more about that as we talk about the office of the CFO and your success as a CEO. So welcome, Michelle.

Michelle Valentine (00:51):

Excited to dive in.

Randy Wooton (00:53):

So yeah, let’s go back to that. We were talking about my son and the fact he’s all about computer science. And talk a little bit about your undergraduate experience. You started off with civil engineering, you fell into computer science. What attracted you and then what then was compelling for you to make that your destiny?

Michelle Valentine (01:09):

It’s always easier to connect the dots backwards than it is to really know what you were doing at the time. And for me the theme was following your passion. So funnily enough, at Stanford I was more focused on architecture, which led me to water in my grad studies, which led me to infrastructure at Goldman, which then led me to infrastructure software investing at Index Ventures where I was really doing early stage software investing. And really the theme here is that you can be curious about a lot of things, but you might not be passionate until you’re an expert. So it was really following curiosity over passion that led me to all the different meandering chapters to get me to Anrok today.

Randy Wooton (01:51):

I love that point around, it all makes sense in hindsight, though it seems like it’s wild, crazy shifts and left turns, right turns while you’re actually going through it. I’ve done a background in the military and now I’m in software selling to CFOs. You would never have connected the dots from where I started to where I am. But talk a little bit about the computer science part, I think that’s really interesting. So you were doing civil engineering, how did you get into computer science? And then that was something you kept doing and then clearly you’ve been extremely successful at it because you’ve started a company, got funded and has had a great success over the last three years.

Michelle Valentine (02:28):

Funnily enough, software engineering is only something I discovered later in my studies and it’s something I invested more on the side. And while I was at Airtable, the product I was working on were the applications that would run on top of the database. It was called Blocks at the time, it’s now called apps. And one thing that I was focused on is how can we work with partners to build applications together with let’s say a Loom for example, to work with a Loom, that video editing app that now got acquired by Atlassian but embed Looms into Airtable for example. And one of the things that I wanted help with was take my programming to the next level, and funnily enough found someone to help be that coach and be that tutor for me to help keep leveling my programming skills up. Again, connecting the dots backwards, but he ended up being our founding engineer at Anrok. Really when you hire your own tutor and your own coach, that means you know they’re good.

Randy Wooton (03:28):

Yeah, and I think the thing that you have that I don’t have is you are technical at the level of where you can call it BS on the code. When I go in, I was like a product manager and I could say, “Well, these are the use cases I want to get done.” And the engineers would say, “Oh, we’ll take 12 sprint points.” Whatever. And I was like, “Okay.” But I could never actually check the code.

Michelle Valentine (03:47):

You give me too much credit. I would also say even the average engineer once your code base gets quite large, it’s really hard to hold all of that in your head. And so I think for me, the thing that it was most helpful with is to really understand how to break problems down into small pieces. A lot of programming is breaking things down into different functions. And for product that’s also really helpful. For building company strategy that’s also very helpful. So these are some of the things that I’ve taken with me, even though I’m quite useless with that today and I do not touch the code today.

Randy Wooton (04:22):

You never touch the code, you don’t ever just dust it off once in a while and go in and throw some lines in?

Michelle Valentine (04:27):


Randy Wooton (04:27):


Michelle Valentine (04:28):

I was allowed to touch the marketing website code for a while and again, that’s being taken away from me and we’re now on Webflow.

Randy Wooton (04:36):

We will absolutely talk about what it means to be a successful CEO and delegation I assume is going to be part of that. But what’s so fascinating to me is just this transition points that you made from finance to VC to product to Anrok, a company focused on the office of the CFO. We’re partners, we have joint customers. I think we’re both looking at this broader monetization ecosystem and how can we unlock the value through applications for the office of the CFO and the CFO in particular. I would love to shift the conversation now to the current disruptions that we’re seeing and specifically from your point of view, because I think you have some great advice having been on the investment side for CFOs. And do you want to talk a little bit about that, the investor model that you think about and why that’s important for CFOs to consider at this point?

Michelle Valentine (05:23):

Yeah, maybe starting with that investor skill set that is useful for CEOs and CFOs, which is really to see the present clearly. I think as an investor it’s obvious why that’s important, how to make good bets, but also for CEOs and CFOs where you’re really capital allocators. And so figuring out where your company is, where the market is at present, and where you should be allocating your resources in the future is critical. And one thing that I worked on a lot when I was investing as a VC was how to update my prize such that when the world is changing so quickly around you, how do you update your mental model? How do you update where you think the world is going to make the most accurate bets possible? So one tool to give you an example of what I find useful, is think about your truths or your beliefs. Not as binary. yes, no, I believe X, but really to think about it in probabilities.


Like my credence or my probability that I ascribe to believing in this strategy is about 70%. And knowing what your crux is and what you might need to change your mind is very useful. Very few company strategies are truly black and white and it’s the combination of time, place, different factors, especially when the world is changing so, so quickly.

Randy Wooton (06:42):

A couple of questions on that. One is, it feels like you’re ascribing a percentage to something where you don’t really have numbers to-

Michelle Valentine (06:50):


Randy Wooton (06:51):

Right. So you could also say, I don’t know, high, medium, low. I was an English major, so that’s what I’m going to use versus the 70%. But how do you as an executive develop that capability to do the pattern matching, the understanding of what’s happening in reality and to have a certain level of confidence on the outcome of that strategy?

Michelle Valentine (07:10):

You’re absolutely right with numbers, it’s subjective. And for me to say, oh, I’m confident 60% is probably different if Randy were to ascribe a 60% percentage. And so a lot of that is numbers that I keep to myself, or maybe the ones you work really closely with could really grok what your scale looks like. At Anrok when we write docs, we often write the epistemic confidence at the top of the doc and we use exactly what you suggested, high, medium, low. I have medium confidence in this proposal or I have low confidence in this proposal. And that really helps other people quickly grok the state of the draft of the doc, like is this a yes I’m pounding the table for this or is this, I have no idea. And so that helps you also understand how much commenting do I need to do to change this person’s mind because this is a terrible idea, or this is a great idea.

Randy Wooton (08:05):

That’s great. How do you align with your investors on that or when do you bring your investors in? I was talking to Jeff Epstein, a former CFO of Oracle who’s been at Bessemer for 15 years and we talked about the budgeting process. And he said, most budgets if they’re effective only have a certainty of 50%. I’m like, really? You really have the comfort to have that much variability where I feel like what I’ve grown up with is your budget you’re delivering it no matter what and you have your comp plans tied to it. But for you as you’ve aligned with your investors, how do you bring into the conversation this idea of a spectrum of potential results without having specific data to inform it. But it’s around aligning gut feels, like aligning pattern matching. When you were an investor you’re doing that pattern matching. How do you get your investors today aligned around a way of defining the possible?

Michelle Valentine (08:58):

I think aligning your thinking before you present a model is crucial. I’m someone who’s much more written than I am verbal. And so what I do is I write down a few bullet points of what I think will drive the model, as well as frameworks and assumptions that I would like to make and get feedback on that. And so one example is how much should we increase spend after a fundraise on marketing and sales. And sharing, “Hey, there’s this magic number framework that actually could be helpful in guiding the upper bound of what we should be spending assuming that we keep up efficiency. Would you agree with this framework?” And I got signed off on that. And based on that, that’s how we built a lot of S&M costs into our model. And so when it came to comments on the budget, we were actually very much aligned and it was a very quick process. But it’s crucial to have those bullet points up front over email before you even present the numbers.

Randy Wooton (09:52):

Yeah, I think that is one thing you find with VCs, especially in a B2B SaaS is they oversee a bunch of companies and they’re doing pattern matching. And they think you should spend this amount of money on gross margin. Like any true SaaS application that is south of 85% for gross margin, there’s something wrong. Gross retention, anything below 90% is going to pop a flag. And so I think part of the challenge is if you are not within the realm of what they think is reasonable based on their experience, then you have some explaining to do.


I know for me, my biggest aha coming to work for a PE company which solves more about EBITDA than growth, was they became much tighter in terms of thinking about where I was spending money versus, oh no, we’re just going to make some bets and we’re just going to grow. Very specifically, it was around I used to use sales and marketing as a percent of revenue for the size company and for our ACV to triangulate on, well, how much should we be spending on it? And Chelsea Stoner disabused me of that and convinced me that new CAC ratio was the only thing that mattered. And it was a really fruitful conversation in terms of how to think about it and the investments you’re making, and whether you’re seeing the efficiency that you were alluding to.

Michelle Valentine (11:04):

And maybe to ask you a question there. Do you care about the segmentation within that new CAC ratio or do you just care about the blended CAC?

Randy Wooton (11:12):

So two different ways of doing segmentation, one, blended CAC being new CAC versus expansion CAC. So we do split that out. We allocate dollars from marketing that are going for customer marketing initiatives. So there is an expansion CAC that we’re doing. And then within the new CAC, we’re working on moving to a segment based on four segments like startup, SMB and what we call mid-market and scale. And we have different sales models, so AEs, SEs. And so we are trying to aggregate all the costs and then put that against the new logo revenue to come out with a CAC by segment. Is that what you meant by segment in terms of go-to-market?

Michelle Valentine (11:58):

Exactly, yes.

Randy Wooton (11:59):

Yeah, and I think companies that it’s germane to the idea of your PLG versus SLG at the highest level. What you would do for PLG, making sure you’re including all the costs because it’s product-led, you’re also including the cost associated with producing the product. There’s a CAC ratio for that go-to-market channel, which is different than your sales-led motion. But if you’re only using a segment like for us in our startup segment, it’s only covered by a early-stage, what we call full-cycle AE. So they have to generate their own SAOs, they’re closing their own deals so they’re not getting any marketing dollars associated with it. So that allows us to offer a lower price at that segment because we don’t have to cover the full loaded costs of AE plus SE plus all the management plus [inaudible 00:12:43].

Michelle Valentine (12:43):

Tracking it by segments is so important, especially for a lot of software companies where your holy grail a lot of the time is to move up market. Very rarely do you as a startup decide, oh, I actually want to go further down market. You usually starts smaller, folks that might adopt you and then you try to expand into the enterprise. And when that happens, your CAC will increase. And so if you’re looking at blended, you actually might have a very efficient motion and that’s just a product of your team winning larger enterprise deals. But you can only tell if it’s efficient if you can segment and point to, hey, my SMB or my mid-market that CAC is staying pretty flat. And so that I think is great that you’re segmenting in four ways.

Randy Wooton (13:27):

And I think there’s inflection points when companies move from one product. You were the person who identified a specific opportunity, a pain that was the vision for Anrok. And then you have one product you’re selling really to one ICP to be super focused. You get the product market fit, you start to scale that. And at some point you hit an inflection point, I don’t know, five, 10 million bucks where now you’re like, oh gosh, I need multiple products. I might need to serve multiple segments or multiple regions and there’s an investment curve. It’s the bow wave of investment. Well, now I got to go invest there. And so I think to your point, the more that people can do segment-based approach to go to market and what McKinsey uses is that three horizon model in terms of product investments. Where are you going to get your money over the next 12 months? What are you investing in the capabilities that are going to provide you money over 18 to 24 months?


And then what are the things that are going to be your next stack, that you’re going to change your business in the three years out? And you bring those two pieces together in terms of thinking about, okay, we have this product, we put a bunch of money into it, what’s our expectation on return? I think each of those inflection points you have different decisions and it adds levels of complexity.

Michelle Valentine (14:35):

Something that I think a lot of people miss is the idea that product market fit is the destination and it rather is a continuous process. As you mentioned, every time you grow into a new segment, you might be selling to a new persona and so you’re refinding product market fit. And so to me the best companies are the ones that are continuously evolving and continuously finding product market fit. So you can say, “Hey, I found product market fit for my segment.” That’s great. But if you win the market opportunity fast enough, you’re going to be on that search again. So that’s the first thing that I would say in reaction to what you mentioned, is people often miss product market fit is really a continuous journey. The other thing that I’ve learned through looking at a lot of software companies as a VC is that you really have to earn your right to go multi-product. If you truly believe your market is massive, you should go deep and really make sure that you’ve put a big stake in the ground.


And that you are the standard in that market before you branch out to too many products and spread yourself too thin. Funnily enough, I was chatting with the COO at ServiceNow, one of the top three biggest software companies out there. And I asked him, I was like, “When did you go multi-product?” And he was like, “Post IPO.” That’s how big their belief in their market was. And I think that was one of the reasons why at IPO a lot of investors they had a great public offering, but I think it could have been even bigger because a lot of investors were worried about that TAM. And their belief was like, no, our market is so big, we can wait until after we go public to really invest in our next act. That said, I do think it’s important to know where you’re going. You might not invest in that now, but you need to invest in that vision and do all of the preparation ahead of making that capital investment.


Something that we’ve done at Anrok is to write down our five-year plan and really build the model. And it’s funny when I look at the model, so much is about to change. It’s almost if I put a confidence level to that, it’s like a 5% confidence that the future is going to look like that. But it helps tell me, oh, if we want that product line to be making that much revenue in five years time, we need to think about resourcing it two or three years earlier.

Randy Wooton (16:48):

That’s great. I think that was one of the things I talked about Jeff as well in setting up the budget and how a strategy and a budget connect. And one of the things I like to do is have a strategy conversation with the board around September. And I only use three years, but what are we trying to achieve over the next three years? And I think there’s a growth plan. You get aligned in terms of this is what the shape of the business needs to be because they’ve invested a certain amount of dollars, and they expect a certain amount of return over a certain period of time. And so at the very high level, you have to get aligned on this is how the business is going to unfold. And then you have a strategy underneath that which says, oh, if we’re going to do that, well, then these are the set of products we’re going to invest in or these are the segments we’re going to go after or these are the regions we’re going to grow in.


And then that informs your budget, which you present in December. And your budget is a one-year budget within a three or five-year plan that you’re ticking and tying. I have one more question on this topic for you because I think it’s really interesting, how as an investor would you coach CFOs, at what stage for them to think about M&A? So inorganic growth versus organic growth because a lot of the initial fire and effectiveness comes from having a focused engineering team on a specific product that they’re building on their own. And you get to a certain stage at which you’re like, we could go build that but there are already other companies out there that are out in front, so let’s go buy it. What would be your coaching for a CFO and for the CEO in terms of capital allocation, organic versus inorganic at different stages?

Michelle Valentine (18:19):

Again, it depends on the stage as you alluded to, but also the type of M&A outcome you’re looking for. So if you are looking for more of an aqua hire, you can do that pretty early on. I think there are a lot of startups where they could be good acquisition targets right now. Really talented team, they got funding in the zero interest rate environment, they’re really struggling to raise their next round. Those could be great acquisition targets. Even if you’re a series B / C company, that might be something you do early. I would say if you’re more looking for a strategic M&A target, there is so much more complexity in connecting back end systems and tech stacks, that I would be really careful with looking at something really shiny and say, “Wow, there are so many synergies here.” That there’s probably a lot of financial synergies that could happen. But to really truly integrate the products is hard.


And so you might be fine with an acquisition as long as they’re standalone products and it’s really having a joint sales force going after them. So if you’re in that situation, that’s easier to do. But if you’re truly trying to integrate the products, I would say think really hard of how difficult this will be to build versus buy.

Randy Wooton (19:33):

Yeah, so from your lips to God’s ears, that was my experience coming to Maxio, it was a merger of equals which I had not really ever heard of before or seen in play. Usually when I’ve done acquisitions both as the integrating team or when I was a chief strategy guy at Seismic and oversaw a couple of acquisitions, you have the big company and the smaller company just comes in and adopts the systems and processes of the big company. For the MOE, when you bring two companies that are of the same size, same number of customers, same number of employees. It was like the Bloods versus the Crips. And one stack was built on Ruby, the other stack was based on Python. There’s no one right answer, but boy, there was a lot of internet scene battling. And I remember at the point I just started and we had to make one of those one-way door decisions, which was which platform we were going to have as the basic and which one was going to be the module.


And we picked one and the other team felt like we were shortchanging them and we didn’t love them. And it was like, “Oh, my God, no, that wasn’t it at all.” It was just for us to move the integration forward, we had to make that commitment. And I think everyone under appreciates how tough it is to do a platform integration if you’re trying to do instantaneous data syncing, if you’re trying to use services across, it’s just really, really hard

Michelle Valentine (20:50):

Yeah, tech debt is real.

Randy Wooton (20:51):

Yeah, tech debt is real.

Michelle Valentine (20:51):

It’s easy to build, it’s hard to maintain, and it’s hard to convince your talented engineers to maintain a system.

Randy Wooton (20:59):

Right on. Well, this is not where I thought we were going to go. So it’s been awesome. Let’s talk a little bit about the CFO maybe just at this part of the conversation, the changing skillset of modern CFOs and the future outlook for the role. So what are you seeing, as the CFOs you’re talking to a bunch of them, you’re talking more than I am probably. What are you seeing as the role today versus the role tomorrow? And what does the next gen CFO need to realize and think about to be successful in that reality?

Michelle Valentine (21:25):

Yes, I think the big elephant in the room is all of the changes going on right now in the AI landscape. If you sift through the noise and there is a lot of noise, the one thing to really pay attention to is where foundation models are going because it’s changing the way that we all work. Whether you’re a CFO or not, it’s going to change the way how you build your team, how you work every day. And maybe the most helpful thing is to share my perspective on how I see the landscape today, because I think that informs how one might build their team in the near future. So today, I think we’ve all experienced truly the magic of interacting with an LLM. The thing that people don’t realize is that we’ve only really interacted with the very beginning models of what it could be.


Most of us if we’ve used ChatGPT, used GPT4, maybe GPT3.5 when it first came out. But we truly haven’t experienced a step function change between GPT3 and GPT4. And that’s significant because the difference between 3.5 and four is a 10X scale up in compute. And the difference between three and four, so the full step function change, that’s 100X scale up in compute. So that’s an exponential difference between the two. And so for many of us that haven’t experienced that step function change, we’re probably going to in the very, very near future. And so the big update when I think about what’s changing for a CFO, is what happens in that landscape where I can have a very intelligent AI assistant, maybe embedding them into my operations. Maybe even changing the way in which I need to think about my company and my software company’s positioning in the market landscape.

Randy Wooton (23:10):

Right. And I think that’s awesome. And so I think we were chatting a little bit earlier about the three ways that AI can augment your company and your team. One is there’s off the shelf AI tools that you can use. So you mentioned ChatGPT that you’re using just to get better at what you’re doing. Number two is maybe applying some of the models internally against your own data. So for example, like many folks, we’ve aggregated all of our Zendesk and Notion articles. And it’s informing an LLM that our customer success reps are using to better answer questions. And it’s amazing because it ingest so much information more than any one human could hold in their head. We’re making all of our customer success reps better because of the model, but it’s trained on our data. And then the third level, which I think you were pointing to with regards to the strategic positioning is if you’re a system of record, how do you take the data, structure it in a way so that the models can be applied on top of it? And so you move from workflow automation to intelligence and intelligence engine.


And then that becomes part of your strategic positioning in the market, is you’re not just about workflow automation. You’re taking data, you’re transforming it into insights and making it easy for your customers to be more efficient and more effective. Is that sort of what you mean by strategic positioning and how to embrace the future or how are you thinking about it at Anrok. Without sharing the secret sauce, how have you evolved your strategic positioning?

Michelle Valentine (24:37):

So I like that with what you said, I’d say it’s more like strategic positioning around product. For me, it was more even strategic positioning about the market opportunity altogether. So I was zooming out even further, which is thinking about how does your business not only survive this paradigm shift but thrive in this paradigm shift in a world where creating software will be so cheap. If you think about the world we’ve lived in the past decade or two, software has been eating the world and AI accelerates software. LLMs make it even today so much more efficient to program. And very soon they’ll be helping build a lot of software themselves. And so there’ll be types of software which people will choose to build rather than to buy because it’s so easy to build custom software. And the interesting thing for me, for a lot of financial tools is that you don’t always want custom software with finance because you want something that auditors know and trust in the structure.


And so in some ways, there is some defensibility in some types of finance tools because you don’t want to build your own ERP. You want to use something like a NetSuite or a Maxio because auditors, fractional CFOs, they know it and they understand it.

Randy Wooton (25:56):

And you don’t want the models hallucinating on your financial data.

Michelle Valentine (25:59):

True. I think in future models that probably will get less and less.

Randy Wooton (26:04):

Right. Sure. Got it. Well, good. So you’re telling me we’re not going to be out of business at Maxio. I appreciate that. But maybe, and I appreciate also the fact that you’re thinking about the company strategic positioning. Clearly that’s your investor chops coming out. As an operator for many years, my biggest worry is that the investors are going to come and say, “Okay, your fiscal year ’25 plan needs to include an AI augmentation efficiency gain.” And we want to see for example, that you’re not hiring as many coders as you said you were going to because they’re all using copilot and your marketing is going to be 30% more efficient. You’re not going to need as many BDRs. You’re not going to X, Y, and Z. And what I tell people is it’s common. And if it’s not fiscal year ’25, it’s going to be official year ’26 when you need to show that you have been able to embrace the tools as a forward-looking software company. And that you’re showing how AI is augmenting your operations and your product, or you’re just going to get beat down.

Michelle Valentine (27:02):

Totally agree. One thing that we’ve encouraged the team to do is to get really good at prompting models because there is a skill set in knowing how to talk to Claude or to ChatGPT, and really prompting to get the highest quality answers. So one example is asking it to not impersonate, because sometimes the model will freak out and say, “I can’t impersonate this person.” But really to say, what would a CMO at a public company like Salesforce critique on this marketing plan? What would they be worried about? And really go back and forth on that. Another example is any product PRD, put it through Claude and get some feedback on what an engineer might think or what questions they might have with the CFO. I think things that I’ve done is to look at marketing spend plans and ask it to synthesize and think through, like are we missing anything? Are there levers we should be including? Is this actually efficient or not?

Randy Wooton (28:02):

That’s great. Lots of interesting things there in terms of product engineering. You made me think of, we did a training with… And so I think there are people out there now that are making their life about how to do AI well. And so they’ve gotten off the hamster wheel and they’re like, I’m going to become the AI expert for marketing. And we had someone come in, I just talked to a guy, Nicolas out of Germany who runs the AI Finance Club. And this is all he does, is training people on how to use AI for finance. And he’s got this huge following. I recommend it to anybody to go check it out. But on the marketing one, we had this great woman come in and give a presentation to our team and help us become better prompt engineers.


And she said, “The models actually respond to being polite.” If you say, please do this for me or say thank you, or if you say something like, this is really, really important for my board meeting, the model will work harder, because it’s being trained on human interactions and human language that it responds to that. And I was like, “No way. That’s not true.” And now I’ve talked to 10 experts and they’re like, “No, just treat it like your mother.” Be nice and polite and it’ll give you a better output.

Michelle Valentine (29:08):

And if you tell it to think it through step-by-step, it thinks it through step by step and you get a high quality answer.

Randy Wooton (29:14):

I think there’s something to that that’s a great point. I think everyone should be doing a little AI every day in how are they playing and learning how to write the prompts better. And at some point there’ll be like a neural net and it’s just going on back and forth your conversation with your personal AI. Well, good. Well, tell you what, why don’t we… Given the time, let’s shift to the speed round. And so the speed round as we talked about was your favorite metric and why. We already tore apart CAC, if you want to use that, that’s fine or if you have a different one. Your favorite book doesn’t have to be a business book, it could be any book that you find inspirational. And then your favorite influencer, someone who you find is offering new content, not just the recycling of current whatever’s going on in the echo chamber. So favorite metric?

Michelle Valentine (29:57):

Favorite metric I would say net dollar retention, especially if you’re a usage-based business there are so many ways to think about it. There’s the time it takes to really get activated and ramped up. So do you measure net dollar retention from month zero, or do you measure it from what you thought the annual contract would be? And so I think that’s a metric that is underappreciated because it can tell you many different things depending on how you measure it.

Randy Wooton (30:20):

And in usage it gets really complicated, right?

Michelle Valentine (30:23):

That’s right.

Randy Wooton (30:24):

Okay. Favorite book.

Michelle Valentine (30:26):

Excession by Iain M. Banks. He’s a British author. He wrote science fiction in the ’80s. I think Excession is the best post-singularity representation of how AI minds might talk to each other. And I think it’s phenomenal. It’s part of the culture series. You don’t need to read it in order. Highly recommend Excession.

Randy Wooton (30:48):

Excession by, it was Ian Brooks?

Michelle Valentine (30:52):

Iain M Banks.

Randy Wooton (30:53):

Iain M. Banks. Okay, I’m putting it on my list.

Michelle Valentine (30:56):

Iain is spelled I-A-I-N.

Randy Wooton (31:00):

Oh, okay. Great. Well, thank you for that clarification. We’ll put that in the show notes. It’s funny doing these expert voices, I’ve ended up with 10 new books that are sitting on top of the 20 other books that I should be reading. But that one sounds really interesting. Okay, finally, your favorite influence. So the person that you’d like to read in the morning either their emails, you listen to their podcast, who’s helping you think deeper?

Michelle Valentine (31:22):

I have to pick two. So for reading it’s Matt Levine, who’s fantastic. And then his newsletter is great. And then for podcast it would be Patrick O’Shaughnessy’s Invest like the Best.

Randy Wooton (31:34):

Invest like the Best. What’s the name of the newsletter that Matt Levine puts out?

Michelle Valentine (31:38):

Matt Levine puts out Money Stuff.

Randy Wooton (31:41):

Money Stuff.

Michelle Valentine (31:42):

He’s pretty prolific, so it’s hard to keep up. But he goes down rabbit holes, he gets obsessed with different things and it’s just fun to see how he breaks down why the finance world is weird. That’s great.

Randy Wooton (31:55):

Oh, that’s awesome. Great. Well, I’m going to add those two, just adding more work to my life. But Michelle, it was just great chatting with you. What a great background experience. And congratulations on your success to date and look forward to working with you and your team going forward.

Michelle Valentine (32:08):

Likewise. Thanks, Randy.

Episode 30

How to Transform Your Pricing Strategy with the Power of Value Conversations

July 17, 2024


Randy Wootton
CEO, Maxio
Dan Balcauski
Founder and Chief Pricing Officer, Product Tranquility

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Video transcript

Randy Wootton (00:04):

Hello everybody. This is Randy Wootton, CEO of Maxio, and your host of SaaS Expert Voices, where we bring the experts to you to talk about what’s happening at SaaS today and what we foresee coming in the months and years to come. I am super excited to have Dan Balcauski. Did I say that right, Dan?

Dan Balcauski (00:23):

You did. Beautiful job.

Randy Wootton (00:24):

Awesome. As someone who has a horrible last name for pronunciation as Wootton, I’m always anxious about that. But no, it’s great to have you, Dan. What an incredible background you’ve had. We’ll get into that in a second, but primarily, I think we’re going to talk mostly about pricing and all the dimensions of pricing that you’ve experienced in your most recent role as founder and chief pricing officer. But before we get there, just going to your background, you started off in software.

Dan Balcauski (00:49):

That’s correct. Yes. I’ve been in software my entire career. But yes, I think specifically I started out actually writing code, which is a little bit different from what I’ve done.

Randy Wootton (00:57):

Right, as a software engineer. You started off as a software engineer, moved to product management, took a sabbatical, which we’re going to talk about in a second, and then you spent some time at Kellogg, so you were in academic [inaudible 00:01:09] for a while, and then you spun out and started your own gig. So you certainly have had an interesting background, so we’ll spend a little bit more time on that in a second. But yeah, let’s go there. Let’s talk about, so you started off software engineer and you moved to product management. What was the catalyst for that transition?

Dan Balcauski (01:23):

Yeah, well, like I said, I spent my entire 20 year career so far in software and started out more on the value creation side, building products. Ultimately, I became a lot more fascinated by how the products that we were building created value for customers and then how did those turn into dollars and cents for business, and ultimately that led me to pursue an MBA. Multiple times, intersections with Kellogg, it’s where I got my degree, and then now I also help teach there in their product strategy course. But when I was there, I was very lucky, got some of my foundational courses there in pricing, but also many other functions as you imagine a general MBA would be. And during my internship during a two year MBA, I worked for a very successful Silicon Valley startup on the B2C side and got thrown into the pricing world kind of off the bat with them where one of the questions on the CEO’s desk when I showed up was should they do a freemium approach? And so I didn’t know anything about that.


I spent part of the summer on several things I did working on with them, I gave them a recommendation, a TL;DR. I do not like freemium, I do not recommend it in general, but that kind of gave me my first taste of real world pricing exercise there. And then post MBA, went into product management, product strategy world. So still very focused on how do we create more value for customers? How do we understand the value we deliver for customers? Product management in general, I think this applies to many companies, didn’t own pricing and packaging that was owned by our product marketing department, but I have a strong view that product marketing and product management should be very close to the hip. They’re sort of dynamic duo, Batman and Robin, they’re a tag team, not one better than the other, but they just have different areas of focus in order to successfully bring, especially B2B software products, to market.


And they would get asked to do these pricing exercises for our products that they were looking at. They’re like, “I don’t know how to do this. Hey Dan, you’ve got an MBA, can you come help with this?” And so I got a lot of lessons learned. I tried to apply some more theoretical practices I learned of like, “Hey, if you were the brand manager for Minute Maid orange juice and you’re selling in a grocery store, how do you price that?” I realized very quickly some of those theoretical foundations don’t work quite as well at B2B software. So learned those lessons and yeah, went off on my own about five years ago now after the sabbatical you mentioned and decided to start a consulting firm and now I do all day is help B2B SaaS CEOs and their teams try to build profitable companies and get their product into the hands of as many customers as possible. So that’s the privilege I have today.

Randy Wootton (04:12):

That’s great, Dan. And from my background, I went to business school as well, and I remember going into product management initially and hadn’t had any courses in product management at business school. So I went and took a course, pragmatic marketing, which I think is a wonderful course. It’s grown and evolved since I took it 25 years ago. It has a great schematic and way of thinking about all the activities you need to do across product management and product marketing to bringing a product to market. And my first role as a product manager actually included product marketing as well. So it was a holistic role and you just kind of ticked through those different components and one of them was, to your point, around pricing and packaging. I had no idea what I was doing. But it has become such a valuable skill or perspective to have, especially in this market where you have contracting demand and increasing competition and everyone trying to figure out how to increase pricing.


I know broadly in the market we’ve seen data saying that SaaS solution providers have just used a blunt instrument raising their prices by 9%. I think Salesforce is the one that led the way and then everyone else has followed behind that to try to increase the revenue, but not doing it in a disciplined and focused way, feeling it just more like a blunt instrument, no matter who you are, you can get a price increase. So maybe we can use that as a starting point. I’m going to come back to the sabbatical because it’s super cool, but since we’re already getting deep into the pricing, maybe spend a little bit about some of the pricing. On your LinkedIn profile, you say, “I dispel B2B pricing illusions.” So what are some of the top two or three? You mentioned freemium, if we could go down that path for a little bit and maybe a couple other ones. What are the biggest B2B pricing illusions that you have encountered that you try to dispel?

Dan Balcauski (06:00):

Oh man. Well, this is a great setup because I could probably talk for the rest of our time on what are the different misconceptions people have about pricing. I’ll spare you though. I’ll name a couple and we’ll see if we want to dive into any of them with any particular vigor. I think the first one is, when I tell… I was actually having lunch last week with a business school colleague of mine. He’s the CEO of a company, very successful. It’s more in the services business, but he’s got a company about 150 people now. And we’re sitting down, he’s super sharp and he’s like, “Hey, so you do pricing. Is that a lot of elasticity analysis?” I was like, “No.” I was like, “It’s funny you say that because this is exactly what I run into every time someone hears that I do pricing.” It has almost nothing to do with elasticity analysis.


In fact, when it comes to SaaS pricing, most executives think that what you charge determines your success. They’re really focused on the number. In fact, who and how you charge determines your success. So most of the work I do is really helping people figure out what the price tag should go on and not the number that actually goes on the price tag. So I think that’s sort of the first major mischaracterization or thing that people get wrong about pricing. I think the second is there’s this really pernicious myth out there in the world that you can’t talk to customers about pricing, that you’re just not going to get useful information. And I just don’t think that’s true. If there is one thing that’s true, it says you don’t have a choice about whether you will have a conversation with your customers about pricing, you only really get to decide about when.


So usually when folks are putting that logic forward, it’s, “Well, we’re not going to be able to talk to our customer about pricing, so we’re going to make the first time we have a conversation with pricing when our poor sales guy is on the phone and we just launched this thing and they’re trying to sell it to a customer, that’s when we’re going to have the pricing conversation.” And I got to imagine, people don’t think that’s a great idea. So look, should you ask your customer, “How much will you pay for this?” No. And we’ve known that’s a bad pricing question for 60 years, and we’ve had really, really smart people, smarter people than I dedicate their entire academic and commercial careers to figuring out better ways to ask pricing questions to get reliable information, and so there’s much better ways to go about that, but I feel like that’s just definitely a mindset that folks have out there that it’s just not true and I’m having to come back constantly.

Randy Wootton (08:29):

Great. Well, we can come back to number one in a second, but just stay on that. When we were talking about this earlier, don’t be afraid about talking about pricing. I thought of talking with my teenage boys about sex and drugs. You’re going to have the conversation, you get to choose when to have the conversation because it’s going to come up or it’s going to be part of the reality at some point. So what are some of the questions you would coach CEOs or chief customer officers without hiring a professional to, what are some of the questions that you would encourage them to think about asking their customers or framing if they’re going to have a conversation about price?

Dan Balcauski (09:05):

So I think there’s a few different things to keep in mind. So I’ll ask sort of the price framing question, but I think one, if I’ve been having a conversation with a CEO or executive team, like any research, you should have a defined objective. And usually with pricing, the first thing I find is that nobody is really aligned on objective because I can go out and ask a bunch of questions and get you a bunch of data, but if we don’t really know what our final aim is, it’s going to be really difficult to interpret or use that right? We’re going to probably ask the wrong questions, we’re not going to model it the right way. What do I mean by that? It’s like, are you as the CEO, and when I say CEO, I’m broadly referring to the entire senior executive team and the board, are you trying to maximize revenue? Are you trying to maximize profit? Over what timeframe? Are you trying to increase net revenue retention? Are you trying to increase your customer lifetime value? Your average revenue per account?


What is the metric that we’re really looking at? Because overall, let me say one thing first is that when we think about pricing and the price level, we’re almost always dealing with ranges, right? So I think that’s the first misconception I want folks to step away from is there’s rarely sort of one number that is the answer. I’m a super math nerd and I would love it if there was just a system of equations that we could just plug in and then out pop the number. But usually it’s something like, hey, we did this research. Customers would generally pay between $49 and $99 per user per month or per year, whatever it might be, and so now we’ve got a decision to make based upon what that market data. Do we price the lower of the range, the high end of the range, what are the different strategic considerations we want to take into account? What would it mean if we were at one end of the spectrum versus the other factors we might bring into bear? So that’s the first thing I want to just lay out there.


So the second thing is, there are many different ways that you can go have pricing conversations. I think in a B2B context, another misconception, something that I really work a lot with, is to help people understand the concept of value. And so when I’m thinking about what maybe folks would think of as pricing conversations, usually I want to term those in terms of a value conversation with the customer. So I want to frame that as a value conversation. Like, “Hey, I want to understand why you’re making the decisions you are. What is it about your organization or your situation, your context that’s causing you to look for a solution? What are those triggers? What are the other competitive alternatives you’re looking at? What does a product like this do? How does it fit into your operations and how does it actually help you increase the value of your organization? Does it help you increase revenue, decrease costs? Do you have a sense of how that is?


At the end of that, I might have a series of price-specific conversations, but I would say it’s going to be more like 75% of the conversation with the customer. It’s going to be focused on the value they get out of it and really understanding deeply their situation and their context before I get to understanding price because one of the most valuable things is not even the number I come up with, but having a really deep understanding of what is the mental model? Why does someone give me a number that they do because they’re comparing against a certain situation in a certain context? Value is subjective, it’s relative and it’s contextual, and so we really need to keep that in mind when we’re having these conversations. When it comes to very specific sort of price level tactics, there’s two general or broad categories that I would refer to. One is what we generally refer as direct questioning. So that’s where I’m asking you a question like, how much would you pay for this product? So prices directly in the line of question.


The other is indirect. So folks have heard of methods like conjoin or discrete choice. These are methods where pricing is the price of the option I’m asking someone to consider whether the purchase is tied directly to other features that are in a bundle that I’m offering them options to choose among. So therefore, price is just one of several different variables I’m asking them to make trades around. So in general, folks want some tactical, how do I go have a pricing conversation? There’s a pretty well-known methodology called Van Westerndorp Price Sensitivity Meter is named after a Dutch economist back in the seventies who invented it. It’s four questions. First one is, what price would be so cheap that you would doubt the quality of this product and wouldn’t buy it? Two is, at what price would this product be you consider this product a bargain and you would buy it? Third, at what price would this product be you’d consider it to be getting expensive, but you would still buy it? And four, what price would this product be prohibitively expensive and you wouldn’t buy it?


So why is that better than asking just the, “Hey, what would you pay for this?” Again, going back to this idea of prices as ranges. If I ask you how much would you pay for this thing, I have no idea if you’re giving me a high answer, a low answer, as well as when… In these conversations, I also, more importantly than the number they give me back, I usually want to ask why. “Hey, you said too cheap below this price.” “Oh, $10 a user per month. That would be too cheap. I wouldn’t buy.” “Oh, because I bought another product that was like that and it fell over and I would never buy that again.” Whatever. “They couldn’t support us and if we call up, they never answer our support tickets.” Whatever it might be, getting that customer’s mental model is very important. So we could have an entire conversation just on pricing analysis methods, but hopefully that gives your listeners enough practical tidbits to start the journey forward.

Randy Wootton (14:31):

Yeah, I think that was a lot. So maybe even backing up just a little bit to defining the objectives we were talking about, being clear on that, and that the primary ones are maximize revenue, maximize profit over what period of time. When I’m talking to the board, they say do both and as fast as possible. Do you find people able to be more explicit about one or the other of maximizing revenue or maximizing profit? How does that play out for you when you’re engaging people and they’re like me, like, “I got to do all of it.”?

Dan Balcauski (15:05):

Well, we could get into these simple economics and say that there is no simultaneous number that both maximizes revenue and maximize profit, assuming that your marginal costs are greater than zero. So as soon as you have marginal costs, that’s just math. So if someone ask you to do both, you haven’t walked them through the realities of a financial situation. One way that companies do approach it… It does happen. So I think one thing is, if I’m working with an executive team, it’s important to bring that conversation to the front because everyone may be thinking about optimizing something a different metric, and so you want to bring that conversation up and make sure that everyone, at least in that seat, either boardroom or executive suite, is on the same page for what you’re trying to optimize. I’m sure given your background, you’re very familiar with something like the Rule of 40. Well, Rule of 40 is one of these compound metrics and does bring these two together.


And I know there’s been a lot of, say, innovation around the Rule of 40 or conversation at least in the last 12 months where people are talking about weighting those things differently. And look, for any optimization problems, you can say, hey, we want to balance, but we’re going to weight revenue growth more. And so how that comes about when you’re then choosing the price point allows you to build your models and choose your range more in line with those goals. But yes, it is something that you at least want to have the active conversation about it. You don’t want to end up accidentally at the end just being like, oh wait, what were we actually trying to accomplish? That’s not going to be a good choice.

Randy Wootton (16:47):

And I think this plays out maybe two different conversations. One is, how do you want to price for prospects versus how do you want to price for customers? And you can use a table or some way of having a broad set of ranges, to your point. But I think for current customers, the tension is often between gross retention and net retention and what’s the price that they have and the value that they’re receiving today with the product, and you go through a negotiation, especially in a world where everyone’s saying cut back on software spending. So everyone is having what I call contested renewals. People are coming in and saying, “Hey, I need to pay less.” And then you have to think about, as a company, well, are you going to preserve that customer even if there may be a contraction? Versus, you’re trying to drive NRR through either selling features or across divisions or adoption of new modules, or for us, our pricing model is based on the trailing 12 months of revenue. It’s, well, do you introduce a new tier, a new increase in price?


So that NRR versus gross retention I think leads you maybe to think about customers in different segments, in different cohorts in terms of those that are under priced compared to market, how are you going to bring them up to market? Those that are overpriced, are you going to back off a little bit in terms of your expectations? So I think that’s where we have the conversation, at least that I know at the board meeting is, if you want me to drive NRR and I’m going to go out with new aggressive pricing, that may have an impact on gross retention, and let’s be really clear about that. So how do you isolate the experiments to get data to inform your strategy?

Dan Balcauski (18:24):

Yeah, a hundred percent. And segmentation falls heavily into the methods that I work with because you’re absolutely right. Your existing customers, their realized value and their perceived value is going to be very different than a net new customer, and how do we manage existing customers versus net new customers with a price change, with a price increase? Those are very important questions and we think about handling those in different ways, so I definitely approve of that way of thinking about it.

Randy Wootton (18:53):

And then just, you were talking a little bit about rule of 40 versus rule of X, or the new way of thinking about rule of 40. I think Bessemer came out in January with their rule of X, which gives you a multiple on top of your growth rate. So your ARR growth rate versus your EBITDA margin. The rule of 40, for those who don’t know, you can go find a bunch of information on the internet, but it’s the combination of those two factors, how fast are you growing and how much margin are you churning off at the EBITDA level? And that should equal 40. So if you have 10% growth and you need 30% EBITDA, if you have 40% growth and you need 0% EBITDA. So it’s a broad tool and I’ve had a lot of debate about what size company it’s relevant for, et cetera, and there’s a bunch of research. But Bessemer actually showed that the driver of value in terms of shareholder value is tied more to the ARR growth rate and they have a new way of thinking about it.


So I do think, again, thinking about, are you driving for growth? So maximizing revenue or maximizing profit for B2B SaaS companies, series A through series D should probably mostly be focused on maximizing ARR, which then drives shareholder value. You can see it in all the multiples, et cetera. But it’s a robust conversation. I know with our board, one of the things we’ve done is we said, hey, what do we want to be in terms of size of company in the next three to five years? We’re effectively owned by a PE firm. Well, it’s Battery Ventures, but within their PE discipline, and there’s an expectation in terms of the return on the money they invested in the company. And so how do you structure your business to deliver on that profile? Then comes down, at some level, down to a pricing conversation. How many customers can you get at this price and does that price cover your costs or what’s the profitability assumption if you’re trying to drive EBITDA? So all of those big conversations about ultimate transaction resolve down at some level to a pricing conversation.

Dan Balcauski (20:49):

Yeah, I could not agree more. Happy to explore any direction of that.

Randy Wootton (20:56):

Well, good. So that was just bucket number one around defining objectives, getting aligned with the board, the different tensions you have and making sure everyone’s driving against the same vector. The other one I think that you were talking about is this idea of framing value, transforming the pricing conversation to a value conversation. That feels to me like that’s something that the best salespeople do in the actual sales motions. So when they’re doing the discovery calls, they go out and try to figure out the pain, what are they trying to solve, the opportunity, if there’s specific events that are triggering it, what are the alternatives that someone would be evaluating? I know with our product in particular, people are comfortable. If they’re using rev rec, they might be doing that in an Excel file versus moving over to a Maxio system that gives you the rev rec and the reporting.


How do you think about the understanding of value for prospects and customers and leveraging sales teams to get that input? Because you’re one person going out and doing the interviews, but if you can get the input from the sales team, 10, 20, 30 salespeople that are having these discovery calls, what would be a recommendation, if you have one, for ingesting the data broadly?

Dan Balcauski (22:08):

Yeah. So this is a great question because there’s often a… I mean, one of the things that I am dealing with in a lot of client situations is just a lack of general process or ownership. One thing that you said is really important, which is, every day those sales folks are having to have a value in price conversation. The question is, are they having to start from scratch because the rest of the business hasn’t supported them in a structured way? So we could have a longer conversation around who should own pricing overall. I generally don’t believe it should be sales. There’s many reasons for that. It’s sort of like putting a Dracula in charge of the blood bank. But if I was to say that… Look, they are an incredibly important stakeholder and they have a lot of experience, just like you might go through some baseline sort of ROI calculation or your product management team might do some sort of risk reward, total addressable market analysis, but at the end of the day, you also trust your product team that they have some sort of spidey sense, they’ve talked to enough customers, they really know what’s important even if they can’t sort of finally justify every last bit of it.


Sales and pricing is the same way. They’ve just had so many of these conversations, they just have a spidey sense of how customers may react, how customers describe the situations that they’re in. So you want to make sure to definitely bring them in. And for any pricing engagement, sales should definitely be in the room, should be in the core team who is looking at it. Should they own the final decision, should they own have full legitimacy up to a hundred percent, no questions asked discounts on any deal? We could have those conversations. Generally, I don’t think that’s best practice, but absolutely, you want to make sure that they are brought in and that everything from what are the competitive alternatives? Do our arguments against how we have differentiated value over the competition, do those make sense? Do customers buy them? Do we support them effectively? Do they resonate? Or do we say it and every time the sales guy says it, he gets laughed out of the room and they’re like, “Yeah, the last 10 guys told me that. Prove it.”?


And then they’re stuck and all they’re left with is a discount lever, and you don’t want that to happen either. So I absolutely think you should bring them in. I think the more that you can make sure there’s a consistent conversation happening between… Sometimes, depending on the organization, but sometimes it might be the product marketing team that maybe owns the strategic pricing levers, they’re having regular one-on-one conversations with sales folks, sometimes it might be at the level of the strategic pricing committee where there’s sales representation and then maybe there’s a deal desk, so that deal desk focus seeing every sort of deal come through and requests for discounts by customers in different segments or different geos or different special situations. And so we’re making sure that we’re bringing that back into the organization. There’s an entire process element. It doesn’t necessarily get me out of bed in the morning, but actually the larger you get, the more important it is for this because pricing is painfully cross-functional.


You can’t just have a single product manager or product marketer or the CEO just go into a room and say, “Hey, here’s what we’re doing.” It’s going to affect everyone in the business. And so yeah, setting up those information flows back from the front lines into that strategic planning is incredibly important.

Randy Wootton (25:39):

Yeah. That was actually the third bucket of best practices when we did our pre-brief. The first one, which we might come back a little bit because I think we glossed over it, was the, it’s not about what you charge, it’s about who and how you charge. Number two was, don’t be afraid to talk about pricing, which we went down the path. And number three was be deliberate about pricing governance and answering the question, who owns it? What is the forum for the conversation? I know in our experience, I remember when I came on board again because our pricing and our model is tied to revenue, our customer’s revenue, and we have two different types of products, we have a billings tool primarily, and then we have a rev rec reporting tool. Well, how does that pricing work and what’s the value if it’s not tied to number of invoices being sent? The general partner, Chelsea Stoner, said to me when I first started, “Randy, one of the things they find across their port cos is that people don’t get pricing right.”


And so when they buy a company, it’s a major area of focus over the first year or two is to redefine the pricing. And honestly, even in the first three months we launched new pricing, we were trying to do an integrated pricing model. Classic Salesforce where I had been before was you had your bronze, silver, gold packages and you would graduate people up, and I was all about making that happen, and we launched it and it didn’t work. It didn’t resonate in the marketplace, and so we had to bring that back in. And for our initial pricing work, we had used a consultant, we actually used two to come in and help evaluate the market, give recommendations on what the competition was doing, go do the interviews for processing customers and how they wanted the pricing. So we had had professional feedback, but I personally didn’t have enough experience in this market to be able to apply judgment to it, and I think we missed.


But then it came back and Chelsea was like, look, in their experience, they like consultants to come in and provide advice on a periodic basis, but there needs to be a commitment in the ELT in particular, to your point, about cross-functional alignment on pricing, and the team needs to build the muscle of pricing. So we’ve started a pricing council which meets once a month, and it is to bring together the information across multiple products and situations for both prospects and customers on what’s working, what’s not, how do we want to rev it? Because every time you rev it, you’ve got to train your team, you got to get instantiated in Salesforce, you have the tracking and reporting. So it’s a major lift if you’re going to be instantiating the pricing construct versus just experimenting. So I think to your point, having a pricing council where it’s the executive team owning it, it’s often the CFO who, at the end of the day, I think…


CEO owns it at the highest level, but CFO has to own it because there are business model implications, back implications, back to your point around are you solving for revenue or profit? If you understand our unit economics, are you willing to price and subsidize customers early on because of lifetime value over time, you’re going to have price? So I think the CFO has to chair the pricing council. We’ve ended up getting a wonderful gentleman join the company, one of the, call them operating partners, executive in residence of Battery who has a deep background in monetization, and he’s come on board and has started a whole nother set of conversation, the segment approach that we talked about, the different products that we have, what are some of the recommendations? And it’s been a really fabulous to have someone embedded who has background and experience in pricing and monetization to help inform the conversation we’re having as an executive team.

Dan Balcauski (29:18):

Yeah. There’s so many threads you open up there. So one, I want to go back to something you said at the beginning of that, which was, Chelsea is absolutely right. I haven’t met her, but I like her already. One of the major tools in the private equity playbook is pricing. It’s one of the first things that they do. And why is that? It’s because it’s an untapped lever for growth and everyone’s afraid to touch it. Look, there’s only three ways to grow a SaaS business, acquisition, monetization, retention. And sorry, all the oxygen gets sucked out of the room with acquisition. It’s just like, how can we drive more leads? How can we close more deals? And look, for a certain amount of the company lifecycle, those balances are going to shift, but I see way too much attention spread over too long just on the acquisition bucket. Obviously retention, once you get maturity, if you’re a seed stage company, there’s very few customers to retain, so it’s not going to have that much impact even if you move that percentage wise.


So I think that that’s important. And even with the little bit of your tale of woe, you launched it, it didn’t go well, but the world didn’t end, Maxio didn’t go out of business. And so I think that’s a beautiful story because you got pushed to change it, you changed it, it didn’t work, and then you tried something else. And I think people really have this fear that, oh my God, if we don’t know how to do it perfectly, we’re going to break it. Everything’s going to go to hell, and, I don’t know, I’m going to get put on the front page of the Wall Street Journal as the world’s worst CEO. I don’t know what the story is they tell in their heads, but basically it’s some version of that that says if it ain’t broke, don’t fix it, and therefore we’re not even going to try to learn. And that’s not how you do anything else in business, right? I’m sure as a CEO, the job of being the CEO is you get to do something every day you’re terrible at.


So today I’m terrible, and in a year, if I do it every day, I’m going to be less terrible. That’s the way things go. I’m going to build that skillset over time. But if you just ignore it, right? It’s a dragon that sits in the closet, it’s just going to be something you ignore, ignore, ignore. And the private equity folks realize this, they acquire a company and one of the first things they choose because everyone decides to ignore it. So if there’s one thing for your listeners, I would say. It’s a huge opportunity and the world’s not going to end if you screw it up, you can always roll it back and apologize. There’s better and worse ways to do it. Sometimes there are pricing changes that ended up on the front page of the New York Times, you don’t want to be that person, but those are very rare from what I see.

Randy Wootton (31:46):

Yeah, I think there’s something to that, and this idea of, as much energy and effort you put against product innovation, pricing innovation. So to that point, one of the areas we were going to talk a little bit about was pricing for AI product extension. AI is the buzzword. Everyone’s talking about it. What are you seeing in terms of how are things evolving? What are some of the best practices and what are some of the things to watch out for if you’re thinking about taking AI for your corpus of data and coming out with an AI product either as your core offering or as an extension to what you’re currently offering?

Dan Balcauski (32:19):

Yeah, there’s a whole bunch there. And so let me see if I can just give some highlights or some mile markers so folks don’t get too lost because when we start talking about AI, it can mean a lot of things to a lot of people. There’s sort of generally what we’d call AI as a service, and these would be your foundational model companies, your Google, Meta. Actually, Meta is just open sourcing their LAMA models, but like Anthropic and Open AI, they’re selling sort of foundational access to these what are now large language models where they’re increasingly going multimodal. I think most folks are not in that camp. There’s also another camp when folks talk about AI, and especially in the AI and pricing, there’s been companies for well over a decade now, probably 15, 20 years. Pros, Van Dabo, Price Effects, Zilliant, who’s actually based here in Austin where I’m at, and they’ve been applying artificial intelligence for more B2B industrial type use cases to manage their pricing.


And so that is your traditional machine learning models, they’re doing a bunch of different market modeling exercises to do pricing generation, much like the airlines, the hotel companies do, that type of generation. So I don’t think most folks in your world are thinking about that. What we are seeing is a lot of folks these days who are embedding the technologies coming from Google, from Open AI, from Anthropic into their platforms. And so it’s still early days. I haven’t seen one model that’s absolutely the way to go. I think there’s a couple of things I would keep in mind for folks. One is, don’t make the mistake the Web3 crypto folks made by saying, “Hey, now we got blockchain, so our product is better because it has blockchain,” Because mostly customers didn’t care. The blockchain case made a lot of value worse, but we’ll leave that to another day.


Telling people you have AI, I think a lot of people are getting swept up in the craze of like, “I need to tell my board, I need to tell my investors that I have AI because they’re asking me.” But a lot of the customers have no idea what to do with this. I’m very sort of leading edge and I’m using AI tools all day, but I’m also a weird pricing guy who’s been in software for 20 years and used to be an engineer. I’m not your standard customer. So most folks, at the end of the day, we really need to care about what is the use cases? What is the value that we’re unlocking for folks? And get the focus on that. And so what does this mean? I think one interesting example that we’re seeing is Intercom. So Intercom, they’re the little icon that pops up in the corner of every website, says, “Hey, how are you doing? Can you answer any questions?” So sometimes sales, sometimes customer support, they have different use cases.


On their customer support, they have released several different AI capabilities. And what’s interesting about that is they’ve actually split it into two different domains. In the customer support domain, they’ve got AI capabilities like, “Hey, summarize all the account history for this client.” “Suggest a message I should send to them.” So it’s capabilities that enable and enhance the capabilities of existing customer support agents on the front line. That’s different than what they’ve created from their autonomous agent, which they call Fin AI. Fin AI is, hey, the customer comes to your website, starts asking questions, and the Fin AI agent, if it can actually go through the entire support process and resolve that customer’s case without ever involving a human. They have two separate pricing models. So the first one that I was referring to where it’s enabling, making your existing agents better, faster, more effective, there it’s just an ingredient in the product. They’re talking about things like everyone else is talking about, “Hey, it was summarization or help you compose emails faster,” But it’s just included with your user license at the different sort of good, better, best tiers.


Versus the Finn AI capability, they’re actually doing outcome-based pricing and they’re charging like 99 cents per successfully resolved case. So I think what’s interesting about that is that it’s made a very clear distinction between, is this just an ingredient to enhance existing value drivers or are we creating entirely net new capabilities like this agentic robot that will act on your behalf to replace a human? Because why is that relevant? For the Intercom base pricing, they price per user. Obviously they don’t need a user if the AI is doing everything for you. And so they’re able to effectively sort of play both sides of this. I would also note, a couple of things I’ve seen folks do that I really do not like and would caution against is there’s two major things happening with this shift to AI. There’s really a lot of ambiguity on two sides of the equation that are intricately related to pricing. What is on the value side? What is this thing? How are we going to use it? What is the actual incremental benefit we’re going to get out of it? So all those questions on the value side are existing.


And there’s a lot of new questions on the cost side, which B2B SaaS companies haven’t really had to deal with for a while. If you look at a P&L, the marginal cost of an additional customer has been relatively small. You’ve got some compute, you’ve got some network, you’ve got some storage, you’ve got very marginal costs there, but if you’re paying for one of these AI as a service companies, that cost equation is going up. And so the thing I’m seeing companies do is, we really don’t understand value, but we really understand our costs, and so what we’re going to do is we’re going to say, “Hey, it’s $25 per user per month, and each of those users gets 2,500 credits or tokens.” And now what you’ve done is you’ve taken your cost model and forced your customer to understand it.


I’ve talked to a couple of startups that have gone down this road and they’re just like, yeah, now every time my sales guy’s on the phone, he’s got to explain what a credit or a token is, and your customer doesn’t care about it and your salespeople shouldn’t have to care about it because at the end of the day, you’re just helping the customer get their job done, and now you’re forcing them… Especially when the value side is so uncertain because you don’t know how you’re going to use it or if it’s going to deliver the value, and now you’re making people like, “Whoa, what is a token? How many am I going to need?” And all of a sudden it’s just going to gum up the works in your buying cycle. I think following the model like Intercom, it really is something that nicely addresses that friction that I’m seeing some folks fall into.

Randy Wootton (39:08):

Yeah. Clearly the through line through our conversation has been around value and pricing being associated with it, and so then your uber point around the AI product extension is no different. It’s getting clear around the output of the result that you’re driving, and the Intercom one is a great one, so if you can define something like a resolved case, a successful resolve of your case, then you can track. Then to your point around the cost, you as the supplier of that solution need to figure out what your cost structure is behind that in a package or in an offer with a price associated with the value. And then you get out of, to your point, you’re just pushing on costs that you don’t really understand, but as you’re looking at your P&L, you’re freaked because the variable cost is going up and you’re not sure if you’re monetizing it correctly.


So then, going back to your opening comment around your whole background and experiences around trying to find value, deliver value, price value, monetize value, AI is just making it a little bit more complicated because now you’re playing on both sides of the P&L.

Dan Balcauski (40:14):

Well, and I think it’s forcing a more discipline on the pricing side than companies, B2B SaaS companies have had to deal with in a while. So if that is the move to get folks to think more about pricing in their P&L a little bit more rigorously when they’re building features, I’m for it.

Randy Wootton (40:31):

And we like complexity on our side because then you need sophisticated systems to help you do that pricing catalog and then the actual billing and invoicing and monitoring and metering, et cetera. All right, Dan, well, this has been great. We’re almost up against time, but I’d love doing the speed round. So with our speed round, three questions. What’s your favorite metric and why? What’s your favorite book? It doesn’t have to be a business book, it could be any book that you found inspirational recently, and then your favorite influencer. So this is someone who you spend the time reading their emails or listening to their podcasts, you think that they’re actually adding to the conversation versus just in the echo chamber bouncing around ideas you’re hearing everyplace else. So favorite metric and why?

Dan Balcauski (41:13):

Favorite metric and why. I think probably would go with net revenue retention. It’s probably the most important metric for pricing.

Randy Wootton (41:20):

Fair with the caveat of pricing, right? Because where you’re driving the pricing. Okay, got it. Favorite book?

Dan Balcauski (41:26):

Favorite book. I’ll say a series. I’ve got this entire bookshelf behind me and one entire shelf was taken up by the Wheel of Time series.

Randy Wootton (41:35):

Oh. Yep, yep. Have you read all of them? There’s a lot of them.

Dan Balcauski (41:39):

I’ve read all of them several times because I started reading them in eighth grade. And much like the folks with the Song of Ice and Fire, he did not finish in time, so three years between books trying to catch up, so I’d have to reread them in order to understand the newest one that came out.

Randy Wootton (41:57):

Oh, got it. Yeah, I’ve read that. I don’t think I’ve read them all. I’ve read several of them, but they were definitely a great impact on me personally. And then favorite influencers, someone that you’re reading or listening to that you think has interesting ideas that you would recommend for our audience?

Dan Balcauski (42:09):

Well, I would say two in two different domains. I would say just in general, I’m a really big fan of Sam Harris and his Making Sense podcast. I’ve bought Waking Up subscriptions for friends and family. I’m really big into meditation. I think he’s doing a really good job of touching, going in depth on a bunch of topics in our world that other folks are not touching as deeply. So I think that’s really valuable. In terms of just general influencers, I really like this gentleman, Roger R. Martin. He was a dean of the Rotman School up in Canada for a while, and he co-wrote a book with A.G Lafley called Playing to Win, who is the CEO of Procter and Gamble. So if you’re really interested in learning about strategy, Roger’s blog is really good. I think his blog is called Playing to Win, Practitioner’s Insights, something like that. Sorry, Roger. But I highly recommend that if folks are into the strategy world.

Randy Wootton (43:05):

Oh, yeah. Playing to Win is one of my favorite books. I didn’t even think about going to listen to his podcast or read his blog, but absolutely introducing that idea of how do you win strategy. A gentleman, when I was at Salesforce, a guy named Pablo Zamita Ramirez, who was my boss, who had worked on that initial framework, theoretical construct when he was at Monitor, brought it to Salesforce, and we used it as Salesforce, and I’ve used it at three different companies. I find it to be one of the best strategic frameworks, approachable, understandable, but super robust in terms of how do you align along those five different variables of the strategy, so great recommendation. Well, Dan, as always, I’ve enjoyed our conversations. I always learn something, and appreciate you spending some time with us today.

Dan Balcauski (43:47):

I really appreciate the opportunity, Randy. It was a blast.

Episode 29

Revolutionizing FP&A: How AI is Shaping Financial Analysis

July 11, 2024


Randy Wootton
CEO, Maxio
Nicolas Boucher_headshot
Nicolas Boucher
Founder, AI Finance Club

Video transcript

Randy Wootton (00:04):

Hello, everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices, where we bring the experts in and around the SaaS segment to talk about what’s going on today and what’s unfolding for tomorrow. I’m super excited to have Nicolas Boucher, who’s joining us from Stuttgart, Germany to talk about AI and finance.


Nicolas has some incredible background experience, was in audit at PWC for seven years. He worked in the corporate sector for eight years at what would be the French Boeing. We’ll talk a little bit about that, his FP&A experience when he was actually head of finance. And then, he did an interesting shift into corporate finance and became a keynote speaker for the past two years and has done a deep dive into AI, specifically tied to finance, and has started something called the AI and Finance Club, which we will talk a little bit about. So welcome, Nicolas. Thank you for making the time.

Nicolas Boucher (00:55):

Yeah. Thank you, Randy, excited to finally show to people how we can use AI in finance because that’s a topic that is in all of the accountants and corporate finance people and CFOs. And I have the chance to spend my day on this topic, so I’m really happy to share that with you and all of your audience.

Randy Wootton (01:16):

I’m very excited. It is, we’re talking about AI in general, revolutionizing all the functions, and each function having to figure out what are they using off the shelf versus what are they creating on their own and how do they actually think about what they do on a daily basis is very different. It was like night and day, a sea change in terms of how things are going to be done going forward.


But before I go there, I’d just like to go back onto your background a little bit because you have one of these interesting career shifts, backgrounds where you started in audit, that’s a classic start, and then you went into the corporate sector. Can you talk a little bit about that transition from audit into corporate, and what you were hoping to accomplish? And you spent eight years there, so clearly you had a very successful career. What was it that you got out of that sector? And then we’ll talk about your shift into the training sector.

Nicolas Boucher (02:06):

Yeah. So I think, as a lot of us who went through the Big 4 career and audit career, it was kind of the door after the university and the college to continue to learn and we didn’t know where to go, but we are still eager to learn a lot. And that’s what I got from auditing. I could work in Luxembourg and Singapore, many different clients. While it’s already fast, you get a really culture of working hard and working well.


But then, I never wanted to become a partner, and I was interested also to have an impact for companies. And when you shift from audit, where you look at the past, and you go to FP&A, where you look at the future, is a really big shift. And for me, after I did kind of three experiences in audit because I worked in a cycle of two to three years, and so I did three cycles there.

Randy Wootton (03:01):


Nicolas Boucher (03:01):

I was done with it, that was two experiences, and also family was also a priority. And with my wife, we both decided to shift to more a corporate side where there is more sort of work-life balance, even though I was still working hard.

Randy Wootton (03:20):

All right. Yeah.

Nicolas Boucher (03:22):

And I found a company in Germany because my wife found a job here, which I already did a training before, an internship when I was younger. And so, for me, I was switching I think five parameters when I moved from audit to corporate. First, I changed jobs, so I was no more an auditor, but I became an FP&A manager. Then I moved country, so from Luxembourg to Germany. Then I moved also language, so you have really in Luxembourg we’re speaking English, French, a bit of German. And then, in Germany I was only talking German and I was not yet fluent in German. And then, I also changed industry, because in Luxembourg and Singapore I was working more on finance institutions, so insurances and funds. And finally, I changed culture, because you went from Big 4 to a big defense and aerospace company, which is more long-term and more kind of almost public companies or institutional companies. So that was a lot of shift.


And what I learned is if people are also in the change process, on all of my career, I learned that you have to wait six months. And you should not be like, because you start, you have the honeymoon phase, everything is new, everything is good.

Randy Wootton (04:48):


Nicolas Boucher (04:48):

And then, after the two, three months you’re like, “It’s really hard.” You don’t have your routine, you don’t have your colleagues. The language is also hard, and you need to wait six months. You need to wait six months to make a point, “Is it really for me or not?”

Randy Wootton (05:03):


Nicolas Boucher (05:04):

Doing a point earlier and being not happy is too early. And at six months, you actually notice a lot of things becomes natural. When you speak, you don’t have to find your words. When you walk across the company, you find the offices, you know your routines, you know what you have to do, you have learned the job. And so, that’s one advice for everybody changing jobs, changing countries, changing language, changing maybe culture, wait six months.

Randy Wootton (05:31):

That’s great. It’s funny, because I’ve thought about in my career there are three variables to think about as you hit those career inflection points is function, industry, and location. And then, you layered in the other two as well as far as language. I just couldn’t even imagine changing all of those at one point. I had an old boss tell me once that when you’re hiring new employees, you need to really wait until 90 days. It’s like a broom. After 90 days, the broom is broken in and you’re going to find out what you really got versus what they said they were going to do in the interview. But I think to your point, if you’re the individual making the change, giving yourself six months to decide, “Was it a good change?”


I know in this job I came out of 25 years in go-to-market, and I’d been CEO twice before but it was always in the go-to-market category and minor shifts between ad tech to market tech to sales tech, service tech, but all on that go-to-market front. And now, moving to the office of the CFO, I was super deliberate about that in terms of wanting to have a new set of challenges, a new set of intellectual stimulation. But to see if the patterns of running a company in go-to-market was similar to running it in the CFO, it’s taken me longer than six months, Nicolas. I’ll tell you that. I’m still learning stuff about how you guys in finance think about the world and how we can sell to you.


And maybe it’s just I’m older and it’s taking me longer to learn, but I do think there is this opportunity when you hit these different stages in your career to do that assessment. Are you happy? Are you being challenged? Are you interested in the problem set? Or do you want to mix it up? And you did that again. So you were FP&A, Head of Finance, and then you decided, “Well, now I’m going to go off and be a corporate finance trainer and a keynote speaker.” What were the ahas and insights you had from your experience either at Thales or at PWC that led you to believe this was your next path?

Nicolas Boucher (07:28):

So actually, it started even before I worked. I noticed when I was younger like a teenager, I was getting a lot of energy from coaching young kids at soccer, football. And then at university, I remember the accounting classes that we had for me, like math and accounting, I had facilities. But I had a lot of friends, it was more difficult for them. So I actually learned thanks to them because I wanted to help them. So I told them the concept and thanks to them I got a good grade because they forced me to learn.


And it continued also in audit when I really loved the part when you become senior and manager and you coach people. And what I noticed is this is something I get a lot of energy from. But in my corporate career, there is only a certain amount of people that you can coach. You have a small team of 10 people, then you can maybe expand to other departments. And also, I didn’t get really a mandate to coach that many people. And there is a technology that exists right now where when you can spend the time to explain to one people, actually you can spend the same time and explain to 1 million people at once.

Randy Wootton (08:44):


Nicolas Boucher (08:45):

And so, I turned to LinkedIn first because I wanted again, the network of PWC and the network of best practices to learn for myself. And then, when I noticed that I had also something to share, I started to post. I started to see that I had an impact. And there was really one day where I noticed that I had something different is that I was using visuals to explain complex problem. And it resonated to a lot of people. I have the Finance Cheat Sheet, 26 million people saw it.

Randy Wootton (09:22):

Oh, my gosh.

Nicolas Boucher (09:24):

When I read this happened and now I have almost 1 million people on LinkedIn, and across all media is more than 1 million people, so it’s crazy to think about that. But I really thought, “Okay, there is something bigger and something also that gives me more energy than just checking invoices or working on a budget.” And I also noticed a lot of people don’t have the opportunity that you and me got. They were not born in a Western country. They maybe didn’t get a proper job, proper education. They didn’t maybe get a mentor that helped them. And so, I wanted to share that with the maximum amount of people. And for this training, also digital trainings, corporate trainings, was the opportunity to do that.


And working in finance, I was really limited to only finance. But my best role in finance was when I was part of the management and I could do a lot of things that were not finance.

Randy Wootton (10:24):


Nicolas Boucher (10:24):

And I have a mind like a really entrepreneur spirit, because my dad was an entrepreneur and I think I saw that and I learned so many marketing and entrepreneurship and networking and sales. And for me, it was frustrating not being able to do that so I think going the entrepreneurship journey helped me get a lot of energy from doing many different things.

Randy Wootton (10:50):

Well that’s great. In my own background have been a teacher and a coach, and I can totally appreciate that sense of just fulfillment you get from working with people and helping them to discover something for the first time as well to your earlier point, that in teaching it, you learn it better I think. Right?

Nicolas Boucher (11:08):

Yeah. One friend told me that teaching is learning twice.

Randy Wootton (11:11):

Exactly, teaching is learning twice. Yep, absolutely.

Nicolas Boucher (11:16):

And to come back to the story where what was really the, I would say, the aha moment was two years after my dad passed away, there was one day the energy was really… His birthday, not birthday, but the day of his death, I don’t know how you say that in English. And I don’t know where it came from, but I really got a big force to push the button to say to all of my audience, “I’m starting to monetize all of my trainings and I’m going to build my first course.” And I just sent out, it was maybe 500 people, and I thought, “Okay, if I get 10 people that will buy it, then I will do the course.” And I got 10 people, and then after, it took me two months to do my first course. But it’s crazy sometimes how I don’t believe in this kind of things like this, they are spiritual, but it was really on this day another energy that helped me push the button and say, “Okay, I go for it. And I try it.”

Randy Wootton (12:18):

As my mother would say, “You opened yourself to the universe and the universe spoke to you.” So well done and congratulations on all the success you’ve had. I think this interesting combination of skills and experiences, but also your inclination and your ability to create pictures, right? I think sometimes finance folks, they sit in Excel and Excel speaks to them, but it’s hard for them to translate Excel into concepts that other people can process. I was an English major, and with my CFO, I’m always like, “Look, I don’t want to look at the model. What I want to see is the pictures and the trends and help me see. Because I can see patterns. It’s hard for me to look at numbers and identify the patterns without those images.” And so, I think a picture is worth a thousand words, but the more when you’re doing presentations that you’re able to give visual representation of interesting data.


I think of the map of Napoleon’s march to Russia and how that, do you know what I’m talking about? That one map and it shows the size of the force at the beginning of the march going all the way in and then coming back.

Nicolas Boucher (13:19):

Yeah. Yeah. Really seeing, yeah.

Randy Wootton (13:20):

Yeah. And so, it captured all these different components in it in terms of size of the army, the weather, and then just the attrition of the army through death and starvation. But it was a massive amalgamation of data represented in a really compelling way. And that picture has stayed with us for 200 years or whatever it’s been. So your ability to bring that together is really extraordinary. And so, now you’ve taken-

Nicolas Boucher (13:43):

Actually, there’s really science behind that, especially now that all of us in finance, we don’t have a problem anymore to have enough data. Data is there.

Randy Wootton (13:44):

Right. Right.

Nicolas Boucher (13:53):

We get a lot of data. And so, the problem is we pass through the data to the management and then we don’t help. And there is a science that says that the brain registers and captures an image 60,000 times faster than a word or a figure. So if you really want to… An advice for everybody working in finance and wanting a bit to be noticed by the management, thinking about the Napoleon map, send the graph that the management will remember and they will, when they talk to you, say, “Oh yeah, like this graph, this trend.” This is what will stick, not a long email, not a nice report. The graph will stick.

Randy Wootton (14:39):

Absolutely. My CFO does our all-hands, and one of the things that he does on his own but I reinforce, is draw circles around the numbers that you want to talk about and draw lines showing it’s going up to the right. And then, everyone will see all the different things and get it. “Get it, it’s going in the right direction” or “Uh oh, it’s not going in the right direction.” So that’s great.


And so, then you’re training people on FP&A in particular and how to represent business and participate in conversations at the management level. And then, the AI revolution takes off. What was it? Everyone’s talking about AI today, right? It’s almost passe. But what was it that you saw with this opportunity as a finance professional and being at this intersection of FP&A and training and just your natural inclination to want to go deep dive into this? Because you’ve been in it for several years now, but even before it became popular. So what was it that attracted you to it? And then, we’ll talk about the use cases that you’re seeing that are most applicable in finance today.

Nicolas Boucher (15:40):

Yeah. So all of my career, I really used technology to leverage my work to be faster but also provide more value. And instead of spending hours and hours stuck on a file, trying to automate to be faster and get home early to have fun. So I already saw technology like this and I’m really curious always on where is the technology going and how can we use it for ourself for work? And when on November, 2022, OpenAI released ChatGPT, so the version that everybody knows now, but November, 2022, I think I got the access one day after it was released.

Randy Wootton (16:22):


Nicolas Boucher (16:23):

And when I got access to that, you know how it felt, Randy? It felt like when you’re a kid and you get this video game at Christmas from your parents or this Barbie house that you cannot stop playing with this. And so, I got access to this and I was like, “Wow, this thing is crazy. You can do so much things.”


And I felt that somebody was going to take away from me this new toy and that it was too good to be true. So I was just, then trying everything that was coming to my mind and then first for myself, then for business, then also for my content. And I started also to research if somebody else was looking at how to do it to use it for business. Because a lot of people were using it to write a poem to their wife or to write a rap song in the style of Mozart, but nobody was really, I think at the beginning, picking up what does it mean for business?


And when I did my research, I didn’t find anything. So I was thinking, “Okay, if nobody’s going to do it, I’m going to spend a lot of time and try and try and also connect.” Because as an auditor and working in a big corporation in different roles, I saw a lot of different roles in finance but also other departments. And so, I know what in finance we need and where we spend our time. And so, I tried, “Okay, how can you use it to write a procedure? How can you use it to help yourself with your Excel file? How do you use it to create scenarios? How do you use it to help you create a cash action plan? How do you use it if you want to write a code for a program, even if you are not a coder?”


And really quickly, the more I was trained, the more I was documenting that. And in February, 2023, I launched a PDF guide that was sold I think 4,000 times. And now I helped, I think in total, 5,000 people with my courses, with my workshops, with my webinars. I help companies like Mercers Benz, KPMG, training their teams. And my goal really is I believe in finance, we are the champions of Excel, we are the champions of ERP.

Randy Wootton (18:44):


Nicolas Boucher (18:44):

We are even often really good at PowerPoint and Power BI and some of us VBA and Python. And I do believe that we can be that good and be the champions of business in AI. And my goal is to bring that to people, because we have the culture of using technology for our job. And with AI, there is a lot of data that we can make sense of and I think finance is ready to use AI.

Randy Wootton (19:13):

I think you’re onto something in terms of finance are probably the most fluent in data, business data, right? Because they use the ERP systems and they’re grinding all that out and they’re presenting the reports for the audit, et cetera. And so, then the question is can they take the leap to using a tool that’s more black box, where they have to trust that there isn’t going to be generated scenarios that aren’t rooted in the reality?


I think one of the things when I talk to CFOs is why they like Excel is they can look at the specific cell and say, “I saw that number and I can trace it. Even though I have 50 tabs open, I can go for my summary and drop through down into all the other tabs.” And when I’ve talked to CFOs so far it’s been, “Gosh, I just don’t know if I can trust the output of the model,” so the hallucinations. So how have you addressed that to make people feel comfortable?

Nicolas Boucher (20:10):

At the beginning, first it was each time you were trying to do even the simplest calculations, you could see from your eyes that there was a problem; that the model that we are all using, so the generative AI models, are by definition generating something, so creating, not calculating. So it will give you the most probable output based on your input. And if you start giving a lot of numbers, it’s not an Excel file that you have in front of you. It’s just a model that will try to give you the best answer. And because of this, you cannot rely on the computation because it’s not made to compute.


So once you have understood that, that the model is not there to compute, it’s actually there to help you compute. It’s there because it knows, “Okay, if you want to do a cohort analysis on your SaaS sales, well here are the three or four metas that you could do. You could do maybe a cohort by month. You could do a cohort by type of products or by that type of promotion.” And then, it will explain to you how to run that either in your Excel file, or if you have a lot of data, in Python.


And then, while you do that, you are not giving any confidential data, you are just explaining your problem. If we two meet on a barbecue on Sunday, we are two competitors, but we are friends since a long time and we work as CFO. And I can ask you, “How do you do your cohort analysis, Randy?” And then you can explain me how to do it without giving me any confidential information. And then, I go back after this talk being smarter, and then I will try it on my own data and I will get the value out of it, because now I have a guidance on how to do it. And on top, then it’s like, I talk after to my best friend who is expert in Excel and I’m like, “How can I do that in Excel because I have a really hard time?” And then, ChatGPT or Gemini will do that as well. They will tell you, “Okay, that’s how you do a heat map in Excel, because you have to do a lot of conditional formatting.”


And then, after you talk about your best friend who is really good at storytelling, and then, “Okay, how can I present that to my management because it’s a lot of data?” And then, you will also get a lot of help in this, and you have all of this in the chat bot which has all of these skills. But you can only make sense of it when you ask the good question.

Randy Wootton (22:42):


Nicolas Boucher (22:42):

And that you also challenge it and you interpret it and you use it in your own environment.

Randy Wootton (22:47):

Great advice. Have you also found… One of the things, we had someone who does this for marketing come in and train our marketing team on how to use AI. And it was a woman, and she said, “Just say please and thank you.”

Nicolas Boucher (22:58):

Yeah. I do that just intuitively because it’s like chatting with a friend or chatting with your team. You always say please or thanks. So it’s just not changing your language because it is just like a chat open and doesn’t really matter. Yeah, adding please doesn’t hurt.

Randy Wootton (23:22):

No, but what she said was it in fact helps, because the AI is trained on language. And the people are saying please and thank you, to your point, in their language in the way they interact with each other. And so, it’s more responsive. I thought it was baloney, but she actually said, “No, no, no. It pays to play.”

Nicolas Boucher (23:41):

Well, thank you is that. Thank you is a permission to the model that don’t swear is really what you expected.

Randy Wootton (23:47):


Nicolas Boucher (23:47):

Rather than choose to save time, rest assured that it will just generate another answer to please you, because the model always want to please you.

Randy Wootton (23:55):

Yeah. And that was the other thing she said, is tell him that it’s really, really important. You’re doing a board presentation. You’ve got to do it right. Give it the extra college try and it’ll come back with yet another answer. And so, I do think there’s this interesting dynamic of it is a machine, but because it’s trained on human relationships, you interact with it in a human way. It’s been fascinating.

Nicolas Boucher (24:17):

A chicken dance. So what you can do if you get an answer, let’s imagine you ask help to get a cash action plan. First because cash action plan is so wide, you can do so many things and you are limited by the context window, so meaning how much output you can get can get from the model, then you will only get a really broad cash action plan. Which if you have experience, you are thinking, “I don’t learn anything here and it’s not going to help me.”


But the technique is to go down two to three levels until you get something super practical. But once you get something that you want to use, then you can ask ChatGPT or Gemini, “Look, review your output, and rate yourself from zero to 10 on how much practical it is and how much specific maybe to a SaaS company it is.” And then, it will give you an answer saying, “Oh, I think it’s at six on 10 or seven on 10. And then, specific to SaaS, maybe on three to 10 because it didn’t know until now that it was a SaaS.” And then, you ask, “Okay, change your answer that you get a 10 on both.” And that is a way to really like 2X or 10X the output you get, because then on these two dimensions, which is practicality and SaaS specifics, it will give you really a much more practical and specific answer.

Randy Wootton (25:48):

Interesting. Well, with that, let’s segue into some of the use cases. We have five, we’ll see how many we can get through. This was based on the pre-brief we talked about and the ones that you thought were going to be most relevant for finance and accounting. Let’s start with automated invoice processing and accounts payable. Help us understand how you think about AI helping in that process to drive efficiency and effectiveness.

Nicolas Boucher (26:14):

Yeah. So now we’re talking about AI and not Generative AI anymore.

Randy Wootton (26:18):


Nicolas Boucher (26:18):

So in AI you have a lot of different technologies. And one of them is OCR, so optical character recognition, meaning that if you give an image to AI, and that’s something that we have already since a year, so you did have to wait ChatGPT for this because it’s not connected. But you know when on your phone or even when you scan a PDF, it can recognize the text? Well that’s the OCR.


So imagine now a lot of companies and a lot of accounting departments, for years, they have gotten an invoice per mail. Then somebody will have that on their table, and then process that directly in the ERP. Well, the first step is to say, “Okay, I can scan the invoice and let all of the fields already in a pre-formatted table, where after the human will say, ‘Oh, when you see here invoice number, then I map it to my ERP invoice number. When you see invoice amount, I map it to invoice amount.'”


So that was already existing the last 10 years, which is something where you always needed a human interaction for the first invoice. Then after, when the same invoice was coming back, then the model was already trained to understand this invoice, so then it was automated and then processed. Then when you start receiving that by email instead of mail, then you don’t even need somebody to scan it, you process it directly.


But now thanks to NLP, so NLP is natural language processing, meaning what we do with ChatGPT, meaning it understand the words, so you don’t need a human explaining that, “When you see invoice number, you have to map it in the ERP with invoice number,” because then the NLP technology will recognize and see and say, “Okay, at 99.9999%, if I see invoice number, I can map it to invoice number in my ERP. And now thanks to that, you almost don’t need any humans in the loop. And you can do that not only on invoice but on receipts.


So imagine all of these mini receipts that are really hard to read, sometimes also handwritten or in different languages. Because now you have also a lot of transformers that will understand Chinese and if somebody is going to China and going after a late night with their clients and inviting them on, I would say on a ladies bar or something like this, “Well, maybe the eye content will not notice that is a ladies bar because it will just book it.” But the tool will recognize it because then it will see, “Okay, based on the name or based on my research on internet, I see that it’s not in line with the expense policy, so I deny it.” And that’s also how you can process things faster, avoid to spend money on things you should not spend. And also, then the finance team is not there to do mundane tasks but more focused on the problems. And that’s also for everybody. It’s better, because you do work on better tasks than tasks that nobody was interested to do before.

Randy Wootton (29:32):

I think you’re making two really, well, a couple interesting points. One is people use AI, and they mean lots of different things and under the category broadly of machine learning. In my first company back in 2015 I joined, it was part of the first generation of AI where we were using logistic regression analysis building models. But it took us, we had 30 data engineers, data scientists that were building the models, and then we had a set of folks that were working with customers as well. And so, you had this level of abstraction between the user of the model and the model. And so, what’s happened now with the Generative AI is people can interact with it directly. But also, you have these other technologies that have been out there like OCR, which are now becoming more accessible because of NLP and just the interface.


You had mentioned a couple of companies I think for this specific use case that you would recommend or are you familiar with, one was AppZen and the other one was Glean.ai.

Nicolas Boucher (30:25):


Randy Wootton (30:25):

Do you want to talk at all about those or any other ones that you would say, “Hey, if you wanted to automate invoice processing and accounts payable, here are a couple of firms take a look at.”

Nicolas Boucher (30:34):

Yeah. So AppZen, for example, was the example I just gave you about this receipt where you go in China, if somebody goes in China. And so, they have their own model where they will read and train the model on your own expenses policies, and then will flag everything or refuse everything that is not part of the expense policies. And they have also been in the market longer than ChatGPT. So they are not like all of these ChatGPT rapper that pretend to be AI, but they just connect themselves to ChatGPT and get the output from ChatGPT.


Glean.ai, the advantage is that they read everything that is on the invoice. So I don’t know if you have experienced that, but when there is a problem with one invoice or when costs increase or when you want to search for cost reductions, then your general ledger is not enough. You have to open the invoice and start to compare invoices over the last two years and start to go into the details. And for this, somebody is either first searching for the invoice, then opening it, then writing all of these details in Excel, and then comparing if we are not over-consuming the service or if we don’t get the increase of price that we didn’t ask, to challenge the invoice.


With Glean.ai, it’s again using the OCR recognition to understand the detail of the invoice and then map that months after months and create an insight, and then flag also the problems and help people to validate invoice because everything is there. They don’t have to go through the 30 pages of the invoice. Already the summary will be on the report from Glean.ai.


And the third one, if you are a small company or medium size and you don’t know which tool to use, but you use something either like Microsoft Azure or Google, they already have those model where you just connect your folder with your PDFs and they have models that for Microsoft Azure is called Document Intelligence. And everything is already made where you just choose the option invoice or choose the option received, and then it will extract directly all of the relevant information that are typically on invoice. Because it’s trained on so many invoices that it will recognize it.


And the advantage is you don’t need an IT team for this. I would say with an appetite for technology, you can do that in two hours.

Randy Wootton (33:07):


Nicolas Boucher (33:07):

Even if you not a tech person. And that really removes the barrier of entry for a lot of people to go from, “I have no process of digitalizing my invoice” to one afternoon after, “Okay, I start to have all of my invoices in a flat table.” Then the next step is, “How can I connect that to my ERP?” And then, if you have an ERP with a easy API, then you just transfer this flat table with the API and it books for you all of the expenses in the ERP or in the accounting system.

Randy Wootton (33:42):

Well, maybe that’s a good lead into one of the other use cases, and we’ll probably just get through one more, is real-time financial reporting and analysis. So if you start out with processing the invoices in the accounts payable and you’re able to automate that process and then have it go to the ERP, what are you seeing in terms of AI that are generating real-time financial reports offering up-to-date insights into revenue expenses and profitability?

Nicolas Boucher (34:07):

You know how until now you have your revenue details in another other ledger and FP&A has to make sense of it, make reconciliation? And then, you need two or three days to understand what are the sales you did in the details and why did you have variances? And now you have Puzzle.io, which is done by Sasha Orloff, who started with the premises that he’s not going to change companies’ sublegers, because either your subledger are in the right tools or not. And if they are not, then he just says, “Okay, I’m not going to work with you.” So he works with startups and what he does, he says, “Okay, we want four conditions. The first, that you are in a bank where we have the API, so Mercury or I think there are a group of banks that you can have easy APIs. So like this, the cash rack is super easy and everything is uploaded and in real time inside your accounting system.


The second one is on payroll. So with Gusto, they also have API, and you get real-time information on your biggest expense, which is salaries, because 80% of our expenses for most of the companies are headcounts and salaries. And then, on payables they have a connection with rent, and then the last one on revenue, connection with Stripe. So with all of these four subledgers, then they can create real-time accounting and all of the SaaS KPIs that everybody needs and are calculating on a Excel file. They do that straightaway when they integrate the four subledgers. And on top of that, they use AI for categorizations to help also generate insights.


But it’s mostly first the value in the integrations. And AI is not solving everything. It’s first do you have your data? And then, AI can help in the mapping, can help in flagging errors. But it’s mostly like do you have the data? Do you have the right data? Then can you map them through integrations where nobody is touching anything, it is just coded once, and coded the right way that you can get value from it.

Randy Wootton (36:32):

Well, I was going to say, I’d be remiss if I just didn’t do the Maxio advertisement here, because Maxio is a revenue recognition, revenue management system. And so, to your point, people that are trying to create the finance tech stack of the future where they do connect via APIs, but then sitting between the CRM and the general ledger to pull all that data together to do the revenue recognition. And then, for SaaS companies in particular, to provide the output in terms of the operating metrics, your gross retention, your net retention, your MRR roll forward, all those different components. So I’ve got to talk to this guy at Puzzle.ai. We’ll cover off on that separately.

Nicolas Boucher (37:07):


Randy Wootton (37:07):

So we’re kind of bumping up against time and I wanted to get through these other ones. So maybe we’ll do a V2 of this, Nicolas if you have time.

Nicolas Boucher (37:08):


Randy Wootton (37:14):

But just to close it out for our audience, I’d love to talk about the speed round. So the speed round, there are three questions. What’s your favorite metric and why? What’s your favorite book? It could be business or personal, and why. And then your favorite influencer, someone you’re following or you think either in the area of AI or in the area of finance that you think is really writing original content versus just putting a spin on other stuff. So favorite metric, what’s your favorite metric?

Nicolas Boucher (37:42):

Well, I like to understand in a company what is the salary by headcount?

Randy Wootton (37:48):

Ah, okay.

Nicolas Boucher (37:49):

Sorry, the revenue by headcount.

Randy Wootton (37:49):


Nicolas Boucher (37:49):

Revenue by headcount, because it helps me understand if the company has a good margin or not, because usually either… And not a lot of companies are trading companies, so if we forget that, a lot of companies, the value is created by the people. And so, revenue by headcount I think is a good indicator to see if the company is profitable or not. Because usually people will tell you the revenue, they will, and headcounts you can find out everywhere. But you will never know about debits, so it’s a good way to feel if the company is profitable or not.


And then, what I also like is for people themself. In my team, often I was explaining to them, “Look at how much value you need to generate. If you look at your salary and the revenue, if you get a salary of 100 and you have to think about all of the other costs, then it means that you need to generate 150 or 200 as value.” So to make people stick that to themselves and feel that they are part of the equation. Because if not, everything is numbers for people that they cannot touch it. But if you tell them, “Okay, if you were a loan, you have to create $150,000 or $200,000 value to cover your salary.”

Randy Wootton (39:09):

That’s great. I know that in my previous incarnation as CEOs, we’ve always had a focus on ARR per headcount or ARR per FTE, so almost like a proxy for revenue. It’s a little bit different. But working for a PE company, they have been laser focused on cost per FTE, and how do you think about creating more efficiencies that drives the EBITDA? Because to your point, such a large percentage of the costs are salaries. And so, how do you think about that? And I think in this hybrid world now where people can work anywhere, it does create opportunities. And AI also if you’re adding augmentation, I know I’ve seen slides going around amongst CEOs I talked to that invest in firms, VCs and PEs are expecting 30% efficiency starting next year driven by AI augmentation. And so, this idea of how much leverage are you getting from AI is going to be critically important for people’s success going forward. Okay. So that was the metric. Favorite book?

Nicolas Boucher (40:11):

So I have to go something a bit non-business and non-finance.

Randy Wootton (40:11):


Nicolas Boucher (40:18):

But still help us understand the world is Sapiens.

Randy Wootton (40:21):

Oh, sure. Right, yeah. Great. Yeah.

Nicolas Boucher (40:24):

Yeah. Because I think when I read it, first, it’s fun to read even if it’s big, but you can stop at any time and come back. And I think it teaches us so much about why are we what we are today and what happened before.

Randy Wootton (40:36):


Nicolas Boucher (40:36):

And it’s a great way to step back and make sense of everything that is happening right now.

Randy Wootton (40:44):


Nicolas Boucher (40:45):

Or personally as a person.

Randy Wootton (40:47):

Did you read the follow on? It’s by Noah Harari I think.

Nicolas Boucher (40:47):

Yeah. Yeah.

Randy Wootton (40:47):

And then-

Nicolas Boucher (40:47):

I think it’s Homo Deus or something like this?

Randy Wootton (40:59):

Yeah, something like that. Yeah, yeah, yeah, Homo Deus. You’re exactly right. I didn’t read that one, but Sapiens was one of those ones, I can’t remember when it came out, but it’s absolutely transformational.

Nicolas Boucher (41:06):

No, I didn’t like the Homo one. Yeah. I didn’t like the Homo Deus because I think it was going on something where it was not that impacting. But yeah, the first one was so good.

Randy Wootton (41:19):

Okay. Sapiens, yeah.

Nicolas Boucher (41:21):

I had also high expectations.

Randy Wootton (41:22):

Yeah. And so, I just looked it up quickly. It was published in Israel in 2011, and then came out in 2014, so it’s been 10 years, which is hard to believe. But yeah, I’ve got it down. This a good one maybe to pull that back up for a summer read, because to your point, it was really just eyeopening when I read it. Okay. Favorite influencer, so someone that you like to read in the morning. You wake up in the morning, you grab your cup of coffee, who are you reading that’s providing interesting ideas and insights?

Nicolas Boucher (41:51):

So it’s less reading and more watching.

Randy Wootton (41:54):

Okay. Watching, than.

Nicolas Boucher (41:56):

Two person, a bit in the same area, is Scott Galloway.

Randy Wootton (42:00):

Of course. Great, awesome.

Nicolas Boucher (42:02):

Because he has a really spiky point of view, and you might accept or not what he says, but I really like that he has his own point of view, especially on two things. Basically, technology is not good for everything and that we all let TikTok coming into our words, but TikTok is managed by Chinese.

Randy Wootton (42:26):


Nicolas Boucher (42:27):

And also, I think it’s more American-focused, but on the youth. The second one is, I guess not a lot of people know him, is Shawn Kanungo.

Randy Wootton (42:36):

How do you spell the last name?

Nicolas Boucher (42:38):

Yeah, so K-A-N-U-N-G-O. And I talk to him. So it’s a guy who is doing a lot of keynotes, and he has a really spectacular style of doing keynotes on innovations.

Randy Wootton (42:54):


Nicolas Boucher (42:55):

And you need to look. His keynotes are, I think, the best in terms of experience. And I love the fact that he makes, I would say, both key results with these keynotes. First learning, so you learn something and you reflect. But second is also really entertaining. And for me, who is also doing keynotes, is I see that as an example and a path to follow; that if you take time of people, if you are in front of people digitally or live, and even now in this podcast, if you take one hour of people or one hour of 1,000 people, then you owe to the people that they have fun and that they learn something. And for this, I think you have to work for that and you have to be conscious about this. And that’s why I really like those two, Scott Galloway and Shawn Kanungo, because they have each in their own style great learnings for me, but also for everybody who is just watching them. They are really entertaining and insightful.

Randy Wootton (44:06):

Wow. I could not think of a better way to wrap this episode because that’s our ambition. I don’t know if we will achieve it, but it would’ve not been because of you, because you did a great job in sharing some insights in terms of your background and experience and what you’ve seen unfolding with AI and its specific use cases. So thank you, Nicolas, for your time. It’s really been a great pleasure.

Nicolas Boucher (44:25):

Thank you, Randy. And call to action to all of the audience.

Randy Wootton (44:28):

Oh, that’s right. That’s right.

Nicolas Boucher (44:31):

If you learned something today, share it around. Because I think if you are listening to that, it means already you are in the top 1%, and you owe to the others to bring them with us to the learning path. Because AI is going super fast, and there are some people that are maybe either not as lucky or maybe don’t see that, but you need to bring them with us and teach them and show them the value of it and also the risk and limitations.

Randy Wootton (44:59):

Right. And so then, sorry about that, the call to action. People can find you on LinkedIn, they can join the AI and Finance Club, where if they wanted to learn more about what’s happening in AI at the intersection of finance. You have a ton of materials there they can access and they can be part of the conversation. And to your point, they can pay it forward and help all of us get better together.

Nicolas Boucher (45:20):

Exactly. Yeah. I just wanted, if people don’t want to join us, it’s not my intention for this podcast. I really want to teach. But in the AI Finance Club, it’s really the place where if you are a CFO, if you are a professional CFO, if you are just touch anything about finance and want to learn, but you feel that alone is not enough because it takes a lot of time, then you can use me, you can use the experts that are with me. Because we do the work, and then you just get every week just something you have to consume in five to 50 minutes. And one time per month, we also meet in a masterclass where we can learn from each other and I bring experts. And I found that was the best way to learn because we all come from different backgrounds. A lot of people also bring their insight, but all of the questions that we receive, if we answer them, then everybody benefit from it. And it’s great to learn together.

Randy Wootton (46:17):

All right. Well then, that’s where we’ll wrap. Thank you, Nicolas, for your time. I really appreciate it.

Nicolas Boucher (46:21):

Thank you.

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Episode 28

The Power of Intent: How Clear Communication Drives Success

June 26, 2024


Randy Wootton
CEO, Maxio
Amber Wendover
Principal, Thinking People Consulting
Tom Perry
Chief Career Officer/Founder, Engaged Pursuit

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Video transcript

Randy Wootton (00:04):

Hello, everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices, where we bring experts who work in and around the space of SaaS and help us understand what’s happening today and what’s going on tomorrow. I am delighted to have two people I’ve known for a very long time join us, Amber Wendover and Tom Perry. Tom and I have known each other basically since I’ve been in a professional setting outside of the military. From [2000], we worked together at Avenue A, which became aQuantive. I liked him so much, I brought him over to Microsoft when we started in 2004, and he worked with us there in 2012 when he made a jump into L&D, and we’ll talk a little bit about what that is and why he had that career change.


Amber also, I didn’t know her back in 2000, but started to get to know her in 2006, when she joined a group that we were doing building out Microsoft’s search engine and search media operations. She spent time at Microsoft, made the shift into L&D in 2008, and then has been deeply involved with unlocking people’s potential since then. And so we’re going to talk about the seven secrets of success today and how CEOs need to focus on unlocking their peoples’ potential. But welcome, Tom and Amber. Really excited to have you guys.

Amber Wendover (01:24):

Thanks, Randy.

Tom Perry (01:24):

Yeah, thanks for having us.

Randy Wootton (01:25):

So maybe, Tom, since I’ve known you the longest, why don’t you start with that career transition. I know how much, when you started as a manager in our organization, how much you cared about the people and trying to get the most out of them and really took on all of our work around management excellence. But what was it that you were like, “No, no, no, this is what I’m going to go focus my career on going forward”?

Tom Perry (01:47):

Yeah, you’re right, Randy. I consider myself to be a people builder. It’s sort of at my core. I love to build teams and culture and organization, and I did that throughout my time at aQuantive and Avenue A with you and throughout my experiences at Microsoft. And for me, I experienced some bumps along my career path. I was experiencing a pretty wild ride at Microsoft, and then all of a sudden, like with most folks in their career at some point, I experienced quite a big struggle, and I was not in an organization where I was thriving. I found work that I was doing not to be at my core strength, and I really struggled for quite a while.


And I really learned that support within that struggle, support for people like me, who were doing really well and then all of a sudden hit some sort of rough patch, just didn’t exist, and so I decided to think about that experience for myself and build a solution, build a business, out of that experience. And so I experienced something firsthand and have been doing some consulting business around tech and people’s experiences within the organization for just about nine years now, and it’s going really well.

Randy Wootton (03:13):

Well, that’s great. I think it’s part of that finding that passion, finding what you really care about and trying to align the avocation with your vocation.

Tom Perry (03:21):


Randy Wootton (03:22):

And just to be clear, you liked it when you were working with us, right?

Tom Perry (03:24):

Oh yeah.

Randy Wootton (03:24):

It was some other group that you were working with at Microsoft where you weren’t feeling fully engaged and-

Tom Perry (03:28):

That’s right. Wasn’t feeling the love. Yes, yes.

Randy Wootton (03:32):

Okay. But I love the other thing, Tom, is you talk about this idea of the forgotten community. Can you define what you mean by the forgotten community, because I think it’s a really interesting sweet spot that you’re focusing on?

Tom Perry (03:43):

Yeah. It’s really that core professional, that varsity squad, I like to call it, those folks who are in the middle, doing the work. I found that a lot of organizations focus on the edges. They think about the new employees, those college hires, those interns who are coming on board, and then, of course, they think about those executives and the senior leaders who are defining the strategy, helping to drive revenue, getting new products out the door. But those folks who are in the middle, those individual contributors, those frontline managers, those high-potential varsity players, unfortunately those folks don’t get a lot of love. And I was in that community for the majority of my career, and when those individuals hit a rough spot or need help with stuff like manager relationships or working with other team members or just feel stuck, there just wasn’t a lot of love there, and there continues to be, I think, a lot of need to support that community.

Randy Wootton (04:49):

I think that’s great. I know just from my own experience, that, and well, I’ve been studying and failing at leadership since I was 18, but just in building organizations, that first inflection point of where you move from an individual contributor to a manager and you’re being recognized and rewarded for all the work you did as an individual contributor, where you were probably out in front and leading the way, and then all of a sudden you have a group of people who aren’t necessarily all type As or aren’t necessarily the strivers, and how do you really bring that initial team together and learn how to be different is a really important career transition. And we called it at Microsoft, and have continued to call it, management excellence. And there are very few companies that are able to invest the money and time in that development area. They do spend time, for example, at the leadership level, to your point, how do we get the effective leadership team? Well, great.


And then you, Amber, similarly had an epiphany in your career, having been at Microsoft with us as a search media strategist, operation and sales, and then in, I think it was 2008, you made this transition to embracing L&D and working with Insights, which we were actually using at Microsoft in terms of helping people better understand their interpersonal effectiveness, their style, et cetera. So tell us a little bit about your career journey. What was the insight that you had while you were at Microsoft about what wasn’t working for you and how this led you down this new path?

Amber Wendover (06:16):

So Randy, I’m a salesperson. I’ve always been a salesperson. I thought I would have a phenomenal career in sales, and was at Microsoft when we were getting MSN.com up and running. And at that time there was a lot of early career people that were starting, myself included, although back then, I was in my mid-20s and felt like a grandma, because we had a lot of people who were starting just out of college and didn’t have business acumen and professional savviness, and didn’t understand how to communicate challenging situations with grace and how to manage up to their leaders.


It happened by happenstance. I just got really interested in the human dynamic of people, and was like, oh my gosh, I can sell. What if I sold things to people? What if I sold people to people, basically? And started helping people understand, okay, this is what it means to have personal power and presence. This is what it means to manage up, this is what it means to communicate, and fell in love with Insights, the personality assessment, and actually was really inspired by one of the facilitators that was at Microsoft and I was like, I want that job. That’s what I want to do for a living. Microsoft wouldn’t give me that job, so it’s been a little bit of a trial and error to get enough experience to be able to end up being where I’m right now in my career. But I love bringing people together.


And I just want to echo what Tom said, we get lost in the middle. And so I think when you go to the middle, it’s almost like you have two paths, you can either stay as an individual contributor and be successful or you have to be a manager. But if you want to switch careers in the middle of that, your functional group, I think Tom and I are actually really lucky that we were in a group where there was this guy named Randy, who was our general manager, who allowed us to switch careers and still have a phenomenal relationship with Microsoft because I actually think that’s really unique, Randy. I don’t think that happens to everybody.

Randy Wootton (08:20):

Well, thank you. I think that one of the advantages of being at a large company is you can help people make transitions, and if you’re focusing on the whole person and trying to figure out what is it that really makes them excited, how do you have them be great contributors in different paths and make that transition is a great luxury. It’s one of the things we take great pride at Maxio. We’re much smaller, we have about 240 employees, but really celebrate those individuals who discover their next adventure at Maxio. Because you spend all this time and money to hire them, and they usually have an enormous amount of experience, background, and knowledge, and to lose that from the organization is crushing, so if you can redeploy them, like we’ve had people come into BDRs who have gone into customer support, who have gone into product management. We’ve had support folks move to product management. I think I have one guy who’s on his fourth job, and he’s only been here like five years.


So I do think there is this balance in terms of coming in, making an impact, making a name for yourself, and if you are one of those people, one of those HIPOs, which both of you all were, how do you meet those folks, as they say today, where they are and say, “Where do you want to be?” And I think having that conversation, which we probably had, which I have with everybody, is, “Tell me where you want to be in five to seven years. What does that look like in terms of the type of work you’re doing, the type of role you want, what industry you want to be, and then what can we do for you, in this case at Microsoft, to get you on that path?” And you have that conversation. It is all about investing in the people, and software is a people business.


Well, great. Well, it’s just been great to watch your careers unfold, and then to reconnect at this stage and see how much you each have done just makes me so happy and grateful for what we were able to share. One of the things we were talking about for this podcast, in particular, was focusing on those seven secrets of success for CEOs, which I’m doing a little bit of writing about, and we shared them with you and people can find it on our LinkedIn in terms of driving results, establishing a winning strategy, shaping values and standards, and a couple of other ones.


And you guys, classic you all, said, “Yeah, Randy, we like the seven, but we think there’s an eighth.” And I was like, “No, no, no, no, there’s only seven. There isn’t an eighth.” But maybe, Tom, because I think you were the one that initially suggested an eighth, can you tell me what you think we’re missing and what should be the eighth secret of success for successful CEOs?

Tom Perry (10:37):

Yeah. Well, I love the concept of seven, Randy, but I am going to push you to maybe go for an eighth one, and your last one around investing in your tribe, I think is so critical for leaders, especially in a startup kind of environment, a group that might be forming or storming or norming. You as that leader have to have support. You have to have your coach. You have to have your executive committee. You have to have the community around you that’s going to allow you to be the most successful. And I wonder if your folks need that tribe, as well. Your peoples’ tribe, I think could be that eighth secret to success, going from that kind of I focus as the CEO or CFO within an organization to maybe more of a we approach. We grow, we learn, we need each other and a community to grow. That’s where I think organizations can really thrive, is focusing on that eighth crucial part of success.

Randy Wootton (11:45):

And Amber, how about you? How would you think about the eighth, the me versus we alignment?

Amber Wendover (11:51):

I echo Tom, Randy. I think you’re going to follow up with us in a week and say, “You guys, I hear you. I have eight secrets of success now.” There’s two things that come to mind. One is a model that I absolutely love is it’s called the It-We-and-I. And so in the most simplest forms, that it is our business. How do we make money? What do we need for profitability? Who do we need to hire? Roles, responsibilities, functional customers, all of that stuff, right? I think we talk about this all the time. We as a company, it has to be successful. The we part of that model is the people with this kind of overlay of cross-team collaboration, our customers, marketing has to work with sales, operations has to work with finance. We talk about kind of cross-teaming all of the time.


And I think this eighth secret of investing in your broader group, the peoples’ tribe, it really hits on the third part of this model, which is the I. It’s where our enthusiasm comes, our engagement, our passion, our purpose, our mission. It’s helping us individually be the best version of ourself that we can possibly be. And Randy, to your point a few minutes ago, I remember so clearly the day I decided to leave Microsoft and I was going to go work full-time for Insights Learning and Development and I wanted to come back and be a facilitator at Microsoft. Insights said, “You have to go to your GM and get them to sign off on letting you turn around and come back.”


And that person was you, Randy, and I was so incredibly scared to send that email to you. And if I would have had this model and really thought about the I, right? What excites me? Where’s my passion? Where’s my enthusiasm? You said yes. I don’t even know if you remember. You wrote back with a yes and was like, “Absolutely.” And I wish there could have been a more collaborative conversation, and almost like I got so worked up and scared that I was letting Microsoft down and I wasn’t able to articulate how my unique value proposition could actually better Microsoft and make me happier. And so I think that I, the eighth secret, let’s invest in our people, is so important.

Randy Wootton (14:13):

It’s funny, because I fundamentally believe in that, but I hadn’t articulated it in the seven, so you’re making a strong case, both of you all are in sales, to argue for an eighth. One of the things that we do, as you may remember probably, back at Microsoft, I’ve had book clubs and had people get together because we always talk about operating at the edge of our own ignorance, and that means exposed to new ideas, new concepts, and how do you grow. We’re doing that at Maxio, as well, and we read a variety of books.


The one that I’m reading right now is Cultures of Growth, growth cultures versus genius cultures. And this idea of how do you create that environment, what you guys are describing, where people feel like they are empowered to be their full self, they’re feeling challenged, and they see it as a collaborative experience versus what I think Microsoft was when we were all there, was it was really a culture of genius, genius culture, where you were rewarded and recognized for the best idea. You would walk into the meeting and the person who won points because they were the smartest person in the room would take everyone else out.


And I give an enormous credit to Satya, because all the people who stayed there and done very well with Satya and the stock price, has said that within the four years or five years that he was there, he was able to absolutely transform the culture through this focus, I think to your point, around leadership and management and helping people unlock their potential. So I guess it’s a question for you all, are you familiar with that growth culture versus genius culture construct, and how do you use that in your own coaching or experience?

Amber Wendover (15:41):

Yeah. I love the book, Randy, that you’re talking about. I also love Carol Dweck’s book Growth Mindset, I think-

Randy Wootton (15:47):

Which is the original text, and this woman, I think it was Mary something, I was looking for it, built on that, and I think had her as her advisor.

Amber Wendover (15:54):

Yes. Yeah. It’s brilliant, right? You know I have a 20-year-old son, and even in college they’re talking a lot about growth mindset and creating this space where I think that, at the end of the day, we’re all human. So if you believe that we’re human, and bear with me for a second, if you believe that we’re animals that belong together, right? We’re pack animals. Randy, I want you to like me. Tom, I want you to like me. I want to have a good hour with you guys today. And so if we’re animals and we belong together, we’re meant to be together, and so in order for us to thrive together, we all need to be at our best.


And so I think this whole notion of a growth mindset and a learning organization, it’s like at the end of the day, the way I think about this and the way I use it is like what do you need to be at your best, and how do we put you in a culture that allows you to be at your best and values that unique perspective? And then with values and competencies and all the structure around a culture that a company has, it’s like then we can put the building blocks together so that we’re actually building whatever it is we’re going to build. I don’t know if that makes sense.

Randy Wootton (17:04):

Yeah. No, that’s great. And so Tom, how about you? This growth mindset, the growth culture, which is the newer idea, are you playing with that or seeing that play out in your consulting?

Tom Perry (17:17):

Yeah, absolutely. I think that is crucial. I mean to think in bigger terms, to think around the corner, to be more strategic overall. But I’ve really found, Randy, that in order to do that effectively and to lead cultures into this new, high-paced, ever-changing environments, people miss the real basic core of humanness, which I have found to be authenticity. I have found that people in high intense cultures, like we experienced at Microsoft, where you have to be the best in the room, you have to come up with the best idea, folks become a little robotic, and they feel like they have to have the best answer at all costs.


And I have learned over time and in my consulting business that the best leaders are ones who show up as their true selves, who are authentic, who don’t have all the answers, who are inspiring, who can have meaningful conversations, who talk about their weekends, who talk about their families, they want everyone to get along and to work well. And that’s really the secret to great leadership and growth mindset and ever-changing environments, being that human is really the path to that success.


And I’ll go back to one thing you told me, Randy. This is during my early days as a manager of Microsoft. I had made that transition from IC land into manager land about a year after I started within the company, and I was really stressed about all of those elements of management that we’re all taught to convey, the hypercommunicative, all about results, making sure you’re maximizing people’s strengths, having the swim lanes defined. And I remember coming into your office and having a one-on-one with you, and you said, “You know, Tom, people don’t care about that stuff as much as your manager. They want to know you, they want to know Tom, they want to know who you are and what makes you tick and how you’re going to get them to a success.”


And that was so impactful to me. Taking that shield down, taking that wall down, not being that robot has just been really impactful for me, and so I take that into my business today and help people every day be more authentic, and that’s what I’ve found to be the real strength to being a good leader.

Amber Wendover (19:51):

I think about you and actually Anna Collins, who was a leader when we were there, and I was young in my career, but you guys, I think, created a growth culture without the title of it being called a growth culture because we had the ability to explore and experience and make mistakes. I made so many mistakes at Microsoft, and I remember different leaders throughout my time at Microsoft said, “Amber, what did you learn from this?” And as long as I had a learning, nothing was held over my head. And if I couldn’t figure out the learning, you guys helped me find the learning, right? Anna was notorious of this. And so this whole premise of growth culture, we’ve been doing it for decades, it’s just now we have a label. And I think if you’re a small business, a startup, remember that you’ve got to create a space for your team to be successful, and part of that success is making mistakes and figuring out who they are.

Randy Wootton (20:52):

So let’s go there. I think that you guys have both… Well, thank you for that walk down memory lane.

Amber Wendover (20:53):

You’re welcome.

Randy Wootton (20:58):

I appreciate that. I do think that was kind of both Anna, who was my boss at the time, who’s a very close friend, shares the same commitment to people and development of people. Look, we were both in the military, and I think a lot of people are like, “Well, the military is robotic.” Not really. The military, people don’t get paid a lot of money and they’re out there to do missions and they’re working super hard. And so you’ve got to get at the essence of mission-oriented, you’re there to do service, et cetera, but then also how do you make people successful because they’re part of this machine? And so I do think that was something we bring with a real empathy and desire to help people become their best.


The thing that you mentioned, Tom, and you reinforced, Amber, is this idea of authentic leadership. And honestly, it’s interesting I gave you that feedback way back then, Tom, because it’s something I work on regularly.

Tom Perry (21:46):


Randy Wootton (21:46):

Because I think, with my disposition and personality, I tend to be about results, and I want to get to know you in the work that we’re doing. And so sometimes people feel that’s very transactional or it could be intimidating. It could be like, “Okay, what did you do this week? Let’s talk about it and let’s solve problems.” And to your point, Tom, part of it is backing up and just letting them see who you are and being a bit vulnerable. And I think I may have started this at Microsoft, but at Maxio I send out, it’s not consistent, it’s probably every couple of weeks, a thing I call View from the 30,000 Feet.


And it’s usually I’m coming back on an airplane from somewhere, and I’m giving a perspective on the meetings I’ve had or where I’ve been, in part because I remember when I wasn’t CEO, I always wondered what the heck CEOs were doing. And part of it is also just speaking to the pathos, when Aristotle talks about eros and logos and pathos, it speaks to the humanity of, “I was at this trip and it’s been a long time being on the road and I can’t wait to see my family,” but there’s nothing transactional in it. There’s nothing about, well, sometimes they’re about business results, but the whole idea is to provide a view into who I am. And so I hope when people who knows how many read it, when they see, it’s like a different side of me. And as CEO and as leaders, I think it’s so important to show that you’re human and that you make mistakes.

Randy Wootton (22:59):

I think it’s also important, especially in this hybrid community, hybrid work, the how do you create connective tissue with people? So one of the things that this team told me in my executive meetings was I tend to just jump into the results and, “All right, let’s talk about what happened last week. Let’s get going,” and we do 10 to 15 minutes a round of good at the beginning of every executive meeting, and the round of good is what good thing happened to you over the last week, over the weekend? Did you go off and do this? Did you do that? And it’s this really nice, connective time which I, in my core being, am like, “We’re wasting 15 minutes. We could go solve another problem.”


But I think, to the point that you guys are both making, is for an organization, especially in this new reality that we’re working in, is how do you create human connections, right? It’s all about relationships. So maybe I’d ask you guys, maybe Amber, you could start, is what are some of the specifics? You’ve worked with a bunch of companies now, a bunch of early-stage companies, when you go in and you’re talking to probably mostly a technology leader type, what are the recommendations you’re making to them so that they can build this growth culture so that they can help set the context to unlock people’s potential?

Amber Wendover (24:10):

I think the first thing that we all need to do, no matter what level we are in the organization, is think about our brand. And so even when I listened to you, Randy, and you talk about you’re results-oriented, getting things done, I mean, part of the reason why we reconnected is because Tom and I reached out to you and said, “Hey, Randy, we need some help.” And you were like, “Oh, I have an idea. Let’s do this. Let’s get on a podcast.” So it’s like own your brand, and I think knowing your brand and owning your brand right there humanizes you.


So I think one thing that everybody could do, CEO, all the way down to the organization, take 20 minutes, turn off your computer, turn off your phone, and sit down, and I’m not telling you to leave your job, so don’t worry, but it’s the last day of your job and we’re all there to celebrate you, what do you want said about you? Write that down and feel really good about that, because if you know what you want said about you on your last day of your job, now you have it written down, now you can put it on your piece of paper or you can tape it to your desk, you can have it in your journal, on your phone, reflect on that and say, “Okay, am I doing the things every day that aligns to this impact statement that I want to be said about me when I leave my job?” It’s the most simplest, but yet maybe the most powerful exercise that I think all of us can do.


And then the other thing I tell people is state your intentions, and even if you have unintentional impacts. So it’s like knowing that you’re a drive for results type of guy, Randy, then just tell me that, right? “Hey, I’m a drive for results type of leader, so this is what I do. And Amber, if you need something different, let me know.” So I think as a leader, when you ask your team, “Hey, if you need something different, let me know,” that creates a place where we can have a discussion and a dialogue. And so if you say your impact and if you need something different, let me know, then, “Hey, Amber, what’s your impact?” Right? If you’re my leader, Randy, “Amber, what’s your impact? What do you want your impact to be?” And I think you create a discussion and that creates a culture of growth, authenticity, trust, I mean all the things we’ve been talking about.

Randy Wootton (26:19):

Those are two great points. Tom, did you want to build on either of those, or do you have another suggestion before I react?

Tom Perry (26:26):

Yeah, I’ve got a couple. And my focus, Randy is more on those frontline managers. So Amber is looking at the executives and those senior leaders. I love that middle, varsity squad, as we talked about earlier, the newbies to management, the HIPO community. And I totally agree with Amber, I think your brand is critical. I call that your story, so what is that elevator pitch that you have as your discussion around where you want to go and what you’re doing? You know, Randy, that people have those kinds of conversations all the time, whether it be at the water cooler or over Zoom or during formal career discussions, having that is critical. I also love the intent piece. I think that is critical to management, letting folks know where you are headed in a particular conversation or where your lens is in a particular dialogue.


I also think it’s really critical as new managers, in particular, to let go. I think that new managers who are coming from that IC community have a tendency to hold onto that control, try to have that power, and I found real strength comes from those leaders who can empower individuals, have folks think about solutions. You don’t have to have all the answers. That really has helped leaders evolve and grow and become true organizational heads over time, so that’s been one piece of advice that I give them.


And then I also think, just sort of tactically, I think as you’re doing within your current organization, Randy, I think creating time just to be human is really critical. So having those first few minutes to talk about the weekend, to create time maybe at the end of a discussion around feedback, so how did this conversation go for you? What did you learn from this? What are you going to take away from this conversation? I think in lots of Zooms and team meetings that we’re doing, we’re go, go, go, we’re solving problems throughout the whole hour, and if we can just tactically give us some room to talk and to connect, I think that can make a world of difference, too.

Randy Wootton (28:32):

Great. Great recommendations. A couple of specifics that we’re doing at Maxio right now, for example, is the book club. So the book club, I love reading books, and so people find it… We have had 5 to 10 people show up for these book club meetings, but it’s an opportunity to get us all to know each other, and it’s something I really like doing anyway, so I facilitate that. We also have water cooler times where people just get together and chat. We also have a program where, I think it’s like once a week, we have someone who says, “Hey,” you show up, and they talk about who they are and where they’ve been and what they’ve done. And so how do you create these opportunities for connective tissue when you don’t have as much of an in-person dynamic? I think that’s great.


I loved your comment about the personal brand, Amber. I do think now I’m 56 or something, you start to think more about your legacy, like what have you done and who have you lived? Who’s going to show up at your funeral? What are you going to fill between the birth date and the death date, other than the dash, right?

Amber Wendover (29:31):


Randy Wootton (29:32):

I went through this exercise. I’m in a program, it’s a leadership program I’m doing for a bunch of years, it’s called Pathwise, Pathwise Leaders. Highly recommended it. It’s a yearlong program. It’s a four-year sequence, and I’ve done it several times now because I’ve just got to keep learning it. But we did a exercise this last time, which was for the people who love you, who know you very well and who love you, how would they describe you?

Amber Wendover (29:56):

Love it.

Randy Wootton (29:58):

What are your strengths? How do you show up? And so part of that is the positive idea of the legacy, but you do it through the lens, pick two people. Pick your mom and pick your best friend or pick someone at work, what would they say? The people who love you, not the critics, but the people who love you. And I thought that was a really powerful exercise for me because I know, as a CEO and, gosh, I don’t know, eight, nine years now, in roles at different companies, it’s super lonely. And so part of that idea of having that peer group and that build your tribe, for me, it’s around a mentor who’s been in the context you’ve been in who can give you specific advice. It’s about a coach who can help you with interpersonal effectiveness. So managing the board, managing your team. It’s about having a peer group. So I belong to Vistage. There are other groups out there, like YPO and EO, where you’re able to be in a safe space and talk about things you’re struggling with.


And the fourth component is just having a peer group of people who know you really well and who love you, and when you come to them and you have some crazy idea they’ll say, “Well, that doesn’t seem resonant with who you’ve been and who you say you want to be.” And I think the CEO job is really lonely, and if you don’t have that dynamic and support structure in place, it can feel like it’s you against the world. And so this exercise of thinking about who loves you and what they say about you is a really affirming opportunity. And so to your point, Amber, I think it’s both this building your brand and taking a minute to say, “You’re okay, we’re okay.”

Amber Wendover (31:26):


Tom Perry (31:26):


Randy Wootton (31:27):

The other thing you said, which is one of my favorite tools that I use, is the most respectful interpretation. So when you’re having an issue with someone, you’ve got constructive tension, you feel like it’s gotten a little personal, it’s to say, “Well, what could be the most respectful interpretation for what they’re saying?” And so you try to give them the grace or you’re gracious in letting them, they had a bad day, their kid was sick, they were up all night, or something along those lines, and try to say, “What could their intention be?” And if it’s not clear, ask them. Say, “So right now, I’m not feeling great about this or I don’t fully understand. Tell me what your intention is of your questions or the intention of this line of inquiry.”


I know, to your point, Amber, with my personality, it is often super helpful to just say, “Hey, here’s my intention. This is what I’m trying to accomplish. If this isn’t working because you’re feeling the dynamic going sideways, let’s back up. Take a break, go for a walk, come back. But my intention is to be in relationship with you. My intention is to drive business results. How do we do that most efficiently and effectively?” And it’s like a reset for the conversation and the experience.

Amber Wendover (32:36):

Randy, I thought of two things when you were talking about it’s lonely at the CEO at the top. I went through Conscious Capitalism leadership training when I worked for Whole Foods, and one of the things that they encouraged us to do, which I thought was brilliant, is first of all, they reminded us we’re having impact on each other and we don’t even know the impact that we’re having.

Randy Wootton (32:55):


Amber Wendover (32:56):

So they said, “Find somebody that has been in your life 10 or 15 or 20 years ago, call them up, ask them how you impacted them.” And it is such an amazing exercise. If we all did that at work, I mean, think about today, Randy, I told you a story about me being worried about asking you to let me come back to Microsoft. That story impacted me way more than it impacted you, right?

Randy Wootton (33:18):


Amber Wendover (33:19):

And your response was just, it was awesome. And so I think if we all knew these tiny, little moments that have big impact on each other, and if leaders would ask their team members and former team members, I think that would be really helpful. And then on most respectful interpretation, that’s one of my awesome tools, too. I love it. And we’ve evolved it a little bit to the… Have you heard of the rule of three when it comes to MRI?

Randy Wootton (33:46):


Amber Wendover (33:46):

All right. I know you’re a rule guy, right? A rule of three, it’s very [inaudible 00:33:50]. First time somebody rubs you the wrong way, just let it go. Give them MRI like, “I’m going to assume that we had a miscommunication. You’re having a bad day. I’m not going to let it stick with me.” Second time, that same person, something happens, rubs you the wrong way, second time, it’s a coincidence. So maybe we have a 9:00 meeting, I’m running 15 minutes late, maybe 9:00 is really hard for me because I’ve got to get the kids off to school or whatever.


So I’ve been late to the meeting two times. You don’t want me to be late. So you might say, “Hey, Amber, I’ve noticed the last two times we’ve had this meeting at 9:00, you’ve been late. Is there something going on?” And then I can say, “You know what, Randy? Yeah, 9:00’s really hard for me. I’ve got to get the kids out the door, I’ve got to get the puppy, whatever. If we could start this meeting at 9:30, that would help me.” So you’re like, “Great, we’ll start the meeting at 9:30.” And then you tell me punctuality is really important to you, right?

Randy Wootton (34:44):


Amber Wendover (34:44):

Third time something happens, start the meeting at 9:30, Randy, I’m late. Third time, it’s a behavior.

Randy Wootton (34:51):

That’s great.

Amber Wendover (34:55):

You have to address that behavior. You have to hold me accountable, set expectations, let me know if it’s going to get in the way of my job, my performance or whatever. Because if you don’t hold me accountable to that behavior and you ignore me, or what they say now, you ghost me, and you just stay quiet about it. You’re excusing my bad behavior, so you’re in this with me. So I just think MRI is such an awesome tool, and then I love the rule of three on top of that.

Randy Wootton (35:22):

Oh, that’s great. And then the other thing is if you’re a leader and you allow that behavior, you’re sending signals to the rest of the organization that the punctuality is not valued. And you know me, if you’re not five minutes early, you’re already 10 minutes late, so let’s just be clear about how important punctuality-

Tom Perry (35:37):

We’ve learned from the best.

Randy Wootton (35:40):

It’s like high school, just have your meetings go for 50 minutes and then you’ve got 10 minutes to go to the bathroom, and then get ready for your-

Amber Wendover (35:46):

Let’s set the norm that the meetings are running for 50 minutes.

Randy Wootton (35:49):

That’s right. Set the norm. Set the norm. Tom, did you have a reaction to that, or I had one other thing I wanted to bring up, but please, was there something about the MRI or the intention that you thought resonated for you and what you use in your practice with the manager group?

Tom Perry (36:04):

Yeah, I just think that creates such clear communication. I think as you mentioned before, Randy, with all of our hybrid working styles and being on Zoom and Teams, it’s now important more than ever to have crystal-clear communication. So I think having intent, having that MRI, that’s just going to help you be a great leader and communicate really effectively with your team, whether they’re next to you in the office or across the globe.

Randy Wootton (36:31):

I think, just two other thoughts. One is I love Insights, and I’ve done DISC and I’ve done all those other things. I talk to people about if you do it, one, it indicates, so for CEOs that are listening and they haven’t done that, I think it’s an incredible mechanism, relatively low cost, we’ll talk about this in a second about how to budget for this stuff, but Insights is a way for you to create better understanding of how people interact with each other and communication styles.


I tell people it’s like a year’s worth of one-on-ones. If I get your Insights profile and you validate it’s true or 90% true and I give you mine, then all of a sudden you can have this really powerful conversation about, “Oh, you process the world this way. There’s no one right way. There’s different ways,” and I think building that collective understanding of the different colors and how they show up. I use it every single day. And people will ask me, “Randy, what’s your management style? And I will say, “Well, I don’t know. Who am I managing? What is their essence, and then what are we working on together?” Because it could be very different.


The other thing which you called out, Amber, which is something relatively new I’ve started to do, is I have this working with Randy document, and it was in part, I built this and it’s like, “Here’s my expectations. This is what it means.” So, for example like, “There is no space between the line.” When I’m giving feedback, “The report doesn’t look good,” there is no extra context, it’s just, “The report doesn’t look good,” and so don’t read into it.


And there’s other components on that and running the one-on-ones, and I’ve just found over the years it’s been helpful to just say, “Here’s my operating system, my ReadMe file.” And to your point, Amber, we can have some conversations about what your ReadMe file is, my ReadMe file, and how we can build better interactions. I would say at this stage of my career, I am more excited about saying, “Here’s my ReadMe file, and let’s make sure it works for you,” and then especially with executives, right?

Amber Wendover (38:17):


Randy Wootton (38:17):

Because as executives, they’re functional experts on an executive team, your expectation is that they’re going to be able to be the smartest person in the room around that function, but building the connective tissue across the first team is really important. So us understanding, how am I going to co-lead with the head of engineering, which is, I mean, I’ve been in technology for a long time, I’m not a computer scientist, but how do we work together where there’s space for us to co-lead? That working with Randy document allows me to be able to say, “Hey, I’m going to ask questions.” And they may be questions you think, why is he asking? This is absurd. But here’s my intention or here’s where that’s coming from. So I think that’s great.

Amber Wendover (38:55):

If anybody needs an Insights profile, we can get them one. We can get them one, Randy, if any of your listeners-

Randy Wootton (39:00):

Yeah, no, I think this is where we’re having you here-

Amber Wendover (39:03):

We can get them an Insights profile. In the comments section or something, I can give you a promo code, because Tom and I both use that a lot and I love it. When you think about someone that has a lot of data and needs information, and you’re just reminding me, Randy, even if just your style, it’s like I always tell people, the more questions someone asks, chances are the more interested they are in whatever you’re talking about.

Randy Wootton (39:23):

Right. Yep.

Amber Wendover (39:23):

So it’s like we get scared by your questions, but instead I want to be excited by your questions because you’re engaged, you’re listening, you’re contributing, so I think there’s a whole bunch that Insights can do. And the operating system and your ReadMe file, that’s a great tip, too, and how many ReadMe files conflict.

Randy Wootton (39:46):

Yeah, that’s right. Well, that’s where you’ve got to be clear, how’s it going to work. I’ll give one last tool, and then I want to talk about how do people engage folks like you and how do they think about the budget? So my last trick is, I remember being in Microsoft and you would spend all this time to build a presentation, and one of my biggest presentations, another story at some point. And then out of the gate, the executive you’re presenting to just jumps on, and you don’t even get into your flow yet. And so one of my tools I use is when I’m at my best is I’ll tell, “Hey, present for 45 minutes, I’d like to hold the last 10 minutes for me to ask questions.”


During that time, I try to find at least two things that they did really well in the presentation. I write down all my questions. Often, you find that your questions are answered through the presentation. You’ve just got to let the person tell their story. And then the third bucket is guidance. Here’s the one to two things that I think you need to do going forward. And so in doing that, if you let the person get through their [inaudible 00:40:43], and you can ask clarifying questions, but you just let them get into their story and you let people be great. And you start off with the feedback was, “Here’s the two to three things I think you did really well in this presentation,” their openness to the feedback and guidance when you give it is radically different.


They felt like they got in, they got to dance their gig, they got validated and they got a couple of points, and they’re going to go off and go kill it. And so I think that’s another one of those tools if you find… You should not be the first person, as the most senior person in the room to speak. That was something I learned, Tom, from Brian McAndrews.

Tom Perry (41:20):


Randy Wootton (41:21):

He would be CEO of Avenue A/aQuantive, he would let everyone else speak, and at the very end, he would come back with one or two things to consider. I’m not that good, but I think of that as the model, the paragon of how do you let people really be extraordinary in meetings?

Tom Perry (41:33):

Yeah, that’s so true. And especially for new managers, as I mentioned earlier, that tendency to jump in, to be that solver, to come in and to have all that immediate feedback. I tell those new managers to hold up, have some silence, be a good listener, like you said, take some notes, create space within that meeting so you can have questions. Those tactical efforts can really make a big difference, not only for you as the consumer of that information, but for the person who’s presenting to you, which oftentimes that’s a huge opportunity for them. They’re super nervous, they want to do well. That really impacts them, too.

Randy Wootton (42:12):

Yeah. I think people forget what it’s like when you’re walking into the office of the CEO or you’re walking into the director. And I think at Microsoft, we ended up with a lot of people where the director would, if not take credit for the people that were working below him, definitely felt like they had a lead and tell that story versus if you’re in a space, like we were talking before, where mistakes are okay and you’re using it as a learning opportunity, that’s the opportunity for that first-time manager to present. And of course, you want to give them coaching upfront, you want to give coaching afterwards, but resetting the expectation of the people in the room that this is a learning opportunity. It’s not a judgment activity where you’re going to rip them apart.


Okay. Well, in the last three minutes we’ve got, look, everybody says it’s a good idea, they want to do it. You’re in sales, Amber, how do you help people think about budgeting for the investment in CEO coaching? And Tom, as you think about unlocking the middle, the forgotten community, do you have a rule of thumb in terms of how much money people should be spending on L&D per employee? We budget T&E, what should we budget for L&D?

Amber Wendover (43:18):

So my rule of thumb is you should budget 5 to 10% of everyone’s salary for L&D. Super simple. And if you could take 5% of my salary and invest it back into me, you’re going to get three, four, five times of that from my potential. So if you just want a quick and dirty, I would say, especially your high performers, whoever you want coaching, 5 to 10% of their annual salary, dedicate that to some type of coaching, learning and development, the program, there’s lots of programs out there. And I think with working with an outside consultant like Tom and I, the more people you invest in, kind of the bigger bang for your buck. So you think about Insights, right? There is a cost per profile, which is a few hundred bucks, and then some facilitation fee, but the value of that, it goes way beyond that program. So that’s my quick answer. What do you have, Tom?

Randy Wootton (44:11):

That was great. Tom?

Tom Perry (44:12):

Yeah, that’s right. 5 to 10% is what I’ve heard, as well. And I think when it comes to the actual program and the content and the curriculum that is provided around this stuff, I think one of the pitfalls I think most organizations are experiencing is that they feel like they have to define what that is for folks. And I have found that the best organizations, whether you’re huge in size or just starting out, is to let the employees come up with what they want to build their learning plan.


So that could include some coaching like with us. It could include some real-life transforming content like Insights. It could include going to conferences or taking online training or getting certified in something. Let the employee be the person who is defining that for themselves. Now, of course, you might have some organization-wide stuff around topics like better communication or how to deal with conflict or things like that. But I just find that letting the employee be creative in how they want to spend those funds, that can really be the biggest bang for your buck, because they are invested in what they want to actually get better at.

Randy Wootton (45:31):

Yeah, I think that’s great suggestions on both fronts in terms of you need a commitment to it, I would suggest probably like what we did, we hired an enablement director, and that person is helping us to build enablement programs, to build the skills broadly from our leadership excellence program, our management excellence program, and then very specifically, the courses that we want everyone to take to learn about product. We rolled out Insights across the whole company.


But then beyond that, Tom, I think you’re right. People have to participate in their own rescue, they have to participate in their own development. And if they have ambition, to your point, Amber, the ones that are the HIPO that are always like, “I want more, I want more, I want more,” is how do you help them give them access to funds or an understanding with an expectation that they’re going to go someplace, learn it, and share it?

Amber Wendover (46:17):


Randy Wootton (46:18):

Well, you guys, we’re at the top of the hour. It was awesome catching up. Thank you for your insights and the experiences you’ve been sharing. If people wanted to connect with you, is the best way through LinkedIn or is there a website you want them to go to, Amber, or what would be… They need coaching tomorrow, where do they go?

Amber Wendover (46:34):

They could do either. They can connect with me on LinkedIn, which is Amber Wendover, A Wendover, or our company website is thinkingpeople.com.

Randy Wootton (46:43):

Thinkingpeople.com. And you, Tom, I know you’ve worked with Amber. Is there another way you’d like people to check in with you, or is that the best?

Tom Perry (46:49):

Yeah. So, of course, you can go through my personal LinkedIn, as well, or my company is called Engaged Pursuit, and so I’ve got a company page on LinkedIn, or my website is just engagedpursuit.com.

Randy Wootton (47:01):

Awesome. All right, y’all. Thank you.

Episode 27

From Numbers to Narrative: Crafting a Compelling Financial Forecast

June 19, 2024


Randy Wootton
CEO, Maxio
Josh Aharonoff
Founder, Mighty Digits, Your CFO Guy, and Model Wiz

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Video transcript

Randy Wootton (00:04):

Hello, everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices, where we bring the experts to you to talk about what’s going on in SaaS today and what they’re seeing as the possibility and opportunity in SaaS tomorrow. Today, I’ve got Josh Aharonoff with me, CEO of Mighty Digits and several other companies, which we’ll get into, who started in accounting and joined a Big Four accounting firm. He’s been a startup founder, strategic finance guy, and is now acting as an outsourced CFO. Thanks for joining us, Josh.

Josh Aharonoff (00:39):

Thanks. Great to be here, Randy.

Randy Wootton (00:41):

Look forward to chatting, but I always like talking to people about their background and the lessons learned they had from the different stages in their career. You started as an accountant, went to KPMG in 2012. I mean, what was the passion for you about being an accounting and why KPMG? And then why did you make the shift from KPMG to your first startup, Skill Silo?

Josh Aharonoff (01:02):

Sure. So, I declared my accounting major right around the time when Lehman Brothers collapsed. I remember I went to my accounting 101 course, and my teacher was sitting on his desk holding up a newspaper and he said, “I’ve said it before, I’ll say it again. In good times, you’ll need accountants, and in bad times, you’ll need accountants.” The idea to me of, “Huh, this is a really stable career. There’s a lot of demand for it. I’ve always been good with number,” I naturally fell into it because of that.

Randy Wootton (01:31):

Oh, that’s great. Funny, because I thought you were going to go slightly differently, which is I’ve talked to several folks who went to this national law firm that says the number one deal killer is accounting errors. So, having accountants who can help you get your numbers right and get you ready for due diligence either for raising money or getting acquired, that continues to be the issue in terms of getting deals across the finish line, especially in SaaS where you have to do the rev rack and the reporting. But interesting, you were there for just always be employed.

Josh Aharonoff (02:08):

That was the thing that turned me on the most. Okay, this can make a lot of sense, but I love math, I love numbers. They just clicked for me in a way that sciences, biology never really clicked for me, and it was just a natural progression to go into the field.

Randy Wootton (02:23):

That’s great and then you were at KPMG for a couple of years, but then you decided to jump and found Skill Silo. Can you talk about that transition, what you were looking for and how you picked that specific area to focus on?

Josh Aharonoff (02:36):

Sure. So, first, I graduated from Binghamton and they have one of the best accounting programs in the country, really impressive. 90% of the people who graduate go directed at Big Four. So, I always thought in my career, Big Four is the holy grail. That’s where you want to not only start your career but grow your career. As many of you may be aware, Big Four has really two paths, audit or tax. So, I started my career in tax really after just flipping a coin, not really knowing the difference between the two. I didn’t have the best experience. This isn’t a rip specifically on KPMG or Big Four accounting. I think it worked really well for some people.


Whatever reason, the group that I was in, the work that I was doing, it just didn’t really speak to me, and it was like a mutual decision that we would go our separate ways. Around that same time, I was taking Spanish lessons with a woman based out in Central America, and I was using this company. It was a very affordable price, and I was learning an hour a few times a week direct via Skype before Google Meets and Zoom was a cool thing. I was just amazed at my progress and I’d always been entrepreneurial. At the same time, it just happened to be via fate, one of my really close friends was living in Guatemala. His wife is from there, and they moved there for a few years and he was also learning Spanish.


He said, “Hey, why don’t we start this company together? We could start with teaching languages by connecting native professionals from all around the world, eventually scale this to anything that you can learn via video chat.” I jumped at the opportunity. I very close with my friend at the time. We’re still close. I always really appreciated his mind and that was our start into the official entrepreneurial life.

Randy Wootton (04:14):

That’s awesome. You spent about two years there, is that right?

Josh Aharonoff (04:17):

I did. That’s correct.

Randy Wootton (04:18):

Then you actually migrated back into finance as a consulting firm. What was it that you learned about being an entrepreneur? Yeah, super cool, but sleepless nights, trying to raise money. What was the issues where you’re like, “No, I think I’ll go back in toconsulting. This time it’s finance consulting”?

Josh Aharonoff (04:35):

So when I went into it, I went in with this idea that I have it all figured out. I’m going to show the world now who exactly I am. It all makes sense in my head. I’m going to go and scale this company. It’s going to be simple. The stats that nine out of 10 companies fail, well, that’s nine out of 10 companies. I’m not nine out of 10 people. I’m the exception to the rule. In reality, it was the exact opposite. So many assumptions that I had about how exactly we would acquire users, how we would be able to really scale and grow, and all these different things that I took for granted were so much more challenging that I actually thought, it was the first time that I went out to validate a lot of these things that unfortunately in many ways I feel like I just fell flat on my face.


Although I learned a ton of lessons along the way that in many ways now I use in my career and things that I wouldn’t trade for anything, no MBA could have taught me, it also was a pretty painful experience that I had to learn the hard way.

Randy Wootton (05:29):

Well, I think that’s the thing about founders, right? They’re very successful, but in part because they’re young, they don’t know better, they’re sleeping on their mother’s couch, they have a low burn profile. They can do that for a couple of years and maybe have a couple of them. I think that’s true, or you’ve already hit it and you can go back and do it again. But I think having that experience as an operator on the front line is obviously helping you now in your career where you’re relating to folks. You founded Mighty Digits in 2019 after your tour with the consulting firm.


What was it that other than this experience that you had at Skill Silo after the consulting firm? Clearly, you had an entrepreneurial bug. What was it that compelled you to start Mighty Digits? What were you focused on there and maybe how did the earlier experience inform how you approach doing your consulting now as Your CFO Guy compared to what others may offer in the marketplace?

Josh Aharonoff (06:18):

Sure. So, I was very fortunate that I had someone in my private network reach out to me saying that they were looking for a fractional VP of finance. In essence, I’d worked for them 20 hours a week. The salary was close to identical of what I was making working at this consulting firm. They not only offered me the position, but they guaranteed me a contract through the end of the year. So, in many ways, me going off on my own was more secure than me staying and working for someone else. I compare that to my experience at KPMG, how I left and I didn’t really have anything figured out. I didn’t have a source of income or any customer contracts or product or anything like that, but I wanted to just go out and try something.


Whereas this time, it was the smallest risk possible that I just stepped into another already well-oiled machine with this huge contract that I had. Thankfully, they were very open to the idea of me going out and scaling this to be an actual company where the remaining 20 hours a week. I could find other clients, which I eventually did and hire staff. Here we are today almost exactly five years later, and we’re a team of about 15. We’re working with about 35 clients. So, I’m very grateful that I had that large contract for that seven-month period so that I didn’t have the stress of being in what I call the valley of death where you start a new venture. You don’t know how much more fuel you have to be able to continue. Because of that, I was able to focus on a lot of other things that eventually worked out.

Randy Wootton (07:40):

That’s great, Josh. I think that’s right. I think a lot of people who put out their own shingle who’ve never done it before underappreciate how much time they have to spend on just business development, meeting prospects, trying to convert them to customers, and you’re delivering your work on one contract where you’re trying to get the other contract. So, it sounds great that you were able to get a commitment for part-time work that you’re able to do some other things. Gosh, you’ve been busy, more busy than most people I met.


You’ve also got a media company called Your CFO Guy. You’ve got a tech company called Model Wiz. Do you want to talk a little bit about Your CFO Guy? Congratulations on your success. You have a newsletter with 75,000 people that you’re posting daily. Talk a little bit about how those two other endeavors came into being.

Josh Aharonoff (08:24):

Sure. So, about two years ago, I started publishing content on LinkedIn with the idea that I would hopefully drive more leads to our consulting firm, Mighty Digits. It took me a few months to figure things out, but eventually, things totally took on a life of its own. I felt that my message was really resonating with a lot of other finance and accounting professionals where we could just geek out over the details on revenue recognition and prepaid expenses and cash vs accrual and all of that good stuff. So, I kept posting content every single day. I have an incredible designer on my team who’s helped me put together a lot of the assets that go into the content that we share, which I think has been a very big part in all of this.


Fast forward now to today, over 375,000 followers on LinkedIn. I just also launched a YouTube channel on March 1st, and I’ve been posting a video every week. I think we just published our 13th video. The newsletter, we used to do that weekly, but I was just actually telling someone earlier today, the idea for a daily newsletter came about I sent over a survey to my audience asking, “Hey, I’m thinking of doing this daily newsletter. Is anyone interested?” It was the first time that I really sent out a message to my audience and the response was overwhelming. It was like this, “Hey, is this microphone on?” I didn’t realize how many people were part of that actual newsletter.


One person said, “Hey, I’d be interested sending a daily newsletter, but can you send me one topic on Monday, another topic on Tuesday, another topic on Wednesday?” That’s exactly what I did. So, we have accounting now on Monday, FP&A on Tuesdays, Excel on Wednesdays, Thursdays are round up, and then Friday is my experience in just growing a fractional CFO firm and being an accounting professional.

Randy Wootton (10:07):

Well, that’s great. Monday is your accounting ABCs, as you mentioned, FP&A Secrets. So, you’re covering basically for any early stage CFO or controller or FP&A folks, you’ve got specific topics. Then Excel for CFOs, which we’ll get into in a little bit, I think, into your next startup, which is the Model Wiz. We can chat a little bit about. When you describe the Thursday, I think you called it Legit Numbers, and the round up, it’s a roundup of what? What are you rounding up on Thursdays?

Josh Aharonoff (10:35):

So it’s in essence three different topics of anything related to finance and accounting. So, it could be any of the specific categories of accounting, FP&A, Excel, or anything else, and it’s just at random and presented in a more professional-like newsletter setting.

Randy Wootton (10:51):

Got it. Then I think you said on Fridays, your CFO files and lessons learned from being in the trenches and you have this great experience both as an accountant and then as an operator or a startup and then also running your own consulting firm. What are the hot topics? I think you split it between your newsletter and your social media. What are you finding people are resonating when they’re consuming the information? What are the topics they care most about?

Josh Aharonoff (11:15):

So it’s interesting. I feel like in many ways there’s overlap, and in many ways there are differences. With social media, the general idea is the more broad you can go, the larger the reaction, but the less the actual focus. So, I think accounting professionals is a more broad topic than FP&A professionals. Excel is a more broad topic than accounting. So, I think the best content that I’ve ever produced is Excel, I think about a month ago I produced an Excel piece of content that now is over 12 million impressions, which is just mind boggling to consider. So, in terms of social media, usually the more that I post something on and I try not to get too far still from my core audience, the larger the engagement, the more that it’s going to resonate with a larger group of people.


For my newsletter on the other hand, I try to really go deep in the specific topics that we’re talking about because these are people who are a lot more engaged. They’re hearing from me every single day via their inbox, which is really one of the most intimate ways you can connect with someone. So, I feel like there’s usually a lot stronger of a response on my emails on Fridays because that’s a lot more personal. That’s talking about my journey, my failures, my lessons learned, how exactly I find clients, how I hire people, how I manage others, and all of the other things that can be applicable for an accounting firm owner or just someone who’s working in their career who’s looking to grow.

Randy Wootton (12:36):

Well, clearly, you’re doing something right with 75,000 people that have subscribed to your email in this world where people aren’t reading emails, they’re reading yours every single day. I do think that’s such a great insight that each day is a little bit different. So, it’s staying fresh, but it’s also staying consistent. One of the pieces of feedback I had heard from someone when I started the podcast was they’re like, “The number one thing is to be consistent. Every week, have an episode go live. Even if you’re not doing it live, have it be predictable so people know that they can rely on a weekly push.”


I can’t even imagine trying to crank out a daily newsletter. So, well done. Talking about Excel, you also have a third part of your empire, Model Wiz. Can you talk a little bit about that and what was the problem you were trying to solve with that and how it all ties together with Mighty Digits, Your CFO Guy, and Model Wiz?

Josh Aharonoff (13:29):

For sure. So, probably the area of finance and accounting that I’m most passionate about is FP&A, being able to put together a forecast to be able to tell a story of what exactly is going to happen into the future, to be able to measure the results of that story that I once predicted against what actually happened, explaining why I was on, why I was off, put it together in a way where someone without a finance and accounting background could understand. So, I built maybe hundreds of financial models in my career, and I always thought to myself, “So much of this can be automated. I don’t necessarily know how, but the logic to me makes a lot of sense.”


If you think about it, there are things where every business will traditionally have a financial model. In my opinion, every business should have three statements, an income statement, balance sheet, and cash flow. Every business should have a headcount build. Every business should have a revenue build. But that’s one thing that’s entirely customized based off of the business model. In all of the clients that I’ve ever worked with, I’ve never found two revenue builds that were exactly identical. Everyone does their business a little bit differently.


So, we built this tool right from day one when we started Mighty Digits, that is in essence an Excel plugin that’ll connect to your accounting software, build a financial model in Excel, connecting to all the different source data that you have, so that it’s connected to this data, while also allowing you to customize everything directly in Excel. So, just about two, three months ago, we created a separate company out of that. So, now it’s been a lot of fun managing three actual distinct legal entities with Model Wiz being the third one.

Randy Wootton (14:54):

That’s great. So, help me understand, I’ve looked at the space, the FP&A tool space over the two years that I’ve been here because I had the same assumption that I think you did that having the historical data in your accounting software is helpful. It tells you what happened, and you can look closely at things like gross retention, net retention. You can look at churn, byproduct, segment region.


You can have all these insights for what happened, but the real key, especially as an executive and I think as a CEO or a CFO that’s trying to partner with the CEO or in your case at Mighty Digits as a fractional CFO, trying to partner with the CFO or the board, really trying to understand what might happen in terms of doing the planning going forward is what FP&A is all about in many ways to create the scenarios, not just for the fiscal year budget, but throughout the process and of the year, the unfolding calendar year. I think even more so now, you’re finding this constant state of planning happening.


So, there’s a bunch of companies out there in the FP&A space. You think of Jirav, Basis, Anaplan, Forecaster. Gosh, I mean they’re 50 at least. How do you draw the distinction between what you’re providing as an Excel plugin and the problem you’re solving versus what someone might want if they’re buying an FP&A solution?

Josh Aharonoff (16:07):

So in many ways, they are one and the same. I think a big distinction with what we’re doing is a lot of tools have this idea that you should replace Excel. Excel is buggy. Spreadsheets are clunky. Use instead of the power of a web app, and you can do everything that you need. We’re very much the opposite. We think that Excel is easily the most important tool for a finance and accounting function, and it’s only going to get bigger. It’s owned by Microsoft, the same company that has a partnership with OpenAI and the same company that owns LinkedIn and one of the biggest companies in the world.


So, our goal is to have this plugin in many ways act like an FP&A software where you can take advantage of all of the benefits of an FP&A software with things that are not easy to do in Excel, like connecting data via an API to your accounting software, refreshing that information, transforming that information while still giving you this environment where you can customize whatever you need at your fingertips directly in Excel. You can then share the output of that information with an investor who knows how to use Excel, who reads Excel for all their portfolio companies while benefiting on both sides.

Randy Wootton (17:06):

Yeah, I think that is what I’ve seen in looking at the companies. There is this split between those that are leading with a web-based ASP experience versus Excel first. So, Cube, a company that Battery invested in, is acting as Excel first and they’re almost like an ETL for Excel. I think a lot of those other companies also are focused on larger customers than you. I think when we talked, your ICP at Mighty Digits is really those early stage startups, the seed, series A. They’re small revenue finding PMF.


So, Excel still works. It’s not getting bogged down by having thousands of customers. I’ve been at companies where we’ve had 40 tabs in our model, and maybe that’s a question for you is do you find people migrate from your Excel plugins to these FP&A solutions when they get bigger, when they’re at $10, $20, $30 million, or because of the way your plugins work, are you able to address that scale issue?

Josh Aharonoff (18:02):

So I will say a lot of companies have solutions that are way more robust of what we offer, and I do think that it makes sense for a company once it reaches a certain size. It becomes very challenging to be able to manage all that information directly in Excel. Now, I am a believer that at the same time, it is becoming more and more easy. The idea is rather than having one Excel file that controls everything, you in essence have this database where all the information gets pushed up to and synced, and you could pull that information down. So, that you can run, for instance, a P&L by a specific department or something specific to a segment of the business rather than everything entirely at once.


So, our clients specifically, because we work with a lot more early stage companies, typically later stage companies, they bring things in-house, they have their solution figured out. It’s not as common. We haven’t had any of our clients ever use one of these more expensive tools, but I could certainly see it making sense once a company graduates that level.

Randy Wootton (18:53):

Great, and I think this is a great way to make the segue to Mighty Digits. We were talking a little bit about your ICP, your ideal customer profiles, early stage startups, seed, series A, small revenue finding PMF. What is the most important tool or the process for the early stage company? Maybe talk a little bit about that. We had talked about it being a robust financial model. What does that mean and what are you doing with that model? You had walked through really four stages of how people can build out the robust financial operations, and maybe we just lead into that after you set the table for us.

Josh Aharonoff (19:27):

Sure. So, I am a big believer that a financial model is easily the most important tool in a finance and accounting function because it should in essence serve as a centralized hub for all of the information related to what’s happening in the business historically, as well as what you think is going to happen on a go-forward basis. That information can relate to your actual sales and growth. It could relate to your team, how many people you currently have on your team, how many people you’re going to grow, all of your other expenses that you’d find specifically on your P&L, any cash differences that you would find given the fact that you’re using accrual accounting, which is a lot more common for early stage startup reporting on the accrual basis rather than on the cash basis.


But it also gives you this reporting engine where management can understand instantly all this information, prospective investors can understand all that information. The board of directors can understand all that information at each and every single board meeting, and it should give you these outputs right at your fingertips where you don’t need to transform and do all these additional information. You just take a snapshot directly to your financial model. So, I’m a big believer that that’s the most important tool because in essence it puts in these guardrails. It helps you understand when is your forecasted cash update.


As you actualize each month, were you close to what you projected? If you weren’t, maybe you need to do a re-forecast. So, that number for when you think you’re running out of cash, you actually have a little bit better insight into it and it’s as credible as possible.

Randy Wootton (20:51):

Yeah, and I think especially if you’re working with investors, having a deep understanding of the cash flows, not just what’s showing up in your P&L, but literally your collections and understanding, sending out these invoices, what are you collecting? What’s your historical collection? What’s your write-off? When are you getting money in the bank? Being able to put that against your burn rate to be able to put out, to your point, I think you described it as a cash outdate. Running out of cash is never good. I think it also informs your fundraising. So, when will you go get more cash? What we’re seeing is investors, they put money in two years ago and said, “Hey, raise money in the next 18 months,” and now that’s turned into 24 or 36 months.


So, getting super clear with your investors around the expectations for how long you have against your burn rate and do you have to adjust burn rate, which is, well, I guess there are two ways to do it. One, get more revenue. So, you’re getting super-efficient at acquiring new revenue or reducing costs and then being super clear about how long your glide path is.

Josh Aharonoff (21:49):

For sure. I would say generally every startup, let’s say before series C, maybe even longer, all of them have a terminal illness. They’re burning more cash than they actually bring in. They know that they’re going to be running out of cash. The question is when are they going to run out of cash?

Randy Wootton (22:04):


Josh Aharonoff (22:05):

A company who knows eight months in advance when they’re running out of cash is in an infinitely better position to be able to raise capital, to be able to take their time, to be able to speak to investors, to be able to get favorable valuations than a company who finds out two weeks before.

Randy Wootton (22:16):

Yeah, you never want to be surprised. You don’t want to surprise your investors either. I do think to your point, if you want to have any leverage in the deal in the negotiation, it’s having enough cash where you can court multiple parties. So, you can create a competitive bid process either in investing in your next round or as part of an acquisition is where you create real shareholder values. So, that cash, forecasting cash management in many ways is the most important job of an early stage CEO in partnership with a fractional CFO, which might be different than what you’d get from a CPA firm at that time.


So, one of the lessons learned, we’ll come back to this in a second, but one of the lessons learned you said is when you go into companies, you often find that the financial model is too basic and that you think of that there’s four stages to building a financial model. The first one we were talking a little earlier was about the revenue build and you have the inputs and the outputs. Can you talk us a little bit through that? And then layering the P&L and then layering in the balance sheet and then we’ll talk about the chart of accounts mapped to accounting software and why that last piece is jumping a huge gap in terms of knowledge and systems and technology, but that’s really the promised land. So, what’s true?


Usually, what you find when you walk in and someone has a revenue build, what are the components and how are they thinking about the world when they have that lens?

Josh Aharonoff (23:29):

So going back to the point that you just mentioned, the four stages of forecasting, a lot of times I’ll work with a founder and I’ll see that they’re working with a stage one forecast, which can be okay. If they’re very early stage, they know how much money is coming in and out, they know that they have at least 18 months till they’re running out of cash, you may not need all those details. The first stage I like to call is the revenue build, and this is easily the most important part of a financial model because especially when you’re pre-seed or seed.


The main thing investors want to understand is, “Do you have a really strong grip on how you’re going to scale this company? Do you understand all the inputs for how you’re going to acquire customers? Do you understand the details on how long those customers are going to stay with you? When those customers stay with you, do you understand the business model? Will you sell to new customers? Will you sell to customers on a recurring basis, upon renewal? Will they be upsold? And then how will you potentially book the differences between what goes your P&L and balance sheet, let’s say commission’s expense or inventory or anything else?”


So I like to call a stage one forecast as just having a revenue build, which many times will suffice, but very quickly a company will then grow to not only wanting to show what their revenue is going to look like, but also who’s on their team and what are the other expenses that could feed through into their P&L. So, I like to call a stage two forecast, one that includes a revenue build, but one that’s also connected to a profit and loss. At this point, a company may still be recording under the cash basis. They don’t have enough investors to say we want to record things from the accrual basis. The cash basis is a lot simpler. It may not be as intuitive as the accrual basis, but it’s a lot simpler to be able to manage.


So, it’s there where you’ll want to get detailed on who’s on your team, forecasting out your gross salary, your payroll taxes, the health benefits, and all the other incidental costs, and then all the other areas of your P&L like your travel meals and entertainment, your legal fees and so forth. Stage two forecast involves you having a revenue build and a P&L connected to one another.

Randy Wootton (25:16):

One comment on that, I think in SaaS companies in particular, your biggest expense is your employees. Well, 65 to 70% is what you often find. I think you’re nodding your head. Of course, you have hosting costs, primarily AWS, but outside of that, you got a little internal software, you got a little T&E. But I think getting that headcount mapping and also the model tied to it in terms of you’re going to grow, you’re going to add this many more customers. Well, that presupposes how many AEs if you’re using a sales-led motion. Oh, okay, well, now you need implementation consultants, you need customer success folks, you need support folks. So, outside of the R&D of building the product, how do you operate the machine?


I think that’s where when companies are growing like crazy, they often fall behind because the biggest constraint to growth is having knowledgeable capacity on staff. So, that headcount build is so important, but to your point, understanding where the revenue is coming from first, understanding what the retention expectations are second, so you know what’s your cash generating engine to offset the expenses is so important at that second stage. So, now, I mean that’s a tee up to the third stage where you layer in the balance sheet. So, now you’ve got your three statement set up financials. Talk about the balance sheet, and I think a lot of people underappreciate cash flow, the statement of cash flow as well.

Josh Aharonoff (26:37):

For sure. I do want to just comment on one thing that you just mentioned about your headcount being your largest expense. Definitely, almost always it’s going to be your largest expense, but really important to understand also, it’s also one of your most difficult expenses to control. Now many founders out there think, “Oh, what are you talking about? If someone has an issue, I’ll just fire them. They’ll be gone tomorrow.” It’s so much more complicated than that. Most likely you’re going to be giving a severance package. If you don’t do that, your team morale could potentially have a hit. You may even find yourself with a lawsuit. Whereas with a contractor, you’re working with a piece of software, you can go ahead and turn off that service. It’s a lot easier to control.


So, that’s another big reason why you want to really get your headcount build right, but then moving on to stage three, like you spoke about. When you attach a balance sheet to your profit and loss, you can create a statement of cash flows via the indirect method where you don’t have to actually make any changes to your assumptions around cash flows. Any changes in your income statement and balance sheet will automatically flow through into your cash flows. So, now you have a three-statement model, which is what people call it, where you could easily understand everything that’s happening in each of your financial statements, which a lot of the times is going to tie into an accrual accounting.


So, you may only show $10,000 in revenue in a period, but in reality, your cash flows can wildly differ from that and your actual sales can wildly differ because maybe you’re selling $120,000 on an annual subscription. So, you take a 12th of that as revenue, but the actual cash collected and the actual sale amount can be much higher.

Randy Wootton (28:03):

Right. I think getting clear if you get paid upfront in your terms and just knowing what’s going in the bank when, wicked important to our earlier conversation about “When are you going to flame out?” So then you get to this fourth stage. One of the other things you talked about in our pre-brief in terms of one of the things you found not that most surprising to you but consistently underdeveloped on the finance side is the chart of accounts. So, maybe talk a little bit about what a chart of accounts is for people who don’t know how. When you say it’s poorly designed, why is it poorly designed? And then when you have a good one, how that lets you get to your fourth stage of the financial model?

Josh Aharonoff (28:41):

For sure. I love talking about this. It was one of the earliest YouTube videos that I produced. Your chart of accounts for those who are not familiar with it, it’s in essence the accounts that show up on your profit and loss and balance sheet. So, we call those general ledger accounts, and you can call those accounts whatever you want. You can call an account salaries and wages. You can call it payroll expenses. There’s really no specific ruling on how you actually dictate what your financial statements look like, but the whole purpose of your financial statements is to give clarity to the readers of the financial statements as to what exactly is happening. The more clear your financial statements are, the better they can understand what’s happening.


The less clear, the more need for a follow-up meeting where you need to hop on a call, you need to explain what this actually means. So, sometimes I’ll be working with a company and they’ll have an account like other business expense. I’ll be like, “What does this mean? Is this a company retreat that you guys took or is this a random meal that you had?” You have no actual context unless you look into the actual transaction detail, which majority of the time someone wouldn’t see when they look at the financial statements. On top of that, it’s so interesting, almost all the time when I meet with companies, they’ll have an investor’s name or an employee’s name in their chart of accounts. I have to ask them like, “What’s the logic on including this person’s name in a profit and loss?”


It’s like, “Well, we want to be able to understand how much we’re actually paying this in person and how much actually this investor invested into the company.” Well, you could certainly still understand that. That’s what work papers are for. Those go into the details behind your financial statements, but the actual financial statements that can make its way to department owners, to banks and lenders, to investors. Do you really want them to see this random person’s salary or investment? So that’s another piece of advice that I have.

Randy Wootton (30:26):

Just picking up on that a little bit, I think for me as an operator, one of the things when I’m looked helping companies do due diligence, which I’ve done in my past, both as a strategy guy and then when I was independent, getting clear for example on what goes into your COGS, your cost of goods sold, so that you can have clarity around your gross margin because gross margin becomes one of those metrics that everyone uses to benchmark. So, if you’re north of 85% for your subscription gross margin, that’s good.


People aren’t going to look at you twice, but if your gross margin’s at 80% or if your gross margin’s at 95%, people are going to double click in and say, “Wait, what’s going on here? Did you overload the costs? Did you assign, or are you not taking enough costs in your COGS because your gross margin just looks funky for a web app?” I think similarly, the other area where you don’t get pushback but certainly need to be able to talk to investors especially, is about what gets bucketed into sales and marketing, R&D or G&A. They will have benchmarks in terms of, “Hey, you shouldn’t spend any more than 12% of revenue on G&A.” I don’t know if you have a specific number that you use, but if you’re more than that, that’s where you’re going to have to justify it.


Well, you’ve got more than that because you put the wrong stuff there. Then as I described, you’re just breaking into jail. One example of that is when I came into Maxio, we had people in a rev ops bucket. We had more people in a rev ops bucket than what our investors would say would be typical at our size company. So, 240 people, they’re like, “Ah, we go to companies your size and they all only have three people. Why do you have seven people?” We’re scratching our head. We had some other folks that might’ve been classified under finance, but they were in sales and marketing as rev ops. So, we looked closely at it and tried to be intellectually honest and say, “No, no, those people are really business operations. We’ll put them under finance.”


So we reallocated some of the costs and then the investors were like, “Oh, okay. Well, that makes more sense. That seems in line with what our expectations are.” So those two pieces of data, connecting the headcount, where it’s being rolled up to and then having that level of aggregation at the operating cost center level makes a big difference in terms of when you’re trying to raise money or figure out how to benchmark your next plan.

Josh Aharonoff (32:44):

For sure. fourI think for all the reasons that you just mentioned, that’s why the chart of accounts are really the foundation to your month-end close, your financial reporting, and your financial model, because the best financial models and now we’re getting into stage four where you’re actually connected to your ERP and you could actualize the model and generate all these beautiful dashboards and analyze budget first actuals, what’s happening versus what you thought would happening. Before you have a proper chart of account set up, you can’t really do all that.


There’s so much that is determined on that foundation, but once you have your proper chart of accounts set up, well, now you can forecast each and every single general ledger line item. Now you can do that analysis like you mentioned, where you compare general and administrative compared to total operating expenses and so forth. It all starts at the chart of accounts level.

Randy Wootton (33:33):

That’s great. You just flew by the other thing I just wanted to circle was around the budget to actuals and how important that is. Can you talk a little bit? Because it really does require you to get to this four stage before you can have those types of conversations, both as an executive team managing your business, but then also as you’re managing investors’ expectations. You go and you create a forecast. You create a budget and then you have a forecast at a rolling forecast, but you’ll have actuals at the end of each month that you’re probably trying to triangulate against both the budget and your forecast. Can you talk a little bit about that and why that is the nirvana of financial models?

Josh Aharonoff (34:10):

Budget versus actuals is easily my favorite report. I like to always say that there are three reasons why I see companies start to invest heavily in a financial model. Either they’re getting ready to raise capital and their investors want to see a plan for how exactly they’re going to use the capital they’re going to invest. They already raised capital, and now their investors want to see, “Hey, is my investment secure? Is the company doing a good job? Do we need to get involved?” Ideally, they are getting involved in a positive way. The third, which is my favorite reason, is the company wants to be able to make more informed business decisions.


I found that the budget for actuals with the exceptions of maybe going out to raise capital that may not be as much of a focus, but especially when you’re doing board reporting and especially when you’re trying to get the insights, the budget versus actuals to me is the most insightful report because first, it summarizes the key areas of your business. It’s not so common to do a budget versus actuals on every single general ledger item. You generally want to group those accounts into different buckets, into different call centers, different departments and so forth. You’ll also want to choose a few other metrics like maybe your total cash flows or your ending cash or your ARR, things that may not actually show up on your financial statements.


So, now you have these key accounts that you’re summarizing. You’re showing the actuals, which in and of itself is helpful. Now you see at a bird’s eye view the most important areas of the business. Then you see what you actually forecasted along with a dollar variance and a percentage variance. I like to include both because a million dollar favorable or unfavorable variance may or may not be significant depending on how much you ultimately forecast. If it’s a billion-dollar company, a million dollars is a great variance. If it’s a $500,000 company, we have a lot bigger issues at hand. What I love is that when you then have these variances, you start to tell a story.


First, why do we have these variances to begin with? You don’t need to have zero variances. In fact, you’ll never have zero variances. It’s just part of life. But are these variances because we input in the wrong assumptions? Is it because of a timing issues? Is it because we have a bug somewhere? The sooner you can analyze this report, the quicker you could take action when that’s needed and avoid a surprise like we spoke about earlier, but all of a sudden, you realize that next week you’re running out of cash.

Randy Wootton (36:16):

The only thing I was going to add, I think spot on in my experience, the other thing that’s super helpful is to have some seasonality tied in. So, quarter over quarter or year over year, so you have actuals against budget, but then as you’re representing, especially if you’re off against your budget, what happened last year? Was April a soft month last year or April’s the first month of many people’s fiscal calendar of the second quarter, do you look at the first month and the first quarter and the first month of the third quarter to see what happened in terms of bookings, which translates to revenue or other spend, or I think another one that plays out is internal software.


You’re often spending on internal software and the cash actually goes out at the beginning of the year or the end of month December. So, having that sense for, “Oh, well December every year is a big year because that’s how our contracts are set up.” So I do think just augmenting your thoughts in terms of budget to actual is being able to put it into context, trailing 12 months and then five quarters and then quarter over quarter, year over year. So, it can become a massive spreadsheet.


I think maybe the other point is that’s what you and your as the fractional CFO or the CFO and the CEO and the executive team need to spend time on is wading through that data, not spending time trying to make sure the data is right and then from that, driving the insights to better understand what they’re going to do as operators for the business and then inform the board on if you’re invested in by private companies, inform the board in terms of what’s working, what’s not, and where you’re going.


I think that’s the other thing is if you’ve missed in terms of a quarter, certainly, you have to tell the story for why you missed, but the best executive teams are the ones we’re able to say, “And we understand what happened and this is what we’re doing about it. These are the things we expect to change and these are the metrics we’re going to watch as we go forward.” So that combination of financial metrics and operating metrics to tell that story of business performance.

Josh Aharonoff (38:10):

For sure. I couldn’t agree more.

Randy Wootton (38:12):

So to that, I mean maybe this last part is we talked a lot about when you go in with Mighty Digits, we talked about the most important tool, the financial model, the four stages of it. We talked about why this is important in terms of you’re getting ready to fundraise, you’re deploying capital, or you’re just trying to figure out what the heck’s going on. We didn’t talk about FinOps, financial operations and how you would define financial operations. When you think about what financial operations needs to do well, what do they have to get done every month, every quarter?

Josh Aharonoff (38:44):

So far, we’ve been talking about financial reporting and forecasting, which of course are very big parts of the finance and accounting function, but you also have all these other areas like you just mentioned, the latest to the financial operations of a company. So, there’s accounts payable and procurement. There’s invoicing and accounts receivable. There’s payroll and probably a few other items that may bleed into HR or may just fly directly in a financing accounting function. The idea is with each of these functions, you want to make sure that it’s a well-oiled machine where things are being run efficiently. You’re not draining too many of the resources.


The worst thing that could happen is you actually have to bring in the management team who have bigger problems that they need to be solved, and you also want to make sure that things are not being done that could potentially increase your vulnerability to some error. So, a perfect example is let’s say payroll. You don’t want to miss a paycheck. It could be the smallest mistake that you make that has catastrophic impacts on things. So, there are things that you can do to have a proper payroll function where you have certain checks and balances, certain notifications go out, maybe set things on auto pay as a fail switch and so forth. That’s generally how I think of financial operations.

Randy Wootton (39:52):

Yeah, and I think the one thing we’re talking about, which we haven’t talked about today, is financial operations is responsible for the chart of accounts, getting that sorted, and so a new CFO coming in and making sure that makes sense and tracking through all the way to the balance sheet and how that plays out, knowing the business model. So, what we talked about is the financial model, which actually implies a business model. The third thing is the month-end close. What do you see in terms of best practices for early stage startups to be able to do a month-end close? Is it six business days, eight business days? Is there promise of a zero day close in the future with AI? What’s your sense on the month-end close?

Josh Aharonoff (40:27):

I can certainly see there being a promise with AI. I think nothing is off the table and it’ll only be a matter of time until we see that. I think it really depends on who exactly the stakeholders are and what is the intention behind the month-end close, because again, I think an early stage company, they may be pre-seed, they may be seed. If they don’t really have external reporting requirements, if there’s not a ton of activity going on where they have to worry about potentially running out of cash or making some misjudgment, I don’t really know how much of an emphasis I would put on having a month-end close being done by the first week of the month. It’s certainly doable. But a lot of companies when they start off, they don’t even do a month-end close throughout the year.


They just hire a tax professional. That person will do bookkeeping and clean everything up and just file their tax return. I think as a company grows, the more capital that they raise, the more external reporting they need to do, the more that’s at stake out of them not having their data cleaned, the quicker one needs to have an actual month-end close completed. I think the key to having a month-end close completed in a short timeframe is first real-time classification, categorization, reconciliations, not waiting until the next month for when all the data’s available to be able to do of that. Similarly, you also want to have a lot of standard operating procedures, outlining who exactly is going to do what, how exactly that’s done.


Not only so that there’s better alignment on the team, but teams are constantly evolving. Companies are constantly growing. When one server and someone is doing one thing one day tomorrow, they may do something else. In order to actually delegate that role, you need to have a proper standard operating procedure so that someone else can easily just step in.

Randy Wootton (41:56):

Yeah, that’s great. I think having documentation, especially when you have turnover or team is scaling, nailed it in terms of month-end close. It’s funny, I’ve always had to rely on fast month-end close in part because I joined companies at series C and beyond. So, there’s been a lot of invested capital. You have lots of investors looking for information and trying to manage it. When I was at Percolate, we had Sequoia, GGV, Lightspeed, first round capital, and so the CEO and the team and I were every month trying to figure out what were the numbers and how do we manage the distribution of the numbers to the investors.


They got a bunch of whiz bang Excel jocks on their side who had run you through the numbers if your numbers weren’t right or they changed from month to month and it was a huge issue. At the end of the quarter, it was a big deal because they had to do the report out for the LP. So, to your point, the more stakeholders you have, the more professional they are, the more important it comes that have your data be right and be able to be efficient in producing it. Also, I think the other thing about being a CFO in today’s world is your job is not just about month-end close. Getting the month-end close is the basics. It’s like putting the foundation in the house.


What you really want to be doing is building the rooms with the view on top, and that’s all about the insights that you’re able to drive. So, the sooner you can drive your month-end close, the more time you can spend on, “Oh gosh, we had some churn in this region or this segment. Let’s go figure out what’s going on there and start to game plan. What are you going to do about it?” So I think shifting from compliance officer as CFO to strategic partner as CFO necessitates being able to do month-end close pretty quick.

Josh Aharonoff (43:27):

Definitely. Like you said, it really is the foundation for so many other important things to unlock in a business. Until you have that foundation, everything is a bottleneck and it’s going to be at a standstill. So, that’s why oftentimes there is a lot of pressure to get that month-end close completed in a really short timeframe so that all of these other things that happen after the month-end close is ready can take place.

Randy Wootton (43:48):

Amen. All right. So, let’s shift to our speed round. Three questions, one is favorite metric, favorite book, favorite influencer. So, what’s your favorite metric and why?

Josh Aharonoff (43:58):

Favorite metric I would say is gross margin. A lot of people say cash flows is the best and I think cash flows is also great, but to me, gross margin really just from a philosophical perspective represents how much money the business will eventually get today, tomorrow, whenever with each sale. Those companies that have a very low gross margin, maybe breaking their backs to generate sales, but at the same time not really reaping all the benefits of a company with a very high margin, which a lot of SaaS founders are.

Randy Wootton (44:26):

I know I’m putting you on the spot, but as you’re looking at early stage, B2B SaaS companies, you have a target, a gross margin that you want them to be that’s within the realm or reasonable or what’s best in class?

Josh Aharonoff (44:37):

I’m a big fan of having a gross margin of 90% or above. I think it could be challenging in the very early stages because a lot of times you’re hosting costs, which is very much a big part of your cost of goods sold. It’s fixed. It’ll of course scale, but you have a certain threshold that until you have enough sales to be able to surpass that, you’ll have lower margins. So, it’s really more important as the company continues to scale.

Randy Wootton (44:59):

Yeah, I think that 85 to 90%, spot on. That’s one of the ones where if you’re at 90%, people are like, “Yeah, okay, cool.” Eighty-five, all right. But anything below that, you’ve got to explain yourself in B2B SaaS tech company, not tech-enabled service. All right. Favorite book and why?

Josh Aharonoff (45:14):

I love Never Split the Difference by Chris Voss. People think it is a book on negotiations and how to manipulate others, which I could see it being used for that. It really is a book on how to establish rapport with someone, how to really make sure you’re both speaking the same language, how to get you both to a mutually beneficial outcome to take away the stress from any difficult moments when you’re having with someone. I got a lot out of that book.

Randy Wootton (45:42):

That’s great. I think he also talks about that broad zone of possible agreement. It’s very rare when you’re in negotiation that it’s zero sum. Meaning one person is going to win, the other is going to lose. It’s how do you create a zone of potential agreement. You may not end up with an agreement, but if everyone gets a little win, there’s much more likelihood that you’re going to get a deal done. I’ve seen that play out on multiple M&A deals.


What are you trying to solve for and what are we trying to solve for and how can we make this work? So that’s a great recommendation, Never Split the Difference. Then finally, who’s your favorite influencer? Was it a person that you’re following who thinks is writing original stuff, not just putting top spin on what’s happening in the ecosystem?

Josh Aharonoff (46:21):

Nathan Barry, the CEO of ConvertKit, he has got a lot of really great content and he has also a personal brand where he just shares not only the things that are going on in his business, but also his family life, his hobbies, and I think he’s also connected with a lot of really great people. So, that’s someone I really look up to.

Randy Wootton (46:42):

That’s awesome. Well, thank you very much, Josh, for your time. Really enjoyed getting to know you through the process. Congratulations on your success and I look forward to staying in touch going forward.

Josh Aharonoff (46:50):


Episode 26

SaaS Growth Trends Report 2024

June 12, 2024


Randy Wootton
CEO, Maxio
Jon Cochrane
VP of Strategy and Director of Maxio Institute, Maxio

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Video transcript

Randy Wootton (00:04):

Well, hello everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices. We’re being the experts to you to talk about what’s going on in SaaS today and what trends we’re seeing unfold for tomorrow. Delighted to have Jon Cochrane, who’s actually a Maxio employee. He’s our Director of the Maxio Institute, join us today. Welcome Jon.


Glad to be here, Randy. Thanks for having me. The Maxio Institute for those that don’t know is our marketing arm, which looks at our 2,200 plus customers. And the billing and invoicing data that we collect is about $16 billion of billing and invoicing data that we collect anonymously and then starts to look for trends and insights. And we launched it about a year ago. I think Q1 of 2023 was our first report that we published, right, Jon?

Jon Cochrane (00:54):

Yeah, that’s right. It’s been a gradual evolution, but really we started looking at this about a year, year and a half ago, and each report trying to put out new and relevant insights to the broader market. 

Randy Wootton:

And the intention obviously is to help inform what’s going on in the private market. There’s a bunch of analysts out there that do a great job of culling through the public SaaS data and what’s happening in terms of growth rates and gross retention and net retention and what they’re seeing more broadly. But the private market remains opaque. There are companies out there like Benchmark and OpenView and others that produce surveys, where people respond to a qualitative survey and they’re really robust. In fact, Benchmark just came out with an updated one, which is super helpful.


But there are very few companies that are able to use the real billing and invoicing data to talk about what’s going on. And so that’s what we wanted to contribute. And I know as a CEO of a company that goes in on at least the quarterly basis to talk to my board about our performance relative to the broader market, it’s invaluable to have these insights in terms of understanding what’s really playing out what the trends have been. And so that’s our opportunity to share. I don’t know if there was anything else you wanted to add to the remit of the report or the institute, Jon?

Jon Cochrane (02:10):

No, I think that’s a really good summary, Randy. I think one of the things that we’re able to shed a little bit of light on are some of the dynamics playing out in the public versus the private. Well, really the private instead of the public markets. Like you were saying, there are a ton of analysts that cover the public markets, but there are unique challenges that the private markets face, and you typically don’t know if things are kind of trending in the right direction or companies are struggling until you kind of get that press release that comes out and takes everybody by surprise. Yeah, they’re just unique challenges that private companies face and it’s really helpful to be able to get a small pulse on, hey, what’s going on within my cohort that my business exists in?

Randy Wootton (02:56):

And so we do split the data broadly at this point between those companies that are less than a million bucks and then everybody. The other thing that we bring to the table is an insight in terms of the pricing model, if they’re using consumption versus more of a subscription term-based model. There is some nuances that we’re able to layer in because of our own business model. And finally in our recent report at the end of the year, we introduced vertical analysis. And what’s happening on the verticals, which everyone wants to know, is like, hey, if I’m in FinTech, how are things playing out in FinTech versus Martech versus developer tech? And so that’s what we’re going to continue to do each and every quarter. I think the thing that has been the other real driver for us is to try to make this timely.


And so as a quarter closes to come out quickly, as quick as possible with the information. Our Q1 reports a little bit delayed. That’s mostly because of our capacity on our team, but we’re going to give you the insights now, which is still better than waiting for the end of the year 2024 to find out what happened in 2024. We with our rhythm are trying to do a flash report at the end of Q1 and Q3, and then a deep dive report at the end of H1, a calendar year, H1, and end of the year. So we’ll talk a little bit about what we learned in the Q1 report today, and then we’ll frame up what we’re expecting for the H1 report that Jon and team is going to sign up to deliver at the end of the podcast. So with that, Jon, broadly across Q1, are we still in the recession? Have we seen a rebound? What’s the top level?

Jon Cochrane (04:29):

Yeah, I think the most exciting thing that people may pay attention to in this report is that we’ve finally seen what appears to be an uptick in growth. And so there are nuances to it. What’s driving it? Right. Right, exactly. We could do a little whoop whoop there. I think if you listen to NPR, they have a buzzer whenever things are going well, we need to get one of those for the podcasts here, Randy. But yeah, we’ve seen a slight uptick in growth and it’s really something that when you look at, we tried to take a look over the last nine quarters, that’s the data that we have right now, when you take a look at the trends, it is a noticeable uptick. Now does that mean that growth is here to stay? I think we would caution strongly being like, we’re back, baby. Growth is here. But it is notable saying, okay, it looks like there are cohort of companies that are figuring out how to succeed, how to grow despite economic headwinds.

Randy Wootton (05:25):

And I think that has been the, for us at least, has been an awesome trend because all last year you and I were chatting about how it had dropped off significantly, almost precipitously, and then it was just flatlining at 14 to 15% growth for several quarters in a row. And so everyone’s talking about could we ever get back to a world where B2B SaaS is growing at 20% plus. Don’t know. And to your point, one quarter of data doesn’t make a trend, but as we talk about our H1 report, if we have two quarters suggesting that there’s this recovery, I think that will be something that everyone will be looking at closely. And so then let’s deep dive a little bit, Jon, so that we have broadly the growth, but when you double click down, there’s drivers of the growth and then by pricing model by size, and then there’s certain verticals where we’re seeing growth. So it’s not consistent growth for all companies across all pricing models, across all verticals. Can you give us a little bit of context on what you’re seeing when we do that double click?

Jon Cochrane (06:27):

Yeah. So maybe we’ll start with the bad first and then we’ll talk about the people who are finding a way to grow. I think one of the things that’s very clear in our data is if you’re facing a negotiated renewal, say it’s an annual invoice or something along an annual renewal with your customers, that cohort of companies is struggling. You see that and you see a parallel to what’s going on in the public markets there. I’ll use Salesforce as an example. In their earnings release, there was a noticeable drop in their stock price. They were saying, “Hey, people are budget conscious, they’re sensitive, and they’re pushing back on their subscription spend.” And we’re seeing that correlation play out in the data. So that cohort has not continued to grow broadly. They are still facing some of those economic headwinds. People are pushing back on their annual renewals.


And it’s clear from the data that we’re seeing so far. To contrast that if you are more of a usage, consumption-driven company, we’ve seen growth continue. For the past really three quarters. That cohort has outperformed those companies who have more of a negotiated contract model, but that gap has widened. They’ve actually continued to grow. They’ve outpaced the growth of the prior three quarters. And so usage, consumption is really driving a lot of the growth right now, and there’s a noticeable improvement for companies under a million dollars.

Randy Wootton (07:55):

Let’s hold it for-

Jon Cochrane (07:56):

There’s a lot to unpack there.

Randy Wootton (07:57):

Yeah, there’s a lot to unpack. One of the things is when we first started this report, we actually noticed that the consumption-based pricing model companies were dropping off faster than the subscription at the time. You had a hypothesis, well that probably makes sense, that in the middle of the recession or the COVID that people that are on more of a month-to-month, which is often aligned with a usage model, would pull back and we would see those companies drop. Whereas the annual contracts is more of a step function. At time of renewal, you’re going to see that play out. And so to your point, there are some companies that have more of that annual motion that are feeling the pain that had been playing out in the consumption market a year, 18 months ago. Do you think that’s true?

Jon Cochrane (08:42):

Yeah. So a couple things going on because I think there is a break point and the story is different depending on if you’re an early stage, like the earliest stage company versus a company that has, let’s call it hit product market fit, and what’s that delineation that we make? We see a noticeable difference in the trends if you’re a business under a million dollars versus over a million dollars. One of the insights that we’ve noticed in the data that we look at is if you’re under a million dollars and you want to, you’re trying to get to the next level, having a negotiated model is a really good way to do that because it’s just the quantity of customers you have to win in those generally usage-based environments, it’s a big burden or it’s a big obstacle to overcome. We still see that trend playing out, but we’ve seen an improvement. Subscription invoicing, that’s still outperforms the usage cohort if you’re under a million dollars. However, again, in Q1, big improvement in those startup, early stage companies who are deploying primarily a consumption-based model. If you are over… Yeah.

Randy Wootton (09:46):

No, go ahead. Please finish your thought. I had a qualifying question, so go ahead.

Jon Cochrane (09:50):

Yeah, yeah. If you’re over a million dollars though, that’s where we see the biggest divergence. Your company’s hit product market fit, you already have a cohort of customers, consumption is just outperforming, so the invoicing negotiated renewals. And so that’s kind of the dynamic that plays out. It’s early stage scrappy company, got to kind of do whatever it takes to break past that initial barrier. Once you’re above there, the companies who have found a way are the ones who have more of that. You don’t have to reengage in the negotiation as you’re consuming whatever widgets you sell or onboarding users licenses, whatever it is, your growth rate, it follows the usage of the business. So you’re having to avoid some of those things that the negotiated companies have to, that they’re just hit right in the face with right now. There’s no negotiation. It’s just, hey, they’re using your product more and you’re growing.

Randy Wootton (10:45):

That’s right. So let’s go back to the distinction you’re drawing between a million and those above a million. Part of the reason why we make that distinction is because we tend to sell to companies that are very early stage, even pre-revenue as they’re getting their billing model up and going, up to companies like 50 million. We have companies that are greater than a hundred million, but we are not playing in the enterprise space. So part of it is our corpus of data, the set of customers we have, we’re focused on that space, sweet spot between two, three, four million and 40 million. But there’s another reason that we focus and make a split between the million dollars and everyone else is because 80% of the companies I think are below a million bucks, broadly across according to the Bureau of labor statistics.


And it just seems like that is its own dynamic. And so maybe can you talk a little bit, is there any other reason why we make that split between a million bucks and everybody else? And is there a nuance to being below a million bucks in terms of product market fit or revenue architecture fit?

Jon Cochrane (11:44):

Yeah, I mean there’s no say one-liner that encompasses why we’ve chosen the one million cohort or less. You’re right when you just take it out of the Baxter Institute, look at the Bureau of Labor Statistics. There are a lot of businesses that say are a sole founder who’s running their own business or they just have five employees and they’ve found a lifestyle business or something like that where growth is not the priority. It’s running a sustainable, scalable business. It’s cash flow positive that can pay everybody’s salaries. It’s out there. But what the data bureau will put out there is they’ll say most companies that start are going to fail pretty quickly within two to five years after they launch. To have a business that launches and it withstands the test of time. It’s just a challenge. And so that’s just the dynamic that has played out for decades.


In our data, one of the reasons why we focus on the $1 million cohort is it was originally we thought maybe our data and the way we were slicing the analysis was wrong. But then we went back, triple check the numbers and we went, no, there are real differences between companies who are above that threshold and companies who are below it. And I think that informs the broader strategy that businesses need to think about as they’re evolving along this growth maturity model, the tactics that you employ when you’re less than a million dollars are different than that when you’re in the one to 10 million. And it’s different if you are 10 and above and it changes, there are these different inflection points that companies need to be aware of. They need to think about, you need to plan for in your growth evolution. The one million dollar cohort, the change in the analytics and the findings was really undeniable. So much so that we essentially had to call out. We said there are these different dynamics at play.

Randy Wootton (13:40):

And what we saw, I think just to put a fine point on it, out of 1500 customers, so we do a bunch of filtering to make sure the data is accurate. We have north of 2,200 customers broadly across Maxio, but in this specific cut of the numbers in Q4, the growth rate for companies less than a million bucks was 5%. And in Q1, that’s spiked up to 26%. By contrast, the company’s greater than a million dollars in Q4 was at 19% and that’s dropped to 16%. And so part of that is, hey, they’re small companies, they get a couple hundred thousand dollars and they got massive growth. But I do also think there may have been a clearing out a bunch of companies were less than a million bucks went out of business and post-COVID, there’s been some funding, especially in the AI sector and cyber and etc. And so I think you’re starting to see companies to get to a million dollars, if you’re starting from zero, it’s like a two to three year thing unless you’re on a white hot tear.


And so you’re seeing companies that got founded in 2022 that are coming into focus at a million bucks, post-COVID post the pullback. I think you’re seeing some VC activity happening in that early stage founding. Do you have any other thoughts in terms of this cohort of the new kids on the block that are hitting a million bucks?

Jon Cochrane (15:04):

The one thing that when I saw a spike in the numbers in Q1 really where my mind went was I wonder if we’re having a similar trend that we really last observed back in 2008, 2009 during the last financial crisis. And one of the things that occurred then was you had… There was kind of this, everybody was growing and then all of a sudden everything dried up and companies who were able to get started in that cohort, I think of a couple of notable ones, Dropbox, Airbnb. You can find articles published on this of companies who launched in 2008, 2009, 2010, found a way to survive within really an unprecedented time and make it, have done phenomenally well since then.


We could be seeing that dynamic playing out again, this is a very hard time for companies who want to get funding. To get funding. You really have to be best in breed. You have to have the numbers. If you’re going to get a bank loan, this is an expensive time to do that. Given inflation, business loans, you’re paying a pretty hefty premium somewhere between probably 10 to 15%. That’s a real cash consideration or real cash drain to basically finance that debt. If you’re a company that has found a way to either bootstrap or you can take on funding, this could be that dynamic playing out 15 years later.

Randy Wootton (16:41):

Well, we’ll certainly come back in our reports, subsequent reports and talk more about it and see what we’re seeing. And then one of the things I love that you and the team do, Jon, is you do reach out and look at other, you contact other analysts and you quote other sources to help triangulate on what we’re seeing and to put it into broader context, which I hope our listeners and readers appreciate as well. It’s not just our data, it’s data within context. To that point, let’s then shift to the verticals. We’ve talked about the split in terms of pricing model consumption versus subscription. The world still is going to be hybrid, but what model do you use at what stage? We have a lot of data around that. We talk about what’s playing out in the million and the greater than million. And then at the end of 2023, we layered in our first vertical look. But you’ve been able to go back and provide data for previous quarters and the trends. What did we see in the data for what are the verticals that are winning?

Jon Cochrane (17:39):

Yeah, most recent, the two that are really at the top of the leaderboard in Q1 are software companies in the dev engineering space and those who also are focused on transportation, logistics, supply chains. Previously they were kind of middle of the pack or bottom third, but they have popped to the top most recently. Super interesting when you look back and who were the juggernauts over the prior eight quarters take out Q1. Cyber is the undeniable, they’re the heavyweight champ within that cohort. But we’ve seen a pullback in that sector. And I think some of the dynamics when we were, like you were saying Randy, we try to contextualize the insights that we’re having to some of the broader things that we’re seeing from different analysts in the market. And there was a theme saying cyber has been doing phenomenally well.


People have been beefing up their cyber, but there comes a point where they can’t just continue to charge more and more and more for that data because people eventually are going to say, “Okay, well there are other people and other competitors that are in the space and I have to find a way to have a reasonable cyber budget.” So we saw that. We observed a pullback there but where we observed the newcomers, the dev tech, the supply chain tech, they’ve now risen to the top of the leaderboard.

Randy Wootton (18:58):

Well, let’s split those little apart and we don’t know exactly why, but I think you and the team have developed a hypothesis for why do we think developer and engineering tech has been growing like crazy recently?

Jon Cochrane (19:08):

Yeah, I think our hypothesis right now, again trying to triangulate to what we’re observing in some of the private companies out there and some of the themes that we’ll see is we have conversations with different companies out there. Companies have had to optimize for EBITDA. For those of you that aren’t familiar with EBITDA, it’s basically earnings before interest, depreciation, taxes, amortization, essentially what’s your cashflow? If we had to simplify it down, cash coming in needs to be greater than the cash going out. And so one of the most expensive costs for any business is headcount. 70% of a business’s expenses is tied to headcount and you’ve just observed multiple rounds of layoffs all throughout the private industry. You can’t just cut all of your employees and then expect to continue to grow. You need to find a way to grow smarter, in a more scalable fashion. And so if you’re going to do more with less employees, you need to be able to supplement those employees largely with new tooling.


That’s the dynamic that we think is likely playing out here. You’re going to need some sort of software to supplement the leaner operation that you’re running as a private business right now. That’s our leading hypothesis right now, but we’re certainly going to double check that when we put out the next report here in about a month.

Randy Wootton (20:29):

Yeah, I think it’s a great observation. And one of the things as you guys pulled together, we were talking about the carnage of layoffs in 2022 and 2023, and there’s a variety of reports out there. I’ve heard it’s up to a million jobs had been eliminated in 2022 and 2023 in the tech sector, Tech Crunch I think what you quote said it was 300,000 in 2023, whatever. It was a lot. But what they also said is the layoffs have continued and that through basically the first quarter of this year, there was another 60,000 laid off. And I don’t hear that in the press as much. It felt like at the end of the year everyone was like, we’re done with the layoffs, everyone’s going to start hiring again. But I don’t think that’s necessarily true. We’ll be following that as well as one of those trends in terms of the layoffs as people are tightening their belts and obviously the two ways that you get better business performance brute force as you raise prices and you lay people off.


And I think everybody in the software industry has done that. We’ve seen that in the price increase with Salesforce and others where they just said, “You’re going to pay 9% more and tough.” And we’re like, “Okay.” And I think that’s been playing out in enterprise software writ large. And then the other thing to your point is how to drive efficiency. One, you sort of restructure, you take advantage of labor arbitrage. I think there’s another theme which you and I have chatted about and we’re going to look more closely at is the assumption with VCs and PE firms in terms of AI augmentation and what these tools are going to do to make marketers more efficient at their job. And I think one area you’re seeing that play out, not the first person to say this, but is developers. Buying AI tools like copilot, et cetera, that are helping them produce more code or getting 80% of it done right, the QA.


And so I do think, I’ve been talking about banging this drum that CEOs and CFOs of private companies are going to have to have, next year going into their fiscal year 25 planning cycle, a line which says, and here’s our AI efficiency gains. So not just tooling that you’re describing, but intelligence. The augmented intelligence that is going to help us all do our jobs better. And so that’s the clarion call for all functional leaders to, if you’re not experimenting with AI right now and how to make you better, you’re going to fall behind, especially if you’re looking for investment from the top tier VCs and PE firms.

Jon Cochrane (22:54):

Yeah, it’s pretty wild how powerful that technology can be and how it can augment. And I’ve seen things like it helped me get over writer’s block. Well, writer’s block is a huge… The block, it’s not called writer’s block for any reason. The block is real. But yeah, to your point, call it coding block, whatever it is. If you can just get more efficient, get it done quicker, it’s really powerful. I think I was reading an article actually put out by one of our Maxionauts the other day and they were saying, is AI going to replace human? Everybody goes to Terminator and grow us from going to take over the world. I think the thing that is pretty clear is people who know how to leverage AI are going to outperform people who don’t know how to leverage it.

Randy Wootton (23:36):

A hundred percent agree. I remember I was CEO of a company called Rocket Fuel, which is a first generation AI company. It was the real deal AI, and we had 25 models that we were updating every night, algos, and we had thirty-ish data scientists on staff and another 30 client managers analysts that were helping with clients, customers to do marketing optimization. And we were in that boom versus doom dichotomy, Jetsons versus Terminator. We were putting all the media planners out of the job and this was like 2015. And what we tried to frame was it wasn’t about artificial intelligence, it was augmented intelligence. Fast-forward, guess what? Those media planners and buyers aren’t doing the same thing they were doing back in 2015. They’re all taking advantage of what’s called programmatic buying today. And so I think every industry can look towards what’s happened in marketing, what’s happening in sales in terms of AI, and it’s improving the outbound motion and qualifications, et cetera.


And if you aren’t playing with it, you are going to get left behind. Well good. Well, Jon, I think we’ve covered most of the report on the industry side. I think the lowest growth rate industries, media tech, e-commerce, HR in Q1 over the last eight quarters, e-commerce and retail have been the lowest average growth rate, marketing and sales and media tech. Marketing sales and media tech surprise me just because that industry is totally overcapitalized. There’s like 40,000 different vendors and I think as every CFO is looking at every function and saying you need to tighten your belt, that often marketing and the advertising teams have bought a bunch of tools and so they’re being pulled back and a bright line is being drawn between the must have and the nice to have. And I think that’s what we’re seeing play out is who are the winners and who are the losers in those categories. With e-commerce and retail, with the strong consumer trends that we’ve seen in the broad market, do you have a sense for why they might be not growing as fast as some of the other industries?

Jon Cochrane (25:33):

Yeah, I think that that’s something that we’re certainly going to take a closer look at in the next report. I had been reading some articles the other day basically saying that before we had the growth at all costs, the infusions of all positional capital into the economy, consumers really were price sensitive and you had to have competitive prices to win somebody’s business. And a lot of that went away. That conventional thought went away in 2021, 2022. And we’re just now starting to see a return to, you just can’t continue to charge people exorbitant profits. I mean, you’re observing in the public markets. A lot of these companies are having record profits and people are starting to connect the dots and go, this is not all inflation. These are smart companies who know how to take advantage of a situation and now all of a sudden that’s going to have to start… I think we’re seeing the beginning of that playing out in the B2C market. People getting smart. You got to compete on price.

Randy Wootton (26:38):

I’ve been reading some articles. Are we ready for another consumer contraction? So great. Well, I’m going to put you on the spot, Jon. So we’re teeing up the next report, which will be at the end of Q2. Hope to have it out in 30/45 days [after the ] the end of Q. Two is, other than what we’ve already talked about in terms of what we’re focused on in our year end report, in our flash report along the dimensions we’ve described, do you have any Christmas presents for our readers and listeners for the next report?

Jon Cochrane (27:07):

Yeah, I think the thing that we’ve really wanted to do, Randy, is shed some light on… We’ve hinted at it and said, Hey, these are the top industries. What we haven’t really shed a lot of light on are… There’s a book by Jim Collins, Good to Great. There are a lot of good companies, but what do the great companies do that are different than those who are good companies? That’s one thing that we want to start unpacking. Who are the top 10%? What are the characteristics about those companies that are different than say a company in the top 25%. It’s a big difference if you’re in the top 10 versus the top 25. That’s one of the things that we want to start unpacking.

Randy Wootton (27:47):

That’s great. The mean versus the median versus the mode.

Jon Cochrane (27:51):

Yeah. Yeah. And it’s interesting when you start looking at it that way. A lot of our data is based on averages, but when you start getting into the mean, medium, mode, the top quartile, top deciles, it’s interesting.

Randy Wootton (28:04):

Well, that’s great. And I do think you have to have enough data to make it meaningful. And so obviously what is a statistically significant amount, we’ll try to do it. I do think this was… I’ll never forget when we came in with our year end report for our board, Chelsea Stoner, our general partner on the board, and we talked about the million dollar below million dollar threshold, and she’s like, “Gosh, Randy, that just didn’t make any sense.” I was like, “Well, what do you mean?” And Battery would say they see 5,000 deals a year of which they only do 20 and that there are still companies in that less than million bucks that are killing it. So I do think our ability to discern, distinguish what are the top 10%, top 20%, whatever it is we have to draw, what do they look like? What’s their profile versus everybody else?


CJ Gustafson, one of the guys I’d really love to follow, just posted about the T2D3 and you triple, triple your first two years, you double, double, double for the next three years from zero to a hundred million in seven years. That used to be the glide path that, the acceleration path that everyone needed to hit, that everyone was funding. And I think if we are able to get into the quartile and see the strivers versus the thrivers distinguish that and buy vertical we’ll help those companies that really want to be the world’s best say, look, I got it and this is what it means to be in this rarefied air. So with that, Jon, thank you to you and your team for the hard work to get this out. We’re publishing it in the next day or so and I look forward to feedback and comments on what people find valuable and what they would like in our next iteration. So thank you, Jon.

Jon Cochrane (29:44):

Yeah, thanks Randy. Appreciate the time.

Episode 25

Winning Long-Term: Creating Media-Led Growth and Driving Revenue

June 5, 2024


Randy Wootton
CEO, Maxio
Headshot_Nathan Latka
Nathan Latka
Founder & Chief Investment Officer, Founderpath

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Video transcript

Randy Wootton (00:04):

Hello everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices, the podcast where we talk to experts in and around SaaS about what’s happening today and what they think is going to be happening tomorrow. I’m really excited to have Nathan Latka join us today. He is one of those influencers in the space that I’ve known for years. In fact, when I was at Percolate, we did an initial interview on his podcast when he was running the Latka Agency, but he’s had this incredible experience primarily as an entrepreneur, which we’ll talk a little bit about. It’s been broken into three basic phases.


From 2011 he started a variety of social media and social marketing companies and was super successful, it was his first startup. Then he moved into running the Latka Agency, which we all probably have followed his reports that he publishes, a prolific publisher of information using data to inform entrepreneurs and really one of the people driving the media-led growth model and how do you create content and generate, it was great to see. And then in 2020 he started his own fund. It’s a debt financing fund, which we’ll get into a little bit of detail of why he went debt versus VC. He’s also an author and podcaster. He’s a connector, he brings people together. He’s a provocateur in terms of the ideas that he shares. And so it’s just been great to get to know you over the years, Nathan, and thank you very much for joining our podcast.

Nathan Latka (01:24):

No, Randy, it’s certainly mutual and congratulations on the merger and the rebrand and what you’re doing at Maxio and your team to lead this space. So excited to jump in today.

Randy Wootton (01:33):

Awesome. So we talked a little bit about your three chapters. Maybe give us a little bit of background there you were, social media was blowing up and you jumped into that space. And then we can talk about, well, what led that to the Latka Agency?

Nathan Latka (01:47):

Yeah, I think taking a step back, my dad is a month older than my grandma, and so I grew up with parents that were 22 years apart. And that meant my dad was a coal miner, grew up pinching pennies in Pennsylvania. My mom was a double entrepreneur and was the breadwinner. And so when I went and studied architecture at Virginia Tech in 2008, in my back of my head I always knew, I said, I want to make a lot of money so I can have financial freedom and do what I want with my life. I don’t want to do what I’d done growing up, which is penny pinching. I love my dad to death, but that’s how he grew up. And so when I was in architecture at Virginia Tech in southwest Virginia, and I heard fifth year students when I was a freshman saying, we’re graduating, we can’t get a job. And I’m going, this is the third ranked program in the country. Why would I put myself through this for five years if I don’t have a guaranteed job? And that’s when I said, I’ve got to find another way. And I found this thing, Randy, called FBML, which was called Facebook Markup Language. It’s the code you used to launch custom Facebook fan pages back in the day, and that was my first software company.

Randy Wootton (02:50):

That’s great. And so then how did you move, well first, any lessons learned because I had been in that social space as well. I had been CEO of Percolate, which was a social media marketing space, and just we talked about at that time that all of marketing was going to shift to the pace and pattern of social. Meaning it was always on, real time, how to add value, thinking about rather than when I was at Microsoft, we’d had these campaign planning which would take quarters. It was like you had to be reacting within 24 hours. Is there something about that experience in social media marketing that then led you to found the agency?

Nathan Latka (03:23):

Well, I think a lot of the success we had at Heyo, that was the name of the software company, H-E-Y-O, we bootstrapped it to about a million dollar run rate. And yes, obviously I want to take credit for that, but we were also extraordinary lucky. I mean, Zuckerberg was on the cover of every magazine. Facebook was blowing up and we just happened to capture some of that momentum and it generated revenue for us. But in the back of my head you’re always going, this is not my platform. We are dependent on somebody else. What is the real moat we’re building here?


And so ultimately I said, well, if I want to build something special and really build additional, we should probably raise capital. And I say VC dollars is some of the best marketed, maybe the best marketed money in the world because you’re sort of convinced that if you don’t raise VC you maybe don’t have maybe a real or a unicorn software company. So anyways, I raised 2 million bucks on a $8.5 pre-money valuation, $10.5 post. And the big lesson from this period of my life, Randy, was when I got a $6.5 million acquisition offer from [inaudible 00:04:26] contact to sell the company after that VC round. You’ve been around the block, you know how my board responded, what’d they say.

Randy Wootton (04:33):

They said, well, we’re not going to clear the fresh stack.

Nathan Latka (04:36):

Exactly, exactly, right. You can’t sell for $6.5 if you just raised a $10.5 post. But in my head I’m going, I’m 21 years old, I’d love to take home $3 million post tax. What are you talking about I can’t sell the company. And this is where you learn the hard way. Thankfully I learned it early, but I said, let me sell the company. It wasn’t a massive win, but we got the deal done. So I could say I’d sold a company and then said, I just need to learn. And that’s when I got into Latka Agency, launched a podcast. The intent there was to interview founders and learn as much as I possibly could before launching my next business.

Randy Wootton (05:09):

Well, that’s great. And I do think as someone, I’ve only been VC, well, I guess my first CEO gig was public company, so it had already gone out and I joined them after they were public. And so managing public company shareholders really different than managing a board of VCs who were coming in at different stages. And my last company Percolate, we had Sequoia, GGV, Lightspeed, First Round Capital.

Nathan Latka (05:30):

How much did you guys raise at Percolate?

Randy Wootton (05:32):

Oh gosh. Well, they had raised a bunch before I showed up. I think it was north of $70 million and we were upside down and we eventually sold the company. But to your point, as a CEO, well professional CEO coming in, my intention was to certainly create shareholder value, but number two was to land the tech, to land the customers and land the people and have it be a successful transaction in terms of best possible outcomes.


So I think the VC model, to your point, so few people get invested in in terms of total companies that actually have VC investment. I think it’s less than 1% of all software companies or something. So there’s an enormous amount of successful private companies out there. But to your point, the VC and getting funded by VC, people think it’s like ringing the bell, and if they don’t have the experience that you’ve had or that you’re sharing on your podcast about how to structure the deal, they can give up a lot of equity or set expectations at super high valuation that they got to grow into and just becomes an issue. Okay. And so then Latka, you were doing, how many folks did you interview through your podcast?

Nathan Latka (06:41):

Yeah, so we got the podcast going, the first episode went live in August of 2017. The intent was to do a couple per month, but I fell in love. For anyone listening, thinking about launching a podcast for your SaaS company as a media moat. Something to consider is you have to think about it like a long-term game. You’ve got to say, would I publish one episode per week for three years with no listeners and still enjoy the process? And if the answer is no, don’t even start, it’s not worth it. Now, if you create and do it consistently and create habitual habits with your listeners, over time it becomes a massive asset, which is Randy, probably why you guys are out there and are making the investments you’re making at Maxio, but it’s a long-term play. And so we’ve interviewed now today, personally I’ve interviewed over 3,300 B2B SaaS CEOs.

Randy Wootton (07:27):

Wow, that’s incredible. Yeah, I think there is something about, do you like to have conversations. That’s been the upside for me personally was, I don’t know, we’ve probably done 30 so far, but every person I’ve interviewed really interesting, have great stories and I’ve enjoyed it. And so to your point, whether or not we’re getting the tap loads that we would like, not yet, I think we’re in the top 50% of all podcasts, but there’s a super long tail of people doing podcasts. So trying to figure out the sweet spot in terms of guest and content and promotion is really interesting.


Okay. And so then the Latka Agency, you did that for a bit. To your point, you interviewed a bunch of people to learn all those lessons. After 3,300 interviews, I imagine you had a lot of pattern matching, which we’ll get to in a second, but then you decided to start your own fund, a debt financing fund, this Founderpath. Talk a little bit about what the genesis of that was and why you went debt versus VC. You alluded a little bit earlier to that, but I think it’s a really interesting point.

Nathan Latka (08:24):

When I was building Heyo back when I was, sorry, 21, 22, I thought that everyone who built a software company raised money. I thought that that was the option. I didn’t realize that there is a waste management software in Southwest Kentucky that’s not on Crunchbase, that the Washington Journal has never featured and that Sequoia doesn’t even know about, that’s doing six million of ARR, profiting $2 million of cashflow every year. But I experienced those stories over time on the podcast and realized for about every one that had raised equity or raised VC, there was about 900, it’s like a one to 1000 ratio, 999 that were happy, profitable, not super fast growing, but very happy founders, profitable, $5 million software companies.


And so what I said at that moment was, and this happened really in 2018 timeframe, is it shouldn’t be binary. You can’t access capital markets unless you’re a SaaS company growing 300% year over year and go raise VC. And the SVBs of the world, they’re doing sort of sponsor-backed lending. They want to see you raise 20 million from Sequoia, then they give you five million because they’re banking on the deposits. That’s not actually underwriting the software company, retention, churn, ARPU, CAC, LTV. And so we said is, man, I bet I could lend to some of these companies and actually underwrite the business, not the equity sponsor. And that will create an opportunity for these companies that never want to raise VC to get some cash to grow a little faster or run an experiment or hire an engineer. And so Randy, that was a long answer, but in 2018 I started writing personal checks for about 10 K doing very small debt deals with software companies.

Randy Wootton (10:06):

Oh, interesting. Oh great. Right on.

Nathan Latka (10:08):

[inaudible 00:10:09] a small fund.

Randy Wootton (10:10):

That’s great. So that idea of venture debt versus the debt that you were like ARR debt or revenue based financing, I’ve heard it called. We actually, most of our customers at Maxio, we have about 2,400 customers, most of them are venture PE backed. And we’ve explored this idea of, gosh, we have the invoicing and billing data. So the risk of the analysis that a bank or someone like you and your company would need to do is very different than if someone was just showing up because one, you got all the history of the data. And then number two is you can get right in the flow.


And to be perfectly honest, we’ve worked with some other partners in this revenue-based finance space, and our customers currently haven’t seen us as a channel to get access to debt. They want that from their bank. And we’re going a little off script here, how do you find those people? Clearly you have 3,300 people that you’ve interviewed and you’ve got this huge network, and is that what you’re doing is just building on that CRM to go out and say, here’s a new value prop, debt financing, control your own fate, don’t get caught in the VC gauntlet.

Nathan Latka (11:14):

Yeah, I mean, what I would say is it depends. Some founders, they understand the VC game and they want to go play that game. And I’d say, go for it. We’ll promote the heck out of you. We wish you luck. God speed. Others know they don’t want to go that path. But I think what I spend a lot of time doing is once I realized debt was an option in 2018, I started asking about it in the interviews to learn more. So I’d ask VC funded companies, hey, how do you think about debt? And what they would tell me is, well, we couldn’t really access debt until we did our series D for 100 million and Goldman did a $50 million term loan at SOFR plus 200 or back then LIBOR plus 200 BPS. So like a 6% interest rate with 2% warrants on a six-year term with a 24-month IO or a bullet at the end.


And I’m like, okay, that’s all fine, but what if someone doesn’t want to raise the series D at all in the first place? Who’s going to back them? And then I went in and I did a lot of research on Lighter Capital. I thought what they built was interesting, but you paid Lighter Capital back four to 9% of gross monthly receipts, so you never quite knew what your payment was going to be. It was kind of confusing and if you grew quickly, you’d pay Lighter back faster. So your effective interest rate was higher. That didn’t make sense to me.


I loved what SaaS Capital was doing because this is a compliment in lending space, they’re really boring and it’s perfect. They’re never going to go out of business for lending to bad credits.

Randy Wootton (12:33):


Nathan Latka (12:34):

I mean, you look at what has happened at Pipe, they really spent a lot of money educating the space about what revenue-based financing was two, three years ago. But the founders are not there anymore because they had a lot of losses. So SaaS Capital had a great model, but when I looked at SaaS Capital and said, should I get into debt, can I offer something different than SaaS Capital? They really weren’t even taking phone calls unless you had a minimum of three or 5 million of ARR. Because Steve and the team over there, they’re great, but it’s a 10 person team and there’s not a lot of tech. They have to pick big deals to do. They have limited time. And so the sweet spot I identified was can we automate underwriting for founders with one to 3 million of ARR and enable them to get 500 K to a million bucks factoring their receivables? And that’s when we launched Founder Path and the larger fund in 2020 and 2021.

Randy Wootton (13:21):

Well, congratulations. I mean clearly you did it just the way entrepreneurs do, is you go interview a bunch of people, you find out if there’s a sweet spot, a pain that’s not been satisfied, you segment your audience, your ICP very specifically, and then you offer value that other people aren’t able to deliver. So congratulations. And this is your third fund that you’re now offering through Founder Path?

Nathan Latka (13:41):

Yeah, first one was, first one was five million before even Founder Path. I’ve been, it was really hard to manage all the borrowers, so I said here’s founderpath.com, connect your API so we can monitor automatically. That was the launch of Founder Path. And then in 2022 we raised our second fund, which is $150 million fund, and that’s what we’re currently investing out of today.

Randy Wootton (13:59):

Got it. Awesome. All right. Well thank you very much. What a great career and congratulations for your success and wish you continued success. And maybe there’s a way we can partner and figure out how to offer some of your debt services to some of our customers.

Nathan Latka (14:14):

I just have to give you guys a shout-out real quick. We work with a lot of partners and a lot of times API endpoints are messy and it’s really hard to work with, but we have a lot of founders that have connected their Maxio accounts. Your API endpoints are very easy to read, so credit to your engineering team and your API team there. But we’ve underwritten and wired money to many Maxio customers because their data was clean. They use your MRR waterfall, they use your templates. It’s beautiful and easy for us to underwrite because you guys help them keep things clean.

Randy Wootton (14:39):

Well, that’s great, Nathan, thank you. That was unsolicited but appreciated. That’s what we talked, well, part of the reason I came here was because it’s investor grade reports and we talk about people getting funded, stay funded. What’s interesting, I hadn’t thought broadly about, well we had, because we were looking at the revenue based finance, but we should chat more about how we can broaden the definition of what it means to get funded and how do you get capital to go do what you want to do.


I’d love to shift. We’re going to talk about a couple other things. One is what’s happening in the broader startup market today, and then number two, we’ll talk about what does it mean to be successful as a CEO and then we’ll see how it goes from there. But you’ve talked to 3,300 customers or entrepreneurs and more through all the other events that I’ve seen you at and been with you at. What are you seeing in the startup market in terms of how things have changed over the last two years? Everyone talks about growth at all cost versus efficient growth. I mean, we don’t need to spend a lot of time on that, but just double click down for us. What’s the insight that you have that isn’t being talked about broadly in the marketplace because people are only staying at the surface level of, hey, you got to be efficient growth not grow at all costs.

Nathan Latka (15:44):

Yeah, I mean, look, I’m only 34, so I don’t have the benefit of 40 years of experience or history, but if we expand a little bit longer duration than just the past two years and maybe look at the last five years, you used to be able to back five years ago at my first software company, we could buy attention. We knew what we could spend on an ad to get the sign-up, to get the trial to convert. You then, I don’t know if my dates are exactly right here, but in 2017, 2018, Jeff Katzenberg, billionaire, very successful with Meg Whitman, ex eBay, I mean Top Tech CEO, they got together if you remember, and created with a lot of hype this thing called Quibi, which they wanted to launch and go after the streaming wars, compete with Disney Plus and Netflix. They spent billions Randy, trying to buy attention. They launched, it failed, it went out of business, they shut it down, billions were lost.


The lesson there is you cannot buy attention anymore. It doesn’t matter how much money you have. If you are a bootstrapped founder competing against a VC backed competitor and they’re trying to buy attention, but you’re more creative and you have figured out to get the attention of your customers in a creative way, you will win long term. It’s just a matter of time. So that is, I would say if you force me to only articulate one C change over the past five years, it would be that you must earn attention today with media led growth, you cannot buy it.

Randy Wootton (17:01):

That’s great. I think a couple of points on that. One is just there’s been, well with SaaS growing, there’s been an enormous number of companies been funded with all that VC money we were talking about before. They’re all spending money on trying to buy attention, buying keywords, but they’re not saying anything different. And so when you look at their websites, you can often take the logo and just put it from one to the other. I saw this in the marketing, MarTech space specifically, and there was something like 20,000 MarTech vendors and that guy, chief MarTech just every year does the-

Nathan Latka (17:33):

[inaudible 00:17:34].

Randy Wootton (17:34):

Yeah, it’s scary as hell if you’re in MarTech. And so I got out of MarTech and went to the CFO, the office of the CFO to play in that space. And one of the things, the plays that we’re doing is the Maxio Institute. And the Maxio Institute is we take the 2,400 customers, we go through the data because we have the billing and invoicing data and we publish a report every quarter. And other than surveys, which are people fill out surveys, we are one of the few that has the actual data and are able to do that. And so to your point, how do you build a foundation around thought leadership, around differentiated data, which is what you did at the Latka Agency in particular, and I see you continuing to publish, hey, what’s the top 250 software companies and what size are they? And it’s just continuing to provide insights into data that no one else has.

Nathan Latka (18:20):

Yeah, that was [inaudible 00:18:22] also because I got podcast listeners in 2019 that said, Nathan, you’ve recorded 600 episodes at that point, which one should I start with? And I said, well, what do you care about? And they said, well, I want to listen to someone with five million in revenue. I said, oh, I have to categorize all these on getLatka.com so people can sort by revenue or profitability.

Randy Wootton (18:42):

Oh, interesting.

Nathan Latka (18:42):

And that’s how getLatka.com got going and then we started selling subscriptions to that data set. Think of it like a mini PitchBook or Crunchbase for B2B SaaS. And it doesn’t do $10 million of revenue, but I can tell you it does in the millions of revenue. And we’ve brought in a great CEO, the ex CEO of Datanyze, who bootstrapped a five million and sold to ZoomInfo and Ilya Simon is now doing a great job leading getLatka.com, which includes the podcast, the magazine, and some of the media entities that you’ve mentioned.

Randy Wootton (19:06):

That’s great. Well, I’m not the first person to say this, but data is the new gold, and I think if you’re just an application layer without being really a system of record, you’re going to struggle because someone is going to have access to the data, they’re going to be able to aggregate it. And then this next, maybe this is the other trend just speak to a little bit is AI, is it real or is it hype? I was, first CEO company was a public company, first generation AI, and it was the real deal. And what we’re seeing similarly is if you don’t have the data, the source data, you’re not going to be able to put the intelligence layer on top of it to create real differentiation. How about you, what are you seeing in terms of the hype around AI and the startup marketplace writ large?

Nathan Latka (19:52):

Yeah, I mean look, you look at Jensen and Nvidia yesterday, the stock price pop after the earnings call is incredible. But ultimately what AI is about is about producing intelligence and making it available faster. And so that’s what I like to think about. For our own company, I say at Founder Path, how can we produce intelligence faster? And if that means training an LLM, wonderful, then it’s like, okay, do we use AMA, do we use OpenAI? What do we use for that kind of stuff?


You guys, I imagine are doing the same kind of thing because you sit on a very unique data set and it’s like how do you produce intelligence at scale for your user base? Typically, we tend to do this by having growth advisors, people that have to find patterns and get on a call and coach founders or vice versa. And so they’re going to be ways where you and I, Maxio and Founder Path can figure out how to build some of this actually, this intelligence, we can produce it inside of our applications with no calls at all. And I think that’s where we’re spending most of our time.

Randy Wootton (20:45):

That’s great. We are as well. I would, having been down this path before, getting the data right and getting it in the right structure is a huge lift. And if it hasn’t been designed in terms of making itself available for AI to process it, it’s a big lift to go back and restructure your database. And so I think a lot of companies that are starting today, AI first, are thinking about, okay, how do we chart our database? How do we create vector database? There’s a whole database strategy that if you were a web-based application, you may not be thinking about, but I think probably VC’s and others are really looking for what’s your data strategy and your AI strategy for the companies that are funding these things.

Nathan Latka (21:20):

Yeah, you nailed it. I mean if you talk to OpenAI, the app works, the voice interface you and you say, what is the churn rate of ZoomInfo? Name any publicly traded company, and it’s going to say, tell you churn is 6%. And you say, well, is that logo churn or revenue churn? Is that gross or net? It’s going to go, oh, I don’t understand your response. Please go read the SEC filing. You know what I mean? This is the kind of thing we’re like, at Maxio, I’m sure you deal with a lot. We deal with a ton at Founder Path, when we are trying to ingest data to underwrite we’ve got to get everyone to use our definition or our four definitions of churn and categorize it appropriately. Otherwise, it doesn’t matter how good your AI is because you’ve trained the LM the wrong way on bad data.

Randy Wootton (21:57):

Right, amen. I think that was one of the reasons why I was excited about to come to this company is I mean GAAP, right. GAAP’s defined, you have an argument around what part of customer success do you put above the line and below the line. That’s the excitement in GAAP. Other than that, it’s done, right? You’re just ensuring that you’re closing the books. Side point, I do think there will be a day powered by AI that companies will be able to close a zero-day close. And so you wrap the month, the next day you have your GAAP financial statements done. That’s going to be through accounting software. But when you think about the world of ARR and then the metrics, the SaaS operating metrics, it’s the wild wild west.


And to your point, people have different ways of defining things and we’re trying to come out with a metric policy to say, hey, here’s how it’s done standard across the industry. So if you want to get funded, you need to be doing it this way. What we find is often early stage companies have their uncle doing their books and they’re reading articles and they think they got the rev rec done right. And they’re like, no, no, we want to do it this way. And until they get really often at that stage, they’re using a CPA or a client advisory service, a fractional CFO, someone who really knows SaaS to come in and say, no, no, no, no, you’re not doing rev rec correctly. Their ARR is all over the place. And so to your point when you’re trying to fund someone, understanding truly what is contracted ARR versus live ARR, and if you’re contracting ARR because you gave first six months away for free, it creates confusion and noise in terms of how you’re representing your business. I imagine that makes it hard for folks like you and you’re trying to aggregate that and trying to provide intelligence on top of it.

Nathan Latka (23:35):

You nailed it.

Randy Wootton (23:36):

Well, awesome. Well, let’s shift to the next topic, which is around, hey, in this crazy world, lots of things changing, moving super fast, what’s required to be a successful CEO? I’ve been writing the Seven Secrets of Success for CEO’s. I would say my bias is I come in at companies that are series C, so I’ve not been like you, an entrepreneur and founder. And so maybe if you wouldn’t mind just talking a little bit about the distinction you would draw between founder and CEO. What makes a founder successful and then as they make that transition to CEO, what do you think are the things that they need to be thinking about through that transition?

Nathan Latka (24:10):

Look, I don’t have a lot of experience moving past the founder led CEO into just the CEO’s sort of role, but in my head, the way I sort of think about it based off the interviews I’ve done is somebody like Randy Wootton is coming in because you are dealing with things that are, the founder’s got a vision, the CEO is about operating. These are the people, these are the teams, there’s the budget, here’s the P & L, here’s the board deck and the founder’s vision. That’s sort of how I think about it. So the second that the vision isn’t carrying the whole business, a lot of founders can get up to 10, 20, 30 million bucks just on vision, but at some point you’ve got to start operating the business. And I think that’s when it makes sense, we’re using the word CEO, but you could also keep the founder CEO and hire a president. And there’s a lot of ways to structure it, but I think that’s the biggest difference. Would you disagree?

Randy Wootton (25:00):

No, I think spot on. Sometimes people will split it between startup and scale up. So if you’re thinking in terms, and this is what I think I bring to the table is, hey, how do you run operations at scale globally. How do you build efficiency, operate and execute. I think to your point, there can be startup CEO, clearly there are a bunch that have gone through and made a crap load of money, but I think part of it is often in B2B SaaS, the startup founder is technical and so they have a vision for the problem they’re trying to solve and the technical solution. They’re doing evangelist sales, but at some point to go build the go to market motion in terms of how do you think about crystallizing the positioning and messaging when it’s just not you selling it. So it’s not one to one, you’re not playing tennis. Instead you’re playing, I don’t know what the metaphor is, but you got to go reach a hundred people. How do you scale your go to market.


And then I think the other thing is sometimes technical founders tend to be like, well, the product works, people should just like it. And so then you got to install your customer success as a buffer between the reality of the product and the promise. Those different components I think is where you can get a scale up CEO or president, to your point, or COO and can add a lot of value. I think you find that with Cheryl Sandberg, you find that with Eric Schmidt, you find that at other companies as well where the founding CEO’s and founders have said, well, we need someone to come in and help operate. So I think that’s great. Well, maybe then just focusing on that founder, that startup CEO, what have you found to be the three or four characteristics of all the people you’ve talked to that are consistent of not ensure success, but the most successful ones embody?

Nathan Latka (26:40):

Yeah. I mean they have to have a vision about what they believe about the future that other people don’t believe, right. Otherwise, everyone else would be doing it and competition would drive out all the profit margin. So they’ve got to have something like that they believe in. Now the question is how do you get to something you believe in that you think the market doesn’t see yet? Well, usually that comes from you’re eating your own dog food. You used to go cut lawns and you hated the software you used. Now you have and launched lawn cutting software or marketplace to cut lawn. So I always look for what I call, especially in the world where attention wins, the founders that are best at getting attention is where they’re telling their own story because the market goes, of course they understand the problem the best, they came from lawn cutting. I look for vision about the future and I look for the founder market fit, not product market fit, the founder market fit and the founder’s story fit to the market. And then those are I think two key ingredients.

Randy Wootton (27:33):

That’s great. In fact, about lawn mowing, I’m in this group, this Vistage group, which is a collection of CEO’s and there’s a guy who started a company called Electric Sheep. He used to cut lawns, and this is now a robotic lawn cutting tool that has launched to do commercial landscaping. And it came from out of his experience, but also with his background because he had studied robotics and he brought those two things together. So I love that idea of founder market fit. And then similar, that was your story as well in terms of how you got to where you were. And so that’s awesome.


So founder market fit, what about, I was alluding to this a little bit in joining Vistage. One of the hardest things about CEO at any stage is it’s a really lonely job. So I talk about building your tribe and having a mentor, a coach, a peer group, and then also just your own advisory board of people who’ve known you for 15 years, can call out your own BS. What have you found successful founders have done in terms of building their tribe? Because sometimes it could be, I don’t need anybody else, I’ve got this vision, I’m totally convinced this is right. And if I talk to other people, they’re going to slow me down. Versus, oh no, I’d like to get mentors, I’d like to get coaches. What are you seeing is most successful for the folks that you’ve talked to?

Nathan Latka (28:51):

Yeah, I mean, I think there’s two kinds of founders here. The founders that read and are consumers of intellect all day long and they’re terrible at taking action. I would much prefer the founder that takes action quickly and learns from first person versus just reads all day. You see what I’m saying?

Randy Wootton (29:07):


Nathan Latka (29:08):

So my priority would always be the action taking CEO first, and then it would be, okay, they’ve taken action to 10 million of ARR, or 5 million of ARR. How can they or me or I or them build out a group around them so that as they make additional bets in the future, they can be better informed bets but not compromise speed. And so that’s why I’ve tried to surround myself with at Founder Path. I’ve got people that they know me personally, so my first angel investor at Heyo, he’s very close to me so he knows how and when I overreact or when I don’t react tough enough or the kinds of people I worked well with. So he’s who I go to for that kind of stuff. There’s others, like our series A lead, Savneet Singh, that has been around debt and finance for a long period of time. So anything related to warehousing or margins or macro or micro or alpha and beta, risk, reward, underwriting policies, I’m going to somebody like him. And so you sort of have your mini tribes based off what you think you’re weak at or strong at or what you need for the future. And that’s how I’ve done it at Heyo, I mean at Founder Path today.

Randy Wootton (30:11):

That’s great. One of the values that VC’s sell in addition to giving you capital is the expertise and experience, and by being on the board they’re going to help you be more successful. I think it depends on who the VC is and what the relevant experience is. It depends on whether the partner who sold the deal actually shows up on the board or they give it to one of the people on the team. Bootstrapping your own company or taking debt financing, you don’t have to have a board, you don’t have to have, or at least a board with fiduciary responsibility because you’re not playing with their money. Do you have a regular board that you set up in terms of an advisory board and you’re coming in and sharing your results, or is it more the model that you were hinting at where if you have a specific issue, you go to an individual that you know is an expert to address versus having a regular board meeting in the discipline that a board meeting then entails?

Nathan Latka (31:02):

I think cadence is valuable, but any founder that has no board, that finds it hard to get motivated to look at their financials and close not every quarter and know how they’re doing, is not going to be successful long term. Now, you can put a board in place to put pressure on you to close it out and put the report out every quarter, but I mean, I do that myself and a lot of our best bootstrap founders, they do this themselves and their board is their top six customers, which is the best board. So I think there’s a variety of ways to do it. I can also tell you horror story, I mean I won’t name them but I mean there are many VC backed companies where if a VC has a hundred investments and you’re not in the top five, that board member’s not paying attention to your board meeting, they’re not reading the deck ahead of time. They might even be working on replacing you. So I know there are some very valuable VC’s, but they’re usually investing all their time in their big winners, and that’s usually less than five, 10% of their portfolio.

Randy Wootton (31:57):

Amen. I think some people talk about the A company, B company and C company. And the A company is the one where they’re going to make the return for the fund and they’re investing energy and effort. The B companies, they’re kind of like, well, I’ll come to the board meeting and we’ll see how it plays out. The C companies, they’re actively thinking about either replacing the CEO, and that’s where someone like me comes in, or what are they going to do, because they’re on eight to 10 boards, it’s hard to spend time. And I do think that the VC model is big returns for few investments. The challenge as a CEO in the portfolio is you only got that one investment. You’re that one company, and if you’ve dropped from A to B and you’re on the threshold of C, it can become really unnerving. You’re like, wait, this is when I actually really need you, is to come in and bring all that experience to bear and help me turn the ship.


So I think that’s great in terms of thinking about who do you bring in. I am actually on two boards right now outside of the Maxio. One is Opal, which is content marketing. And so I had been in content marketing at Percolate. They’re VC backed, Madrona backed, and Excel I think. Great board members. And because I have background experience, I’m kind of like the independent for them. The other one I’m on is a private company, Guided Financial, which provides funding for people who want to use their 401 K and buy a franchise or something. Getting early, really early, I should put you guys in touch, but there might be an interesting overlap in your ICP.


Any who they don’t have invested capital, so it’s just them running it. And so the board meeting is more of what we were just describing of, hey, we’re coming in, we’ll read the deck and we’ll help you think through things. But at the end of the day, Jeremy, the CEO, has complete control. And so he can say, meh, interesting idea, but I’m going to go do X. You’re like, good luck. So very different.


Well, great. Well, why don’t we shift to the last deep dive topic and then we’ll go to the speed round, around disruptions in the office of the CFO. Do you have, of all the companies you’re talking to, people that are going after the office of the CFO, of all the CFO’s you’ve talked to or controllers, maybe agencies or CPA firms that are supporting the entrepreneurs that you’re working with, what are you seeing more broadly in that space?

Nathan Latka (34:07):

I think the biggest misconception that founders, who it’s only their first or second company and they’ve never gotten above five or 10 million of revenue, the biggest misconception those founders have about what a CFO does is they think a CFO is just logging into QuickBooks or Maxio all day long and just closing the monthly books. But let me point out some examples to you. Giles Palmer, when he was running Brandwatch acquired BuzzSumo for 15 million cash. It was doing 5 million of revenue, three X multiple. A year and a half later or slightly after that, he sold the company for a five X multiple. There’s a two X multiple arbitrage. That is financial engineering, that is inorganic growth. That goes through the office of the CFO.


So these founders that look at a CFO role as bean counters are missing out on a massive opportunity. In fact, they’re not even being exposed to opportunities to drive inorganic growth. And when you look at the most successful software companies today, they all have some component of inorganic growth. If you look at a publicly traded company that most of you haven’t heard of called Par Technologies, which competes with Square, they’re IOT plus SaaS. So they put the hardware in the restaurant and then they sell the software to the restaurant. Well, Savneet just bought for 400 million bucks of cash and equity, a combined entities doing 80 million top line and 20 million of profits. He’s trading though at a multiple higher than 80 million into 400. So that is multiple [inaudible 00:35:33]. That is inorganic growth.


And if you can figure out an M& A strategy where you’re either buying very similar products, but maybe instead of selling at an SMB level of a thousand dollars per year or less, maybe you bought in your same space, but you bought a sales motion. You bought a same tool in your space, but they sell to the enterprises. That’s an M&A strategy. Another one might be you look at FreshWorks, they’ve got thousands, tens of thousands of SMBs using them. If they buy one other tool and upsell it across 10% of the base, they just added 30 million of ARR. That’s ARPU expansion kind of acquisition. This kind of stuff all flows through the office of the CFO.

Randy Wootton (36:10):

Yeah, well, great examples. I think that was spot on in terms of thinking about organic growth is what’s coming from your current product in your current segment. And I think for founders, they’re starting with a, here’s the problem, the ICP and the persona we’re going to go after. As they start to think about how to expand those customers, what are the other set of products you could be selling in? Well, you could build those, or to your point, you can do an inorganic play. You can go buy a company. I think then it’s, well, how do you go buy that company? How do you get the funding? Do you self-fund it out of your own EBITDA or this is what the PE promise is, hey, we’re going to go put money in, we’re going to build the platform, drive efficiencies, use the EBITDA, and then also give you additional capital to go buy that inorganic growth that’s going to lead to either ARR arbitrage or EBITDA multiples over time.


I would say that has been my biggest lesson learned coming into a PE-backed mashup. Maxio was the integration of two companies, SaaSOptics and Chargify, who each been around for about 12 years. We put them together, try to create a platform, we start offering new modules. But the growth assumptions that I talk with the board are, okay, so what’s the organic growth going to be? And then who are you going to go out and buy and how does that plug in? And so it is a continual conversation. And to your point, it is in large part driven by a CFO being able to say, okay, well, this is what we need the shape of the business to be, to be able to support that. What are we going to invest in organic growth versus how are we going to optimize EBITDA? And then the other point that you mentioned, I think on the financial engineering is spot on. How do you-

Nathan Latka (37:41):

I was going to say, when I grew up too, I always watched TVs and you see all my books behind me. I’m reading bios of these big M&A deals, and you sort of are trained to think as a founder, well, I can’t think about M&A until I have a PE firm behind me and I’ve got a hundred million of revenue, and then I can go do… I mean, there are companies that sign with Founder Path with a million bucks of ARR, and we gave them capital, non-dilutive. They use it to go buy other companies for like 500 K cash and 500 K in stock. They double their revenue. I mean, inorganic growth is not something that is reserved only for $50 million ARR founders with a private equity backer.

Randy Wootton (38:15):

Great insight. And I think that’s clearly one of the values that you offer with the access to capital you’re providing. I think the other point you were making, which I, part of the reason why I came to this company was the CFO moving from back office to front office. So moving from closing the books and compliance to being able to have a seat at the table with the CEO and the CRO to define what our monetization strategy is going to be. So what are the pricing and packaging we’re going to roll out? How is that hitting in terms of win rates? How is it impacting churn? And that is, all that data is coming from the office of the CFO. And so they can be much more, rather than just cash management, they can really help you figure out, okay, what’s your growth management? And so moving into that front office seat.


With people that you work with though, when do you find that they hire a CFO? Because my experience has been it takes getting to about 30 employees. Prior to that you’re probably doing it on QuickBooks, you’re doing cash accounting. Is there an inflection point that you’re finding when bootstrapped CEO’s are bringing a controller on board or a fractional CFO?

Nathan Latka (39:21):

Yeah, I mean look, this is a big [inaudible 00:39:25], there are companies that I still battle with in our portfolio every day that are doing six million of revenue with no full-time finance person. That’s too late. You should have a full-time finance person at that point. You don’t need to pay a $200,000 per year CFO if you’re a million of revenue. So there’s a bunch of really great firms, I’m sure you work with a bunch as partners, but you look at [inaudible 00:39:43] Partners, Ben Murray at SaaS CFO, Escalon Partners, there’s a bunch of these fractional CFO firms that you can pay somewhere between 50 and 150 per hour or two to 4K per month to do basic things like QuickBooks, general ledger management, some FP&A, stuff like that, the non-strategic stuff. But eventually, once you get up to I think three, four, five million bucks of revenue you should have in your fixed headcount expenses, a budget for a 150 to 250 K per year, full-time CFO.

Randy Wootton (40:12):

Yeah, agreed. I think that’s probably the right inflection point. And there are a bunch of these folks, these fractional CFO’s. I would say the key is to find a firm that focuses on your industry. So there are very few CPA firms that are working with B2B SaaS. There are some out there, [inaudible 00:40:30], Crews.

Nathan Latka (40:30):

What are your top three?

Randy Wootton (40:31):

Yeah, the ones that I’m, well, these are the partners we’re closest with is [inaudible 00:40:36], Crews, both West Coast. And so a lot of their portfolio comes from VCs and PEs. FRC is a great one, Naval Academy grad. Shout out to FinStrat, who a guy named Christian, I really have enjoyed getting to know, because he came up through finance. He wasn’t a CPA, and he has some startup experience. So his whole starting point is he goes to the entrepreneur and says, what is your end? What do you want to try to achieve? You got to be honest. How much do you want to sell this for? Do you want to run it as lifestyle business? And then you do the three-year backup and say, okay, well then this is what needs to be true about the business and how you shape it. So he’s adding the services at the highest level in terms of being a financial advisor, financial engineer, as well as providing the accounting service.


You can always get a CPA, but I think your point about bringing a CFO on board, finance becomes strategic. It’s not just about closing the books. It’s like, how are we going to run this business? How are we going to grow this business? And what’s the exit? Especially for people that are doing bootstrap, because you don’t have the VC saying, hey, this is our expectations into T2D3. If you’re not on track, we’re going to do something else. This is you figuring out, well, do I want to create generational wealth? Am I just trying to buy an RV and retire with my wife? But getting honest about that then changes how you run your business.

Nathan Latka (41:58):

You nailed it. And scenario analysis, right, it’s really hard to run scenario analysis quickly without a full-time model and someone owning and maintaining that model with actuals and historicals and go forward.

Randy Wootton (42:08):

Awesome. All right. Well, we’re right towards the end of our conversation. Let’s wrap up with the speed round. So three questions for you, and we can keep it short. One is favorite metric and why.

Nathan Latka (42:19):

A payback period. Anyone that can get the money back instantly has the highest money velocity and short payback period is much better than a big LTV to CAC ratio.

Randy Wootton (42:27):

Awesome. Specifically CAC payback versus gross margin payback, or do you have a-

Nathan Latka (42:30):

Yeah, CAC. Exactly. You could do gross margin. Actually, that’s even more conservative, but yeah, CAC payback.

Randy Wootton (42:35):

Yeah, I was talking to a guy who runs a firm, actually Targus Alex on a podcast. He’s a great one of these financial advisor fractional CFO’s, and he does gross margin payback. And that’s the first time I had heard that, because I’ve always been in the CAC payback world. But yeah.

Nathan Latka (42:49):

Well, yeah, and the gross margin, just for anyone that wants to calculate that without spending a bunch of money, you’re taking your monthly ARPU times your margin, right. So if you’re selling something for a hundred bucks a month and you have 85% margin, you have $85 per month, divide that into your CAC of 160. You have a two-month gross margin and CAC payback.

Randy Wootton (43:03):

Yeah. Yeah. And so I thought it was a great new one that I hadn’t known that much about. Favorite book, doesn’t have to be a business book, but if you got a favorite business book and why.

Nathan Latka (43:13):

Yeah. Look, I have recency bias on this, so you can see it, I actually was reading it this morning, but Charlie Munger as he just passed, so his almanac is really, really good and I’m knee-deep in that right now.

Randy Wootton (43:23):

That’s great. You’re the second person who’s recommended him, and I’m going to buy it and put it on my stack by my bed. Third question, who’s your favorite influencers? So this is someone that’s actually coming out with interesting ideas that you spend the time to read either the email or you follow them on LinkedIn, he or she, which one do you like most?

Nathan Latka (43:42):

Well, yeah, I’ll say there’s a lot of very loud influencers that I don’t think have a lot going on up here. And there’s a lot of people with a lot going on up here that are very bad influencers. They don’t know how to get attention. So my answer is going to be someone that I think does both. I think Jamin Ball is very good. Altimeter Capital on Twitter. He summarizes publicly traded SaaS calls in a very easy to understand format. And I think he’s one of those rare combinations of very intelligent, also knows how to package his intelligence and his feedback in a way that is easily to consume.

Randy Wootton (44:08):

Sorry, can you spell his last name for everybody?

Nathan Latka (44:10):

Ball, like a bouncing ball, B-A-L-L.

Randy Wootton (44:12):

Oh, Ball. And which firm is he with?

Nathan Latka (44:14):

Altimeter Capital.

Randy Wootton (44:16):

Altimeter Capital. I don’t know him. I will add him to the list. Well, Nathan, as always, I learned something every time we chat. Enjoy your perspective. Congratulations to your success, and thanks so much for being part of SaaS Expert Voices.

Nathan Latka (44:29):

Thank you Randy.

Episode 24

The Five Components of a Successful CEO: Focus, Communication, People, Values, and Results

May 29, 2024


Randy Wootton
CEO, Maxio
Headshot_Joelle Kaufman
Joelle Kaufman
Strategy & Revenue Catalyst (aka CEO), GTM Flow

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Video transcript

Randy Wootton (00:04):

Well, hello, everybody. This is Randy Wootton, CEO of Maxio, and your host of SaaS Expert Voices, where we bring experts in and around the SaaS world to talk about what’s happening today and what is on the horizon. With me, I am very excited to welcome Joelle Kaufman, who’s been in B2B SaaS since 1996. She’s had roles in product marketing and sales, has been both a CMO and CRO, and over the last three years has been running her revenue catalyst consultancy called Go-to-Market Flow. Her focus is on helping companies make and recognize more revenue. Joelle, welcome.

Joelle Kaufman (00:41):

Thank you, Randy. I’m so glad to be here.

Randy Wootton (00:44):

Yeah, it’s been a lot of fun getting to know you over the last couple of months as we’ve been talking about this, and then trading notes. It seems like where we would like to spend our time today is really actually not talking about the office of the CFO, but instead based on your background experiences, really focusing on the CEO and what makes CEOs successful. We were chatting a little bit about this series that I’ve been writing on LinkedIn called The Seven Secrets of Success for SaaS CEOs, a lot of alliteration there. You have your own model which has five components, which seems very consistent.


Just as a reminder for people who want to see what I’ve written, you can go to my LinkedIn and the seven Secrets are tied to overall results, establishing a winning strategy, shaping the values and standards that will guide your company, building an effective executive team, managing your board and investors, allocating capital to balance the yield today with investments for tomorrow and investing in your tribe, mentor coach, peer group, et cetera. Those were seven that I had, and Joelle, you had five that were sort of similar, but would you mind talking us through your five and then I think we’re going to deep dive on two.

Joelle Kaufman (01:54):

Sure. I do want to say, Randy, I think it’s important that the CFO and the CEO are partners and aligned, and so everything we’re going to cover, which is important for the CEO, the CFO has a critical role to play. I am a huge believer in metrics and a real believer in avoiding surprises. That usually means the CFO knows what’s coming and knows how to make adjustments at the company level. For the CEO, number one, you must focus the organization with clarity, clarity of vision, of purpose. That will lead to clear missions that support that vision, prioritization, and most importantly, exclusion of what you are not going to do.


You must see this all the time. There are infinitely more things you want to do and you could do and people have good ideas about. If you do that, you have no focus and you will burn through the precious capital resources and human resources of the company. Number one, know how to focus. Number two, clear and consistent communication that is understood by the listeners. It is not enough that you say it, Randy, it matters what they hear, and learning how to communicate so that people can hear you is one of the key learning opportunities for the vast majority of CEOs. Number three, Daniel Pink has a phenomenal book called Drive, and it says, what motivates people? It’s an interesting question. Do you know what the answer is?

Randy Wootton (03:41):

Well, I’ve read the book a while ago.

Joelle Kaufman (03:44):


Randy Wootton (03:44):

What I think of in general is people want to be able to make an impact. I do think that comes into having clarity about what they’re trying to do, understand how it ladders up to the overall mission, and then have autonomy to make decisions within their context.

Joelle Kaufman (04:01):

That is why you are a good CEO, because autonomy is the thing. Now, here’s the trick, you want people to have autonomy, but you need transparency. You have to balance those things. We don’t like surprises, but autonomy is the only way people will be motivated, which brings me to number four. You have to hire, empower and continuously improve people. There’s a saying in Silicon Valley, “Oh, we’re going to just upgrade people,” and they mean we’re going to fire people and hire new ones. Let’s be clear, that sometimes is needed. That is an extremely expensive and damaging thing for the organization. Every time you fire, you lose institutional knowledge. Every time you hire, it costs money and there’s onboarding and there’s risk. Now, if someone’s not performing, if someone’s not the right person, of course, as a CEO, as an executive, we make those decisions.


What if upgrading the organization actually meant upgrading the people themselves and giving them the opportunity to grow and learn and demonstrate that they can perform at a higher level? That’s a fantastic thing to do. I think higher empowering improved people is the fourth of my five. Then finally, CEOs are the embodiment of the values of the company, so they have to articulate them, model them, reinforce them over and over again. If they’re inconsistent with their values, nobody will believe the values and they will undermine the credibility of the CEO. I’m not saying what the right values are, I’m saying know what your values are and live them, articulate them and model them.

Randy Wootton (05:47):

Well, this is great. It’s lots of stuff I would put in the category of how you do your job versus what is that you’re actually doing in terms of thinking about leadership capabilities. You got to get your results done, but then how are you doing it in terms of communicating effective, articulating a set of values, living those values, investing in your people? A couple other things popped for me just hearing you talk through it again, is very similar to what Marc Benioff did at Salesforce with his V2MOM, where you have the visions, the values, and I think he describes it as methods, obstacles and metrics, I think, which is having one sheet that is able to articulate where you’re going, very important to articulate values and to live those values so they don’t become a Dilbert exercise. That people actually see how you reward and recognize people. That’s a wonderful reminder.


I was thinking about your fourth one about the higher empower and improve people. I’m in the middle of a book, Cultures of Growth, by Mary Murphy. I don’t know if you’ve read her, but she is picking up on that thinking around genius culture versus growth culture. Genius culture being what I was experiencing at Microsoft before Satya came on board, we had geniuses running the organization and what it meant to be the smartest person in the room and how you built political capital, et cetera, versus how do you create a learning environment where people are working together to grow. I think to the point you were making in terms of we call it grow our own, where you’re bringing people in early-stage career professionals, well then you have to have both invested time and energy and career ladders to help articulate what success looks like at each stage.


You have to develop and build out a management program. We call it management excellence in terms of what does it mean to when you make that transition. Then we also have another framework on top of that, the great leader framework, which is for people that are moving from directors to VPs and now there’s another expectation in transition in their career. What does that look like? A lot of things you were describing in terms of the capabilities of how you get your job is what you’re focusing more your energy on as you get more senior. It sounds like that’s consistent with how you’re thinking. Before we go into the other ones, anything else around that higher empower and improved people in terms of what you’ve seen companies do successfully or where they make mistakes other than doing the turnover that you were describing?

Joelle Kaufman (08:23):

Sure. I think one of the challenges of leadership is that A, the Peter principle. We promote people who’ve been very successful at doing a function, at doing a job, and then we put them in leadership. Overwhelmingly, we think, well, they’re human, they know how to lead. It’s my experience that leadership is a skill just like sales is a skill or finance or what have you. If you don’t approach it as a skill that can be learned and actually needs to be practiced, I don’t care if you’re a genius or whatever, the number of natural-born leaders, I mean, he’s controversial, but people will say Bill Clinton was a great communicator.


Bill Clinton trained himself in communication, practiced it, got coaching and feedback constantly in order to be great. The idea that you can be great because you are just a really great human, that’s a fallacy. We have to invest in creating great leaders and then helping leaders remain great. We’ll talk about that when we talk about curveballs a little later, but I do believe that leadership, leaders, are the leverage of any organization. Carol Dweck’s growth mindset, which is very pervasive in education, but it’s also critical for organizations. Because if you have a culture that punishes people when something doesn’t work, you get a culture where people don’t take risks.


Now, there are dumb risks and there are good risks and we have to help people figure that out. You want people to take risks, to push the edge of the envelope to try new things, and it will fail. I often say, “Great. What are we going to learn and do differently next?” Now, to my CFO brethren, let’s not spend absurd amount of monies failing. Let’s try to fail fast, let’s try to learn quickly, but absolutely, let’s embrace failure for the learning. Let’s embrace what we learn, and that makes us better. That creates an organization that’s willing to take risk as opposed to an organization that’s practicing cover your S, which is not an organization that’s going to be great on any front.

Randy Wootton (10:50):

Great insight. I think that idea of leadership is a skill that can be developed over time, and there are lots of different types of leaders. Those that are lead for the front versus those that are supporting behind. You have to find your own natural leadership style. I think I’ve seen books like, hey, there’s seven different leadership styles. I actually was just rereading Peter Drucker’s, Effective Executive, and he talks in that book about what it means to be an effective executive. Now granted, it’s a little bit dated, it came out in 1965. He uses he throughout, and the language is a little stilted, but he too makes the point that effectiveness is something that can be learned and you have to focus on, he has five things you need to focus on, very consistent with what you’ve been describing. The irony for me is here I am writing these the Seven Secrets of Success for SaaS CEOs, and basically, I should’ve started off and said, just go read Drucker. He already said it.


I thought I was having original ideas, but no, it wasn’t. It’s all gone back to the master. His point around exactly what you’re describing is that you build this effectiveness through deliberate intention and very similar in the idea of how do you drive focus and drive trade-offs. One thing you mentioned in terms of clear communications that’s understood by listeners, I totally agree with you. Another book that we were just working on in my marketing group was actually Aristotle’s The Art of Rhetoric. It talks about how arguments are built in [ethos], pathos, and logos, and how you need to be thinking about when you’re communicating, how are you using all three of those levers to be effective? How have you found people measure and validate whether they are being understood by their listeners? Other than taking a survey after the presentation, what’s the way that you really know that you’ve landed your message or that people are really changing their behavior based on terms of where you’re directing?

Joelle Kaufman (12:48):

If I’m going to communicate and the massive amount of resources of bringing everybody together, I should have an outcome that I’m aiming towards, and it needs to be clear. If I’m giving an update, I could send that over Slack, I could send that over Teams, I can do that in writing. Why am I communicating? If I know why I’m communicating, then I have a clear change or a clear action I’m expecting to see. Then the question is, do I see it? If I don’t see it, the I think evolved leader says, my message didn’t land. There’s too much else people are hearing. One of the things I’ve invested in, and I was very blessed to first be exposed to it in 2003 is something called the Process Communication Model. It is based on psychological research by Kahler, is his name, Taibi Kahler.


Process Communication proves that we all have communication channels through which we hear best and through which we communicate best, and there are styles that work better with some people and better with others. If we understand who we’re speaking to and what they need, not what I need, what they need, and I use the appropriate channel and approach perception to address how you need to hear things, the probability that you will get my message goes up 10 X. The proof on this, by the way, is that the system Process Communication was adopted by NASA for the selection of astronauts and for communicating ground control to astronauts. Because if something goes wrong, it actually is life-threatening. We need to communicate so the other person can hear.


This is done worldwide, it accounts for cultural bias, it accounts for just different languages. I find it very useful. I work on it with my clients and I’ve been using it and I have funny stories about that, but that will derail our whole podcast. Learning how to understand how someone else needs to hear, and this is harder as a CEO. You could be in front of 50 people, you could be in front of 5,000 people. How do you do that? Well, you’re basically going to have to, to your Aristotle, rhetoric. You’re going to have to deliver your message in each of the channels in the same presentation. Some of them will not be comfortable because they won’t be what’s most comfortable for you. Who cares? Your comfort isn’t what we’re trying to accomplish here.

Randy Wootton (15:43):

No, I think it’s super interesting. I haven’t heard of that. Is it a book, the 2003 book?

Joelle Kaufman (15:49):

No. This was actually developed in the 60s. You and I are going Drucker, Aristotle, Process Communication. You Can Go to processcommunication.com to learn more about it.

Randy Wootton (16:00):

I’ll check it out.

Joelle Kaufman (16:01):

There are books about it.

Randy Wootton (16:05):

We’ll put it in the show notes.

Joelle Kaufman (16:06):

There’s a couple of really popular books, I just have to look them up and I can send them to you. It’s really a profound simplification of what goes right and what goes wrong in communication. Once you get it and use it, your leadership becomes transformed because what is the single biggest instrument of leadership? Communication, that is what we do as leaders.

Randy Wootton (16:35):

I think that’s right. I couldn’t have said it better. I think that when I think about what it means to be a leader, which we’re going to get to in a second, is ultimately, as a CEO, you’re responsible for results, delivering results. How do you get those results as a CEO? I actually do very little. It’s more about how do you help people understand where we’re going, why it’s important, and how they can contribute so you’re getting results through others, and the vehicle for that is communication. What does that look like in terms of your all hands? What does that look like I send a note when I’m traveling, I call it view from 30,000 feet, I’m coming back on an airport? I remember when I wasn’t CEO, I always wondered, well, what do CEOs do? Because you never actually see them.


I provide an insight into where I was, what I learned, and really try to embrace the pathos part of communication versus the logos part of communication. You think about that type of forum and construct is very different than what we do in our QBRs, which is very much about logos. Then there’s the, how often and frequently you’re just doing personal outreach? With the leadership cadre, we have about 30 people in our leadership cadre and try to meet those that aren’t my direct reports once every six months. There’s that personal interaction as well. I think to your point, a lot of time is spent in terms of communicating and thinking about the different forums of communication and overall effectiveness. I would say the way that we measure it at Maxio is through, we do employee engagement surveys every quarter.

Joelle Kaufman (18:15):

Like Culture Amp?

Randy Wootton (18:17):

Culture Amp, right, everybody does. A couple of questions in there about understanding, well, one, do you have confidence in the company? If people don’t believe the message of the CEO, they may think the ship is going sideways. Number two is do they really understand the strategy of where the company is going? Then we have, like everybody, I imagine, have questions around leadership effectiveness. That too is part of, hey, is the leader helping me understand what I’m doing? Is the manager helping me define the work and where I need to make an impact? I’ll be super interested in taking a look at that and digging in, so thank you for sharing.

Joelle Kaufman (18:53):

Well, and I’ll add a couple of metrics that are not survey-based, but if you are having high undesired attrition, you have a problem. If you are consistently not hitting your results targets, you have a problem. Now, by the way, that problem could be you’re setting results that are not in the realm of possibility or the problem could be people don’t know how to do what should be ambitious, like ambition, but possible. One of the things that always takes my breath away is you can just do a verbal check-in with just your leadership team. Simple question, what are the three most important things for the company? Over 70% of leadership teams will not say the same three things. Let me suggest that if your CEO can’t align the first team, the probability that the first team is aligning everybody else is zero, non-existent, and so that’s really important.

Randy Wootton (19:56):

Yeah, that’s great. We’re actually going to have our executive leadership team meeting. We get together once a month, we’re doing it tomorrow. I’m going to lead off with that, the three most important things the company needs to overcome. have them write

Joelle Kaufman (20:06):

Have them write it down on a piece of paper. Have them write it like a ballot. Even anonymous ballot. Because the lesson for you is maybe you’re in the 20 to 30% that’s got it, that would be awesome. Probably you’re going to have some things that are off and that could lead to, well, are these the right top three or should we make an adjustment? Because you don’t want people just parroting, you want people owning it. Autonomy, they have to believe. Okay, but we should talk about results.

Randy Wootton (20:36):

Let’s do it, because I think it’s a lead in and just the bridge I would make is, everyone has one-on-ones, we have a one-on-one agenda, as I’m sure most people do. In our one-on-one agenda, the top thing is what are your three priorities? Every week that we meet or bi-weekly, we come back and say, “Okay, so are these still the right three priorities?” Then I think also having the, hey, what are we putting in the parking lot? Which is around your idea of exclusions and trade-offs. You can have these conversations about things that seem to be exciting, the new shining object we need to go work on, but then you’re always putting them against the top three priorities.


Does this supplant one of these? If so, why? The other thing that does I think for people, and this may be goes into building the effective executive team muscle that we’ll talk a little bit about. It gives people space and control over their lives. If they’re feeling overwhelmed, they can always go back to, well, these are the top three things I need to work on this week. It’s not changes every week, but over the next month it might putting enough energy and exerting enough time to really address the things that are really the top three. Then as long as we’re aligned, they feel like they can be successful. Still feel like they’re working super hard, but they’re not feeling like they’re overwhelmed.

Joelle Kaufman (21:52):

Top three for each individual executive could be very different across everyone on the leadership team, and that’s okay.

Randy Wootton (21:58):


Joelle Kaufman (21:59):

The question is, what are the top three for the company?

Randy Wootton (22:02):

Got it. Totally. That was new.

Joelle Kaufman (22:04):

Great. I just wanted to make that distinction.

Randy Wootton (22:05):

That’s what I’m going to do.

Joelle Kaufman (22:05):

I just wanted make that distinction.

Randy Wootton (22:08):

You would hope that the two would be connected, that if you’re working on the top three for the company that there’s some way for each of the executive team to see how they’re supporting and driving it.

Joelle Kaufman (22:19):

Well, it can be that one of the top three things is particularly product oriented, and your engineering and product team has all of their top threes focused on that one, but they know what the other two are. If I can add another thing, the number of times I have CEOs say, “Well, the top three is that we make our revenue number.” I’m like, “Okay, that is a measure of having done something. It is not the thing. It is the result.”

Randy Wootton (22:52):

Well, let’s shift there. One of the things we’re going to talk about in the Seven Secrets of Success, and it overlaps in terms of the conversation we’ve just been having around delivering overall results by building a high-function revenue engine.

Joelle Kaufman (23:02):


Randy Wootton (23:03):

Can you talk a little bit about how a team needs to do that and think about it and the four whys and a who, and then we’ll just go from there?

Joelle Kaufman (23:11):

Sure. One of the areas that people trip up is when you say, what’s your ideal customer profile? They answer with four or five personas. Let’s be real. You sell something complicated at Maxio, there isn’t a single person who’s going to say, “Oh, I’m the buyer.” There’s buying teams, and those buying teams have multiple stakeholders, and those are multiple personas. I understand how this happens, but who’s your ideal customer? Who’s the person, the role, the level, the context they’re in that’s going to champion this? Because entropy is real. People don’t like doing something new and different. It doesn’t happen because you’re a fabulous salesman. It happens because somebody on the inside says, “We need to do this. This problem is so painful, is so urgent.” Whatever is happening. Understanding your ideal customer profile, and there are, as I said, four whys and a who.


Why is your solution a top three priority for your ICP? Before you got there, why is this a top three priority for them? It’s really hard to make a prospect change their company’s priorities. That’s a heavy, heavy lift. It is way easier to find the people who’ve already made this a priority. By the way, I don’t mean buying Maxio or buying something else. I mean, I’m going to do consumption billing, I’m going to do subscription billing. I need to offer this in my product. Great, well, then I’m going to need a solution to do it, but the problem is there. Number two, compared to anything else they could do, why are their other solutions, including their existing, unacceptable ways to solve this problem?


It can’t be, well, it’s not as good, or, oh, it’s a little harder. Why is it going to be fundamentally unacceptable? Third why, why is your solution 10 X better than other options? One of my funnier stories is I have a CTO I’ve worked with for many years, I adore him, and we were having a conversation about differentiators. I said to him, “Based on our market, what do you think are the most important differentiators that will help our customer, our ideal customer, solve that problem 10 X better?” He said, “No. You need to look at what we’ve got and determine what differentiates it from the competition.” I said, “Well, no, that’s backwards.” It’s scary what I’m saying because I’m saying you as a CEO, as a CTO, as a chief product leader, as a sales team, have to say, we know who our ideal customer is. We know the problem that is so painful, it’s made their top three, and we know what will be 10 X better for them, and that is what we’re going to build for them.


We have to do this all usually before the customer can actually articulate what those things are because they don’t know. They haven’t used it. They’re used to what they’ve got. We have to take some risk. We have to lay a bet, but our bet has to be we’re going to do something that’s 10 X better. By the way, if what you’re saying is we’re going to disrupt an existing technology, well, you’re not going to disrupt them by doing everything they do because they’re going to do that better. They’ve been doing it for a while. You’re going to disrupt them by doing something that people need desperately, dramatically better than their other solutions. Who, remember we talked about all those stakeholders and all those personas? This is where the personas show up, who must align to select your solution? Who has to say yes? Because each one of them has a veto.


I’m not suggesting you throw out your persona work, I’m suggesting you see the difference between the ICP and a stakeholder. Finally, and my favorite, why does your ICP need you now? My caution to anyone who’s watching or listening to this podcast is the answer to this question has nothing to do with you. It has to do with them. It has to do with something happening in their career, in their company, in their market. There is something external to you that has made this go from a nice thing to do, to I’m going to spend this quarter getting this thing done because it is very hard unless you’re selling something that’s very, very cheap. It’s very hard to actually buy things as somebody who’s been the buyer inside multiple organizations. Even in smaller organizations, the number of hoops, whether it is the CFO hoop, the privacy and data hoop, the CEO hoop, the aligning my colleagues and sales and marketing hoop, there’s lots of hoops.

Randy Wootton (28:34):

Well, those are great. Just as you’re ticking through them, I’m thinking about our own challenges. One of the things we would say is playing out is even though the stock market is going up and large tech companies are driving that increase in value, what you find broadly across the B2B SaaS base is there’s been a contraction. That is due in part because the VCs and PEs have pulled back their money. What that has led to with the heart rising interest rate, that what has that has led to is CEOs and CFOs saying, “Hey, pull back spend on internal software.” We’re an internal software vendor selling into the office of the CFO, which is also really hard because the CFO is telling everybody else to stop spending, so it’s hard for them to advocate for a technology change at this point. Gosh, feeling what you’re describing. I think the number one barrier we have with people buying is status quo, which is easier to stay with what they got.

Joelle Kaufman (29:28):

Of course. Always.

Randy Wootton (29:29):

I think your point around aligning with the top three problems and trying to demonstrate that your solution is 10 times better, and then what’s at stake for that specific persona within the ICP? Salespeople talk about the third order of pain, and you’re getting to why are they not sleeping at night or why is their wife or partner going to leave them? When they feel that sort of existential crisis, they’re willing to take on the challenges of buying a tool. Let me ask you a question, a couple of things that popped from me. One was under, why is your solution 10 X better than what they do today? I’ve been at a bunch of different software companies. I’m not sure anyone really had a 10 X better solution outside the marketing that you would describe. What do you coach companies that are, they’ve got some differentiation? I mean, 10 X, that’s big.

Joelle Kaufman (30:23):

It is big.

Randy Wootton (30:24):

Clearly, OpenAI is 10 X better.

Joelle Kaufman (30:27):

That’s right.

Randy Wootton (30:28):

In general, because if you don’t have that, do you just pull up chalks and go home?

Joelle Kaufman (30:33):

No, you find it.

Randy Wootton (30:34):

You focus. Yeah, go ahead.

Joelle Kaufman (30:36):

Look, this is a targeting and qualification problem as much as it is a product problem. You, at Maxio, have sold your product successfully to a bunch of CFOs and companies. The question is, what made that group amenable? Why were you 10 X better to them? Then how does that inform where you’re hunting, what signals you’re actually looking for? I’ll give you an example from a former client of mine. I was brought in to help them accelerate the growth of a managed service version of their offering. I started my work talking to them, large team, good company. I said, “After talking to your customers, your customers change jobs pretty frequently.” They said, “Yeah.” I said, “They buy you multiple times when they change jobs, you’re their play.” They’re like, “Oh, yeah.” I said, “Why don’t you track when they’re changing jobs and proactively go after them? There are companies that provide that, because that’s a growth engine for you, and when they change jobs, you want to reach out to the person who took over where they left.”


Keep the other job and get the new one. That’s a pretty solid growth strategy, and it’s already there because you do a good job. You are 10 X better to these people than an alternative. Now, these people who are smaller companies, they didn’t have as much resources. They needed a managed service, but there’s a shit ton of them, Randy. It’s not the sexy market of, oh, hey, I can go get Salesforce as my customer, but it’s going to fuel your growth engine. Look at Spotify, like smaller businesses are a growth engine if you are easy for them to adopt, service them well, and solve their problems. Now, I’m not saying that’s what the answer is for you or anyone else. The answer is targeting and discipline about that. Now, the pressure, the pressure is, but we need more growth.


What happens is companies are like, “All right, we’re going to pursue this new market or we’re going to add more salespeople.” Now, that can work if that new market has the same pain and you can hunt for it and your new salespeople can align the buyers and compete. More often than not, it’s a money bonfire because you don’t even know that market and you have no idea what their pain is. I think there’s another book, Go Slow to Go Fast. It’s a good philosophy when we’re saying, “Okay, we want to grow. What are the growth vectors we can choose?” The model was, before the inflationary period we’ve been in, the model was growth at any cost. Okay, well, let’s go try this market. Let’s go try this region, whatever. Now, it’s efficient growth.


Well, efficient growth is about, do you know your ICP? Do you know their signals that they’re in pain? By the way, and pain can be desire. You were talking about they stay up at night or they’re going to lose their job. A lot of people buy something like Maxio or things I’ve sold because it can make their career. Look at the history of all the people that bought Marketo and became Marketo champions, it made their careers that they did that. You can have an ambitious person. Again, this idea when people change jobs or get promoted, there’s a set of opportunities. Which ones fit your company, and how are you organizing your revenue engine to identify, engage, and offer value to those people at that right ideal moment? I guess I have ideal customer profiles and ideal moments.

Randy Wootton (34:47):

I think that’s great. In fact, so we recently became customers of User Gem to address the exact-

Joelle Kaufman (34:54):

That’s what I recommended. That’s why I recommended to my client.

Randy Wootton (34:57):

Exactly, to address that point. Because what we found was once Maxio was in a company, you would have Maxionauts who would know how to use it, but if they left, a new CFO or a new finance person would come in and say, “Hey, I’m super comfortable with Excel. Why are we spending money on Maxio?” We needed two things to happen. One was to be alerted when there was a job change so that we could reach out with our customer success team, welcome the new person and say, “Hey, let’s introduce you to Maxio, how you been using it to date, and how can we get you trained and learn if you’re not familiar with it?” That prevent churn, and then number two, to your point, most our best customers are those that have used this before. Heck, I was a customer of Maxio Legacy SaaSOptics at Percolate where I was CEO. Part of the reason I took this job was because it had changed my life.


I knew that 10 X value prop, but it’s super hard to articulate it unless you’ve experienced it on the other side. I was like, “Oh, gosh.” User Gem allows us as well in our outreach is to go track people to see where they landed, because they’re probably going to stay in the same function. You go find them and say, “Hey, remember us?” We send those Maxio swag and see if they can advocate for us in their new organization. I think it’s a great call out. We were going to talk a little bit more under delivering results. I would though, because the way this conversation is unfolding, I think I’d like to shift to the other secret of success around building an effective executive team specifically about the curveball versus fastball.

Joelle Kaufman (36:24):

Thank you.

Randy Wootton (36:25):

Because I think this is one of these really interesting dynamics where an executive team, that first team, has to build muscle collectively, and it’s tied into how do you establish trust, build trust, and how do you react to the inevitable changes that are coming down the pipe. Can you talk a little bit about your curveball versus fastball metaphor and how you see that play out?

Joelle Kaufman (36:46):

Sure. It’s interesting, I believe in the curveball method, it’s actually how I live personally as well as professionally. I think I’ve mentioned to you that I’ve had a 40-year journey with breast cancer in my family, including my own experience with it. Cancer and health crises are a complete curveball, they rock your world. In the professional realm, the SVB crisis was a massive curveball. It rocked people’s worlds. When you step back a moment, I would posit, Randy, that 80 to 90% of what your leadership team talks about or deals with day-to-day are curveballs because you have other people in the company that are handling the fastballs. It’s an unhappy customer, something in the product isn’t working the way it’s expected or it’s delayed. We’re having capital constraints. What are we going to do with our resources? These are curveballs, and how we deal with them isn’t something we want to make up each time a new or really on the fly.


Any baseball player, and you know I have a son who’s one of them, but any baseball player will tell you, you have an approach before you walk up to the plate. We have an approach before we enter the leadership team meeting or before we have our one-on-one. Our approach has to be about can we see the curveball? Do we identify it and say, okay, this is not what we expected? It might not have been what we wanted, but it is what we’re seeing. Two, can we manage our own emotional reaction? This is a big one. Emotional regulation is hard. You care a lot about the company. Most people that are on an executive team have been wildly successful, they don’t like screwing up or failing or making the wrong call. All of those are dysregulating thoughts because You’re still seeing the curveball.


All the things you make the curveball mean, all the what ifs, it comes down to that’s emotional and it’s flooding your body with all these hormones that puts you into your limbic system. Well, that’s great if a bear is chasing you and you need to run faster. If you actually have to make a thoughtful decision, all that stuff coursing through your body is bad for you. You want to get it leveled and get into our very powerful frontal lobe. We have to be able to recognize it. We have to be able to be patient and cool our own jets, and we have to have an approach. The approach is going to depend on what are your strengths, your strengths as a leadership team, as a company, as individuals. We can understand what our weaknesses are, but how we want to approach the curveball should be about our strengths. Being able to again, calmly say, okay, we’re overextended here. We have some strengths in dealing with this situation or some patterns.


What do we think about this? Then create a conversation. Oh, Randy, I like that. What if we added this to it? Oh, Randy, I like that, I’m concerned about this part. What if we shifted it this way? Now your leadership team is literally coming together to figure out how to swing the bat. Now, unlike baseball, you may not have to swing it immediately. You might, I mean, SVB was pretty much an immediate thing, but most curveballs are actually not moving as fast as they look like. That’s actually how they strike out batters. You have a little bit of time to say, okay, let’s come up with some ideas and let’s step away. Let’s look at it again. Let’s look at our ideas and let’s make a measured choice with some metrics of is our choice working. Because good news, if the choice isn’t working, you don’t get out on the first strike, so you get to swing again.

Randy Wootton (40:51):

That’s a great metaphor to hear.

Joelle Kaufman (40:55):

Thank you.

Randy Wootton (40:56):

Have you written about this in this metaphor?

Joelle Kaufman (40:58):

I have a little bit. I’m still teasing the whole thing out. Yet for me, I think what I do when I coach as a revenue catalyst is I teach people the curveball method and how to develop their own approach and their team’s approach for the curveballs of work. Inevitably, they also approach the curveballs of life.

Randy Wootton (41:21):

I think what’s interesting is it also ties in with what we were talking about earlier in terms of higher empower and improving people and allowing people to take risks, and sometimes those risks don’t play out. I know, gosh, we just had something happen last week at the company, and I was like, “Oh, for God’s sakes. Really?” The natural emotional reaction is, well, why did this happen? How do you call out the person that was responsible for it? Scold them and tell them to get back to work, and instead having a mental shift around saying, “Look, it already happened, so what can we learn from this? What can we do to put guard rails in place as we go forward?” Then there’s a lesson learned in there and people are taking risks because we’re trying to do something different and then they will learn going forward.


I think the executive team’s collective ability to manage change and react to change is one of those indicators of a great executive team. We, at our executive offsite next week for example, we’re going to have a set of big rocks. Big rocks are those things that are either big problems we need to take on or opportunities we need to exploit. To your point, we don’t have to make the decision next week, but we certainly want to move the thinking forward. Because of the other end, what you don’t want to have, I think, is just having the same conversation again and again and again. There’s some way, I think in the way you described it is how do you approach this as a team with articulating the goal, being clear about the roles and responsibility?


I think about that as decision making, how are you going to make the decision? Who’s on point for the decision? Ensuring there’s a line around action. In the next month, how are we going to move this forward? What information or data do we need to go? What experiments are we going to go execute? Then come back as a team and say, “Okay, what are we going to do now?” Then just being humble enough to recognize like you were describing like, hey, you may take a strike on this one, but you’re not going to go out. How do you create context where you’re able to invest an appropriate amount of investment and time that you can move it forward without just sucking up everybody’s energy and efforts? Those are great guides.

Joelle Kaufman (43:25):

Well, I think that’s very wise how you’ve summarized it. I’ll add to you, put a timeline on the decision making. We don’t need to do it right now, but we need to do it by, and what are some metrics that our decision was the right one because we want to be able to come back. The good thing about baseball is when you strike, the umpire says that’s a strike. In business and in life, when you strike, often we try to hide it like, “No, it wasn’t a strike. It was just a funky swing.” No, let’s know, that was a strike. We don’t think that’s working. That’s not bad. That’s just information.

Randy Wootton (44:03):

That’s right.

Joelle Kaufman (44:06):

Do we want to make an adjustment? If you listen to ball players, they will tell you, “You have your approach, you see the pitch and you make an adjustment.” You get down two strikes, you make an adjustment. When we lead our leadership teams, what tells us if our swing is working and what kind of adjustments can we make without judgment? It’s all about learning and getting better. If we’re always getting better, I think there’s another author that writes 1% better every day or whatever. If we actually are doing that, if we’re actually doing that, we’re doing it because we’re making mistakes and we’re learning, and that becomes invigorating.

Randy Wootton (44:47):

I think you’re right. I mean, I talk about this idea of my entire life in trying to operate at the edge of my own ignorance. What is it that I can learn or do differently? It’s part of the reason I left go to market tech, go to CFO tech. It was like, well, here’s a new world. Go figure it out. I’m going to make a bunch of mistakes. I do think at some point, a CEO, you got to be right more than you’re wrong.

Joelle Kaufman (45:05):

You do.

Randy Wootton (45:06):

You got to get the right things done. There’s judgment that you have to apply in these situations, I think as an executive team as well. I guess playing out the metaphor a bit is how many at bats you’ve had. You start to recognize a curveball and you recognize how to swing the bat in this specific situation and what the expected outcome. Well, Joelle, look, it’s been great. We could go on for another hour, but I think we got to wrap up at this point.

Joelle Kaufman (45:30):

All right.

Randy Wootton (45:31):

I just want to say thank you very much. I really have learned a lot. I’ve taken a whole bunch of notes on my outline of this conversation with you. What a great conversation. I’ve learned a bunch. Congratulations on all your success to date. If people wanted to find you, we were talking about one thing in particular about fantasy forecasts, which we’re not going to get a chance to chat about, but it’s on YouTube. You’ve got these one-minute overviews of how to avoid fantasy forecasts, and we are going to include that in our show notes. Where else would people find you if they want to get in touch with you or follow you? Is LinkedIn the best medium?

Joelle Kaufman (46:06):

Sure. You can go to LinkedIn, which is, I’m Joelle Kaufman. No double F or double M or double N, it’s just Joelle Kaufman. You can also go to www.gtmflow.com. The name is because when you’re a team, when particularly your go-to-market team is operating at the height of its ability, it feels like a flow state.

Randy Wootton (46:30):

Right, that’s great.

Joelle Kaufman (46:31):

It’s a wonderful thing.

Randy Wootton (46:35):

It would be nice to be there. I do appreciate your time. Thank you so much, Joelle Kaufman.

Joelle Kaufman (46:41):

Thank you, Randy.

Episode 23

Efficiency in Finance: Navigating the Essentials of Early-Stage Startups

May 22, 2024


Randy Wootton
CEO, Maxio
Headshot_Alex Diaz-Asper
Alex Diaz-Asper
Principal & Founder, Tarsus

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Video transcript

Randy Wootton (00:04):

Well, hello, everybody. This is Randy Wootton, CEO of Maxio, and your host for SaaS Expert Voices, where we being the experts to you to talk about what’s going on today in the broad landscape of SaaS, and what is on the horizon.

With me, I’m very excited to have Alex Diaz-Asper join us, who’s had an incredible career. Started off in M&A, and then PE for six years with DKW Capital. He did another tour with a group called Alfred Street Partners. And during that time, he actually made the switch to CFO for TARP, one of their portfolio companies. And so he has that great background in terms of being on the investor side, and then being an operator. And after that, in 2008, right when the Lehman Brothers disaster blew up, he decided that’d be a great time to start his own advisory services firm, now called Tarsus. Well, welcome, Alex, and what an interesting career.

Alex Diaz-Asper (00:59):

Thank you. Thank you, Randy. Great to be here.

Randy Wootton (01:01):

So one of the things we were talking about in the pre-brief was just, maybe because you had these three chapters of your career, the M&A, and PE, and then as an operator, and then now really the last 15 years as an advisor, maybe talk a little bit about some of the lessons learned. Starting back with PE and M&A, in terms of helping CEOs better run their business, using financial operations to better inform their go-to-market strategies. What were some of the key lessons learned from that time of your career?

Alex Diaz-Asper (01:30):

Yeah. The fun part of that is that I’ve seen it now from both sides, as the investor, now the actual guy providing the information to the investors. It’s very interesting to see both sides of that thing. Also, plus, in my M&A days, I saw the end result, where people were trying to sell their businesses.


It was in the telecom space, we were actually acquiring a lot of companies on the buy side, so we saw the end of those processes. So it’s been a very unique and kind of fun experience to see all sides of those different things, so it’s very helpful. Throughout all those different elements, finance, accounting, good numbers, clean books, it’s kind of a cliché, super important, there’s nothing but help you in all these processes.

Randy Wootton (02:16):

And, in fact, I mean, one of the things I quote often, it came from a law firm actually based in Atlanta, but they’re a national firm, and they say the number one deal killer is in accounting error.

Alex Diaz-Asper (02:25):


Randy Wootton (02:26):

And that, especially in SaaS, where you’re doing revenue recognition, it’s not according to GAAP, and so people can come up with all these creative ways of doing revrec. But then, when the MRR roll forward doesn’t make sense, or the customer cohort analysis doesn’t make sense, that’s when PE firms especially, and they got a bunch of Excel jockeys, jump in and start digging in, and they find more issues, and they either trade down or they don’t do deals, because the numbers don’t work.

Alex Diaz-Asper (02:52):

Yeah. I’ve seen deals blow up because of exactly that reason. And I’ve been on both sides of that. One side, you’re panicking, the numbers all-

Randy Wootton (02:59):

Yeah, totally.

Alex Diaz-Asper (03:03):

Yeah, you see, you found the error, there’s a little issue in your spreadsheet, I don’t know who found it, but somebody’s starting to look at it, and it’s like, uh-oh, now what?


And to the other side, where you’re like, “Hey, look, we’re buying a company because we want this kind of revenue stream. We’re valuing the business, I’m an investor, I’m valuing it on AR multiple. And all of a sudden the AR is not what I thought it was going to be, so I have to re-trade.” And then that’s kind of a difficult situation. Those deals have a high probability of breaking up and blowing up.

Randy Wootton (03:27):

I’ll tell you, not having done as many as you have, but having sold a couple of companies, and then being corp … I was Corp Strategy at Seismic after I sold Percolate to Seismic, and did a couple of … Well, we did several M&A motions, ended up buying two companies, and then also doing a strategic investment. But to your point is, as the buyer or the investor, you’re primarily investing in that asset, especially if it’s a bigger company, the revenue, the customer revenue. Clearly, the IP, and the people, you want those folks, but you’re really counting on that revenue to get that multiples, either at the top line revenue growth, or at the EBITDA level. And if it doesn’t work, it doesn’t pass sniff tests, it makes it super hard to get the deal done. So I think that’s a great point. And I would say that we also find that our best customers are usually those that have been multiple time CEOs, or multiple time CFOs, because they know how important it is to have the back office in ship shape and seamen like, as much as it is to have the go-to-market engine going. So that’s a great lesson learned.


So you decided to leave the world of PE, and drop into one of the port cos, TARP. Which is not unusual, but I would say often comes with its own challenges, because many times the CFO for operating companies come up from the big six, or the big four, they’re accountants, and they’re controllers, and that’s just a different way of looking at the world, than coming in as an investor PE guy. So how did you decide you wanted to make that transition, and what were some of the lessons learned from that experience?

Alex Diaz-Asper (04:55):

Yeah, yeah, it’s a great way of putting it. Yeah, I came from the finance side of it, versus the accounting side. And I think you find CFOs have those general two kind of starting points, either they came up through accounting, or came up through some part of finance.


I came up through finance, so I had to learn the accounting, and it’s only gotten more and more painful through the years, including lease accounting, 606, all these fun things. But, yeah, I’ve always relied on really good talent, hiring really good controllers, people who could help me through that process, and that’s also important. I mean, there’s the systems, and the tools, getting out of the spreadsheet world, using systems with tools like Maxio, and then hiring the right people to help you implement those processes and interpret those contracts.

Randy Wootton (05:40):

That’s great. And then with TARP in particular, you were talking about how, when you jumped in, client concentration can really be something that’s an issue. Initially, it’s great to have a big client, because they’re paying you money. At the same time, they can really dictate your roadmap. So if you’re trying to build a horizontal solution, and they’re like, “No, no, no, I need you to do more for me,” you’re in this constant state of tension. Can you talk, as much as you feel comfortable, about that idea of client concentration? And now, as you’ve been advising people, if you have rules of thumb about how much revenue concentration is appropriate?

Alex Diaz-Asper (06:14):

Yeah, that’s a great question. And it went back to the acquisition stuff too as well, clients, investors, and buyers are all going to be looking at this number too. They don’t want to buy client concentration, unless they really love that one particular client. But, it doesn’t show scalability if you have this one big client.


All those issues all wrap themselves up, like you said, the roadmap, they suck development resources that solve these particular issues, and your whole firm sort of ends up wrapping themselves around that contract. And, unfortunately, we see, a lot of times, a lot of our clients have gotten themselves in trouble. Had a big cash cow kind of client, they wrap themselves around it, everybody was super happy, over-serviced it, etc, didn’t focus on other go-to-market, or trying to find other clients, then that client leaves, or that clients another product. It’s a large corporation and they get distracted, and they get … You know how it is with these large corporations, who knows what happens with them? And then all of a sudden you’re in really difficult existential crisis overnight.

Randy Wootton (07:18):

Right. If it’s the whale, and you’re the pilot fish hanging onto the side, and the whale decides to turn left, and you’re like, “Whoa, wait, hang on.” Do you have a general sense for rule of thumb for how much revenue you would want from, no more than from one client, as you’re looking, as a healthy business?

Alex Diaz-Asper (07:34):

Yeah, certainly no more than like 20%.

Randy Wootton (07:34):


Alex Diaz-Asper (07:37):

Yeah, certainly no more than 20%.

Randy Wootton (07:37):

I think that’s right. I’ve used, in my past, and I haven’t done it a bunch, but like 10%. And so how do you drive down to have no more than one client being representing 10%? I think maybe it depends on what scale you are.

Alex Diaz-Asper (07:51):


Randy Wootton (07:51):

So I tend to come in at Series C companies, and so if you’re still a seed, or Series A company, having a company represent 20% of your revenue may be okay. But, I think to your point, being able to tell the story about revenue diversification, multiple go-to-market plays, how are you going to show that you can scale, and have a reasonable sales model, while you keep that honey pot?

Alex Diaz-Asper (08:14):

Yeah, exactly. Yeah, exactly. At the end of the day, it’s all about validation. So the more people who said yes, the more data points you have of people saying, “Okay, I’m going to give you money for this thing.”

Randy Wootton (08:25):

Yeah. That whole product market fit, that they’re going to pay you, and they’re going to pay you again. They get through a full cycle, in terms of that they renew.

Alex Diaz-Asper (08:33):


Randy Wootton (08:33):

Great. So you jumped for PE and that finance function, you came in as CFO at TARP for a bit, and then you decided to go off on your own. What was the catalyst for that career pivot? And then maybe some of the lessons learned over the last 15 years? We’ll get into a little bit more detail around that. But just, you’ve been doing this for a while now, you’ve got a super successful practice.

Alex Diaz-Asper (08:51):

Thank you.

Randy Wootton (08:53):

Why do you decide to do that? It seems like it’s been super satisfying.

Alex Diaz-Asper (08:57):

Yeah, no, I’ve really enjoyed it. I really enjoy early stage tech companies, working with … I serve two roles now, the managing partner of the firm, but I also do service like CFO for about five to eight clients at a time. And I really enjoy working with early stage tech companies. I find that-

Randy Wootton (09:16):

Are you a sucker for punishment? I mean, what is it that you-

Alex Diaz-Asper (09:19):

I tell people it’s like teaching elementary school, everybody wants to play in the NBA, everybody wants to be the president. As opposed to later stage, high school kids, they’re going to be lawyers and doctors. It’s that kind of atmosphere, where they really, really have that kind of energy about really trying to take over the world. It’s a fun thing to be around.


So I figured, hey, I have two choices, I could either go find another early stage company, and go jump in as the CFO there, or start up a whole different way of doing this, of working across a bunch of clients as the CFO, and getting more exposure to different businesses. Frankly, a lot less risk with going to-

Randy Wootton (09:58):

I was just about to say, was it risk diversification, you’re not putting all your eggs in one basket?

Alex Diaz-Asper (10:04):

Yeah, part of it. Part of it. And two things too, part of it is that, and part of it is that, at early stage CFO, you end up wearing a lot of hats. You wear a lot of administrative hats. So this allowed us to build sort of a key team of accounting, and we have an offshore team based in Bangalore, India, and they do a ton of the core accounting, GAAP, US financial statements, so I don’t have to spend my time digging into that part of it.


So we have the ability to really create an infrastructure to do financials, to close the books in a timely basis on a US GAAP basis, using tools like Maxio to do analytical reporting, GAAP revenue, all those kinds of things. So when I get to see the numbers, I’m actually really acting as a CFO, and not a controller, not an AP person.

Randy Wootton (10:51):

That’s great. Right. You get to pick what you want to play, which playground you want to play in. One of the things I talk to folks, and I am primarily focused on B2B SaaS, is there’s usually this phase of when a founder, first time founder, technology person starts their company, they have their “uncle” do the books. It’s someone that is okay with Excel, they do cash accounting, and they manage it through their bank account.


At some point, they hit an inflection point like, oh gosh, and maybe it’s when they take on angels, that they do an outsourced firm, and we’ll talk about the difference between a CPA bookkeeper and a type of firm like yours. And then there’s another phase we find, at about 30 employees, where they actually bring the CFO in-house and say, “Okay, now we have enough complexity, enough customers, I need a full-time CFO, and I want to build out the finance function.”


How do you find that play out? When do you get most of your customers in the B2B SaaS space? Have they all had their uncle, and you’re coming in there as they go to accrual, and try to think about GAAP, you’re like, “Oh my God,” you’re pulling your hair out, because you got to get all the accounting sorted out? And when do they graduate? And what’s the impetus or the catalyst for graduating from your services to a full-time CFO?

Alex Diaz-Asper (12:01):

Yeah. Yeah. So we usually typically get involved even angel round, as long as they get some funding, but it’s typically seed, Series A. And it’s usually that outside capital, all of a sudden it needs visibility. We do work with some bootstrap companies, it’s very different working for a bootstrap company, where the entrepreneur is running it, looking at the bank account, and that’s how they manage their financial statements, versus like, okay, somebody outside the firm needs to know what’s going on, either it’s a bank or-

Randy Wootton (12:31):

And trust the numbers. That’s the big issue too, right?

Alex Diaz-Asper (12:33):

Yeah, exactly.

Randy Wootton (12:35):

And as you move into GAAP and revrec, you have these investors that are trying to understand the ARR, and if you haven’t … If you’re making up your own rules around ARR, because it’s not a GAAP metric, that can get all hairy and scary like we were just talking about.

Alex Diaz-Asper (12:48):

Yeah. And then you start talking about these things with, hey, 606, with uncle, as you said, or it’s like some bookkeeper, or it’s a CPA firm who does their tax, they just can’t handle these things, they don’t understand these things, and they, frankly, don’t want to. So it’s a great starting point for us. And then we typically work with firms until the Series C range, and then at that point is where we see they typically hire a CFO. And at that point-

Randy Wootton (13:11):

How serious … Sorry for interrupting. Revenue size, what would be a typical Series C that you would see, or number of employees, what’s that inflection point that you usually see?

Alex Diaz-Asper (13:21):

It’s usually maybe 80 to 100 employees, $15 to $20 million, that kind of range. And it’s hopefully a sector that’s coming back now. It’s been a little tight the last couple of years.

Randy Wootton (13:34):

I think that’s right. We’ve actually seen it even a little bit earlier, 30 to 40 employees, in that five to 10 million, is where we’ll see people bring in CFOs. So that must mean then, what you’re doing for them is this advisory services that you’re providing, and maybe you can talk a little bit how that is different than tax, and audit, and accounting. What’s the layer that you’re providing for them? Because that seems to indicate to me that the CEOs and the boards who’ve done the Series A, Series B have been excited about what you’ve been providing, and they’re able to extend that with you before they bring on the CFO. So what is that sweet spot that you’re offering in a set of services?

Alex Diaz-Asper (14:11):

Yeah. So we’re able to do all the things that those firms need, like track the KPIs, track the financial model, try to forecast, tell people what happened, and what will happen, both on the KPI side, on the cash flow side. So bring a lot of visibility for the board. We’re very used to dealing with boards, our CFOs have all been around the block, and very much know this space, especially B2B SaaS. So, yeah, we can serve up to that role until the Series C now. Where it gets hard for us at the Series C level typically, is at that point there’s a lot of stakeholders, both internally and-

Randy Wootton (14:50):

You have multiple investors? Yeah.

Alex Diaz-Asper (14:52):

Yes, that investor relationship. And then the management team becomes a lot bigger too. So there’s a lot more kind of stakeholder management, that we’re really not suited for. And at that point, if we’re working with one COO, and one CEO, and head sales guy, that’s okay. And maybe two or three investors, that’s okay. It’s when it gets later stage, and there’s all these different people, you really do need somebody full-time to manage all those people.

Randy Wootton (15:18):

That’s a great point. We had a CFO at Percolate when I showed up, but we had Sequoia, GGV, Lightspeed, First Round Capital. And I just remember, the end of the month, you have to deal with each of their analysts, and our CFO and our controller was filling out their templates. And when we brought Maxio on, then we had the reports that would come out of the subscription momentum report, and it just changed the game. We’re like, “No, no, here’s all the numbers you need.” And it allowed it to leverage, and really decrease the amount of time you had to spend in that IR, the Investor Relationship. That’s a great insight.


So we were just bumping up to this idea of financial operations, and how you think about financial operations. You were talking about how financial operations, at the end of the day, gives you visibility into what happened, what will happen, and what should happen. Can you talk a little bit about that? And the distinction you made in our pre-brief around GAAP revenue, versus analytical revenue, I thought was a really interesting and powerful distinction.

Alex Diaz-Asper (16:17):

And this is super important as GAAP gets more and more convoluted, able to look at and understand these two different things, because boards, acquirers, are looking at these two different numbers. So analytical revenue, well, GAAP revenue is pretty straightforward, it’s US GAAP will tell you what the revenue is for that particular contract on our ASC 606, so that’s, while it might not be straightforward-

Randy Wootton (16:42):

So it’s on the revrec.

Alex Diaz-Asper (16:42):

Right. Exactly.

Randy Wootton (16:43):

Get the rev-rec right, and you got the revenue, you reported on your P&L, and it shouldn’t change.

Alex Diaz-Asper (16:49):

Yeah. And there’s been enough audits, everybody’s been through it, so I don’t think there’s a lot of controversy left all that anymore, so that’s pretty straightforward. But, again, it can be really convoluted, like we have a contract … Especially with clients who have implementation periods, where you can’t start the revrec until after the implementation period, then there’s zero revenue, and then it gets compressed, and then they renew, and then there’s a downgrade. So that confuses the heck out everybody. Nobody likes that, right?


So we then track analytical, which is essentially, what are you going to renew this contract at? So it’s $120,000 per year, but you implement at six months, so you get 120 divided by six, for the last six months, but then next year it’s going to renew at 120. So let’s just capture that, what is the run rate revenue from that contract? 120,000, and that becomes our ARR.

Randy Wootton (17:39):

That becomes one of the things we talk about when looking at targets, is contracted ARR, versus live ARR.

Alex Diaz-Asper (17:46):


Randy Wootton (17:47):

Which is what you were alluding to terms of, hey, you’ve signed a deal, but if it takes three to four months before it goes live, you can’t actually recognize that revenue, and how does that play throughout your revenue recognition? And then, to your point, your ARR, so that you’re not taking a contraction in year two, which is what you were pointing to, because you had this compression.

Alex Diaz-Asper (18:08):


Randy Wootton (18:09):

The other thing I think that it really helps inform is, how do you figure out a way for your customers to get live sooner? So you reduce the time between contracted and live, the opportunity to recognize revenue, but also get cash.

Alex Diaz-Asper (18:24):

Exactly. Yeah. Yeah. Well, a lot of these clients are still charging annually upfront anyways.

Randy Wootton (18:31):


Alex Diaz-Asper (18:32):

That’s why CARR makes sense. And, yes, we got this analytical ARR, CARR, like, okay, even though it might not implement it in six months, it’s still part of your CARR, right? It’s still part of your basis, it’s still part of your validation, right?

Randy Wootton (18:45):


Alex Diaz-Asper (18:46):

Because what we’re talking about, like what investors and everybody’s looking for is, how much do they really get validated? Is it a $10 million company? Is it a $15 million company? Is it a $20 million CARR? So many clients have decided to pay you that much, which is really what those important numbers … And then, for obvious reason, everybody wants to gravitate to CARR, right?

Randy Wootton (19:06):

Yeah. So that was one of the things I was going to ask you, we had talked a little bit about investors, and what are they looking at? Are they looking at GAAP revenue? Are they looking at analytical revenue? Are they looking at a subset of the revenue? You’ve been on both sides, what is the metric that’s got to be accurate?

Alex Diaz-Asper (19:21):

Yeah. Well, unfortunately, all of them.

Randy Wootton (19:25):

Fair. Okay, fair point.

Alex Diaz-Asper (19:27):

And they all serve different purposes, and they all have to be … And you don’t want any of them to go wrong, because then you have a different problem. If you get your GAAP wrong, you don’t want to get an embarrassing audit issue. And then, later stage company, private equity sponsors, they can seem to be gravitating to GAAP. But, at that stage, if you’re going to post- $20 million, $25 million company, it’s a software company, these GAAPs are less important.


Early stage seed company can have big gaps between GAAP and CARR, because they’re selling a lot, they haven’t been implemented on lots of those. So I think early stage, obviously CARR gets very important. Later stage, they tend to gravitate. But it’s important to keep them all straight and reconciled.

Randy Wootton (20:14):

Yeah. That’s an interesting point. What I’ve noticed, one of the big distinctions between VC and PE backed, is also … We’re a little bit bigger at Maxio than what I was at Percolate. Is the focus on EBITDA. And part of that may be the shift in the market as well, and people saying efficient growth, versus growth at all costs.


But, when I was VC backed, it was more around product market fit, reputable sales engine, go, go, grow, grow, grow. And PE is a little bit more around, hey, we want you to grow, we still want you to be high growth, how you define that, but we also want to see you starting to get some operating leverage. And that manifests in EBITDA. I just never really talked about EBITDA before, but it’s become a topic of every conversation.


I think the other thing that popped over the last year and a half, with the rise in the interest rates, is actually … I don’t know what you would call that, EBDA, not IT, because you have to think about interest. And so what’s the hurdle that you have to bring every year to just even pay off the interest at 5%, or whatever it is that it is now, and it’s a crazy difference. And that was not true two years ago, money was free.

Alex Diaz-Asper (21:27):

Right. Yeah.

Randy Wootton (21:27):

So I think that’s been interesting, that conflation of looking at ARR growth, and bookings growth, and churn. But, at the same time, ensuring you understand the revenue, and when that’s going to play out, and how do you cover through the P&L, but then also the cash? And so your 13-week cash forecast, I think that’s been another thing. I don’t know how it’s playing out for the types …


Well, maybe that’s a question for you. So your early stage seed Series A, what are you seeing in terms of their ability to raise capital? And what’s the assumption, in terms of how many months they should go against the burn, before they need to raise again?

Alex Diaz-Asper (22:03):

Yeah. Well, the important point, the biggest point, is that a lot of it’s not … The markets are still pretty tight, so people are still sort of in that frame of mind of, hey, we got to extend the runway. The rounds are-

Randy Wootton (22:19):

So 18 months, 24 months, 36 months? When they’re raising money, what’s the assumption in terms of how much money they’ve raised, and how long will that last?

Alex Diaz-Asper (22:26):

Yeah, I think everybody’s so gun shy now, nobody wants to do less than 24 months, if it’s an external round. Obviously, there’s still internal rounds, just say, let’s fight for another day, 12 months out. A lot of use of leverage, there’s some interesting debt products out there, but they do set up problems down the road, right?

Randy Wootton (22:45):

Yeah, totally.

Alex Diaz-Asper (22:47):

Now, the problem is that people didn’t want to raise capital in early 2022, but now, hey, took some debt, instead of equity, and now some of that debt is not only interest, it’s actually amortizing, you got to pay off the principle. So there’s still a lot of cash flow management. We do talk about a lot of these CARR and ARR metrics, but there is a lot of cash flow issues. But having a tool that can help you forecast your billing is super helpful.

Randy Wootton (23:17):

Yeah, we were talking a little bit about that, that one of the things you find is, in general, B2B companies don’t struggle with their costs, because something like 65 to 75% of their costs is people. And then it’s AWS. You’re not buying data centers around the world. It’s not a huge capital expense, and it’s, how many times do you buy lunch a month?


But what you were suggesting, the big challenge, and I appreciate this, is they struggle with defining and forecasting revenue. Can you talk about why that is, and what are the components that the companies you work with are struggling with most? Especially that early stage, where they’re still trying to, I think, get some PMS.

Alex Diaz-Asper (23:51):

Yeah, yeah. Well, because if you have these large annual upfront invoices, knowing when those next batch of annual invoices are coming, is super important. You can’t assume cash comes in evenly over the 12 months, right? If you signed everybody in Q4, you had a great Q4, and kind of Q3, you’re starting to run out of cash. You see it on the horizon, okay, here comes all the renewals, and new cash is coming in. So that’s super important from the cash flow models, to be able to see those kinds of ebbs and flows of cash flow. And then just having a tool to help you track the renewals. Because a lot of clients, unfortunately, lose track about what’s coming up to do, and then they’re scrambling around to try to renew these clients.

Randy Wootton (24:33):

We call that revenue leakage. Everyone calls it that, but revenue leakage. And there’s some people out there that I’ve seen, analysts, that say that it can be up to seven to 9% of your revenue is leaking out of the business, because you haven’t invoiced correctly, you forgot to invoice, or the customer is contesting it. And you think about that, seven to 9% of the revenue, that you’ve already done all that hard work to get them on board, get them instantiated, get them up and going, they probably paid their first invoice.


But, to your point, you’re coming around on the renewal, if you don’t have a system that’s helped manage that, and do subscription management, you don’t know, you’re not out in front. And if the invoicing is not accurate, you may be missing dollars, because you just didn’t invoice correctly. Or, if it’s not accurate, you end up in contentious negotiation with your customers. Do you see that playing out across your customer base?

Alex Diaz-Asper (25:26):

Yeah. And clients are using every little excuse not to pay you.

Randy Wootton (25:29):


Alex Diaz-Asper (25:30):

Yeah. So you submit, you get your invoice wrong, okay, fine, submit a new one 90 days from that.

Randy Wootton (25:35):

Right, right. You get in the back of the line. Get in the back of the line.

Alex Diaz-Asper (25:38):

Exactly. Yeah. Seriously. Especially Fortune 500, they’re awful. They’re awful on these poor little SaaS companies. Yeah, they’re awful, they really are.

Randy Wootton (25:47):

I mean, you’re living and dying by cash, and they’re floating the interest, they’re making money on the float, but they’re dragging you out. It is another one of those David versus Goliath type thing.

Alex Diaz-Asper (25:59):

It is.

Randy Wootton (25:59):

But I think, going back to earlier conversation, having a broad base of customers, so that you’re not reliant on just one big customer, I think really understanding your monetization strategy, who you’re out selling what to, and how are you going to do that over time? And then I think having a very disciplined order to cash process.


We’re talking a lot about that this week in fact, is the fragmented order to cash, and how that causes problems by not having the connection between the data, the technology, and the process. Is that something, when you go into a organization, an early stage company, and they’re like, “Look, we got this product, we’re going out and we’re going to build this product, we’re going to go sell it, so we’re going to invest in a CRM system,” how do you convince them to adopt back office technology to better inform front office strategies? So taking all the data that they’re getting, and then using that, as we were just talking about, to define and forecast revenue.

Alex Diaz-Asper (26:52):

It sometimes could be a challenge. Hopefully, if you’ve got an entrepreneur who understands, who’s got some experience, then it’s relatively easy, because you’re demonstrating to them. You’re showing them, hey, this is how the financial information can look like. We’ll show them a example financial package, which shows all the KPIs, and all the forecasts, and all this stuff. And then, hey, this is going to make your life easier, it’s going to give you the visibility, it’s going to give your investors visibility. So hopefully that wins the day.

Randy Wootton (27:23):

Do you charge them less if you … I was just wondering, and I don’t need you to tell me your business model, but is it one of these things where you’re like, “Look, I don’t want to have to work in Excel, so if you adopt one of these technologies, it makes my life easier, I’m only going to have to charge you 10 hours a month, versus 15 hours a month?” Do you see that play out at all? There’s an efficiency for you, and you pass that on to your clients?

Alex Diaz-Asper (27:42):

Yeah, definitely. Yeah, we will charge them less if they’re using tools, the right tools. Otherwise, because, like you said, it’s just hours, and not unnecessarily hours where … We are a professional services firm, so hours are not a bad thing, but there’s kind of hours you want to spend, and hours …


What really kills a finance organization, if I’ve learned anything, is just these breaks, these things that then the swirl that comes with trying to fix them. You’re in that board meeting, and you’re like, “Oh, why did ARR go down, and what was that $10,000 churn last month? We didn’t lose any customers last month?” And then it’s like-

Randy Wootton (28:18):

Oh my gosh. And then it turns into a rabbit hole.

Alex Diaz-Asper (28:21):


Randy Wootton (28:21):

Especially with early stage investors, when you get young analysts who are there trying to prove their salt, and they’re going to take you to math camp, and they’re like, “Oh, well, three quarters ago your gross retention was 86.2%, and now you’re saying that same quarter is 87.4%. Why was there a change?” You’re like, “That was three quarters ago. I mean, that was a millennial … Now I’m just talking about what’s happening today.” But, no, no, no, they bring you back, and they start to question your numbers. And I think that’s where you have to be able to come in with investor grade financials, so that then you’re having conversations about strategy, not about accounting roles and reconciliation.

Alex Diaz-Asper (28:55):

Exactly. Exactly. And nobody likes that, the CEOs don’t like it. So it’s an education process, back to your point, with some entrepreneurs. But, yeah, we’ve been pretty successful, everybody … Luckily, also, B2B SaaS companies, they understand technology.

Randy Wootton (29:12):

Right. Oh, there’s that, right? So what’s the percentage of your portfolio that’s B2B SaaS, versus other industries?

Alex Diaz-Asper (29:18):

So on Tarsus now, we do a lot of different things. We do government contract, and we produce that and everything. But the venture practice, I would say, is about 40% of our business. And that was how we started, was out of the venture space. And of those, I would say about 75% are SaaS companies, for obvious reasons, it’s a very attractive business model.

Randy Wootton (29:41):

Right. And it also has that endemic issue with revrec.

Alex Diaz-Asper (29:47):

Yes. Yes. Yes.

Randy Wootton (29:47):

I think that’s what causes a lot of people … So have you seen … What percent of the B2B SaaS companies you’re working with are using a more traditional subscription term, so annual contract, versus a usage or consumption-based model, a metered-type model?


Maybe two different questions. We often find that early-stage companies are adopting product-led growth, and so they have the product, and the customer can sign up for it, self-instantiate, they don’t have a sales team. And that also tends to coincide with a usage-based consumption model. As those companies get bigger, and they start to move into large mid-market or enterprise, they’ll hire a sales team, and that’ll lead to sales-led, and that may have more annual contracts.


Do you think that definition is consistent with your experience, in terms of the earlier-stage companies are primarily PLG, and are they using primarily usage-based monetization, or are they also trying to play with subscription terms at that stage?

Alex Diaz-Asper (30:45):

I think a mix of both. We do see that product-led growth, and investors love that kind of stuff, and pushing companies in that direction. We also work with a lot of cyber companies here, we’re in Washington DC, and they’re just traditional subscription-based businesses.

Randy Wootton (31:02):

What we found in our Maxio Institute Report, ironically, that the PLG cohort was lower growth than the SLG cohort. And part of the reason, we think, is because monthly contracts, usually monthly payments, and so the usage is happening on a monthly basis, and so you start to see the impact of the economy much sooner than an annual contract. If you’ve been signing year contracts each of the 12 months, you see them drop off, but it’s a different type of drop.

Alex Diaz-Asper (31:30):

That’s interesting.

Randy Wootton (31:34):

Yeah. The ideal situation is to actually have both, so that you have the subscription term type contract, that kind of holds it all together, and then, if you’re fortunate, the PLG, or the usage-based pricing mechanism can have some volatility as the companies grow, or as someone is using more of the widget, they pay more for it. You have this aligned value prop for that, but then that also drives your business.


When I first walked into Maxio, one of the people asked me … Because Chargify had been more PLG, and SaaSOptics had been more SLG. Said, “Randy, PLG or SLG?” And I don’t think I fully understood the question, I was like, “I don’t know, I think it’s both.” And they’re like, “Bah, you’re just playing.”

Alex Diaz-Asper (32:20):

Choose a side. Choose a side.

Randy Wootton (32:20):

Yeah. “You’re being a politician.” I was like, “I don’t know.”


But what I think we found is that it really is having both going forward in a hybrid model that’s going to … It’s basically figuring out, how do you offer value, how do your customers want to pay, and be able to offer that. And then having systems to track it.

Alex Diaz-Asper (32:36):

Right, right, right.

Randy Wootton (32:37):

Well, good. Well, anything else that you’re seeing? We’ll get to the speed round in just a minute or so. But in terms of, if you think about disruptions in the office of the CFO, or because you see broadly across all of these companies, and then they start to fleet up to CFOs, are you seeing a different type of CFO stepping into the seat these days, than 15 years ago, when you first started a company, especially in the B2B SaaS space? Do you have advice or suggestions for aspiring CFOs that want to be the first step into that role? How do you see the landscape, from having seen so many different companies?

Alex Diaz-Asper (33:18):

Yeah, that’s a great question. I think the challenge for CFOs is always staying on top of this technology stuff, whether it’s AI … We had a call today earlier with an AI implementation of a sister company of ours, how they’re using it for their FP&A function. Whether it’s that, or the latest type of tools, or … Even your tools are evolving. If you’re on Intact, what’s the latest, greatest thing on that? Axia, what’s the latest, greatest thing on that? And staying on top of all those things. So that part of it, and that’s a little bit harder for these early stage CFOs to stay on top of.

Randy Wootton (33:52):

Yeah. I talk about CFOs, at least the generation that I grew up with, it’s like, you’re going to pry Excel from my cold dead hands, and everything was tied to Excel. And they do their own models, and whenever they come into a company, they throw the old model out, because of course it’s bonk, so they’re going to start over and rebuild the model. That’s the starting point.


The other thing I talk about CFOs is, because, at the end of the day, they’re there to be … And partners like you, similarly, to absolutely be certain about the cash, that they have a very tight control on their tech stack, and they want very few people involved in touching things like the general ledger. I don’t even think my CFO would let me touch the general ledger. He’s like, “Randy, what do you want to know? Here you go, here’s a report for you.”


Whereas all those go-to-market professional sales, marketing, success services, they adopt a new technology every week. They’re like, “It’s kind of cool, let’s try it. Whiz, bang.” But I think there is this, because you’re responsible for the bank account and the cash, the CFO, and also the personality is a little bit more risk-adverse, that they know what they know, and they want to do it that way.

Alex Diaz-Asper (34:58):

Right. Right. Yeah. Now that you mentioned that, the other thing that really has changed a lot, is how the CFO is a big part of the collaboration, especially with the sales team, early stage. That’s super important that we’re partners with each other, the sales people and the CFO, because to manage cash, we need to know new sales as well.

Randy Wootton (35:21):

So tying the CPQ, being able to get the contract, and make sure you feel good about it. And so that’s one of the things we do at Maxio, is that two-way integration. It’s one of the things that we’ve talked about, is do we want to invest more in the CPQ system, to own that full order to cash?


We found though, most companies today, the CPQ, the decision to buy CPQ, still rolls up into a CRO versus the head of finance. And so for us, it turns into, well, do we want to build another go-to-market motion, where we’re trying to target revenue folks to buy CPQ versus … But I do think, over time, there may be … How do you think about CFOs, and owning the CPQ, and bringing it into the GL?

Alex Diaz-Asper (36:01):

This is a fascination of mine. This is my fascination, is RevOps. Who owns RevOps? That’s one of the most critical parts of these organizations, and how that has to work well. And it has to work well, from my perspective as the CFO, so I know what’s going to happen, or at least I have a good idea. I can’t go into a quarter, and then you close half of what we expected, you look like a bunch of morons in front of your investors, and nobody’s happy in those situations. So there’s that, understanding what’s going on on, who’s policing that, who’s bringing all those pieces together, the sales team, the finance team, and getting everybody what they need. That’s a fascinating role.

Randy Wootton (36:42):

When I was growing up, we would have sales ops. When I was at Salesforce, they basically invented that idea, sales operations, and being in the sales force. And then I’d been in marketing for a long time, we had marketing operations, and so much complexity in the marketing tech stack. And then you had success operations, the people supporting the customer success on Gainsight, ChurnZero, or one of those.

Alex Diaz-Asper (37:03):

ChurnZero is a client of ours.

Randy Wootton (37:07):

Is it? Oh yeah, you might. I just saw him in New York, great guy, great product. I think there’s enormous value connecting company data with customer data. To what we were talking about before, is being able to show when a customer is coming up for renewal, and then have all the data in front of you from a system like ChurnZero or Gainsight, where you’re looking to see, well, what’s that customer’s health, what’s been going on with their tickets, do we think they’re going to a trip? Do you get in front of them before the renewal, rather than just having your finance team send an invoice?

Alex Diaz-Asper (37:37):

And staying on top of the month, and helping them use the app platform all the way through, driving success. Yeah. Yeah, yeah, no, it’s a great product.

Randy Wootton (37:47):

Great guy, great product. I worked for Maria Martinez at Salesforce, who really brought life into this idea of customer success, back, this is years ago. And how do you make that something more than just support, answering tickets? And instead, adding value in investing in customer success. And so Nick Mehta at Gainsight really took that and ran, wrote the book, and has great success there as well.


But I do think that whole idea of RevOp, bridging those three, so signing up the customer … Well, going out and marketing, so understanding the marketing funnel, down to the sales funnel, have that whole pipeline. To then bringing the contract across, implementation, value realization, and renewal. And having all that data connect across all the disparate systems is really hard.


Where are you seeing people put RevOps, the functional leader? Does it go up to finance? Does it go up to sales? Does it go up to a CRO? Does it go to the CEO? Or all of the above?

Alex Diaz-Asper (38:50):

Usually sales. Usually sales. Sometimes I feel like sales doesn’t appreciate that role as it should be, because it’s almost like back office. And it’s so important to understand all these metrics we talk about, like your customer acquisition costs, your payback on all that, are you being efficient in acquiring customers? You need all the data to do that.


And that’s where RevOps comes in, make sure we get a good forecast, we understand what the forecast is, all those things. How are we doing across B2B SaaS? Which of our sales guys are contributing? Who are not? Simple stuff like that.

Randy Wootton (39:33):

I think that’s the one where I think sales ops, versus RevOps, is being able to … Because salespeople are so expensive, especially if you’re doing a sales led motion in the enterprise space, and you have year long contracts, big deals, is being able to understand what’s working on a almost per unit, per AE basis, in terms of the activities they’re doing, the management of the opportunities, how many are they supporting, what their win rate is, how’s that compare? Sales is one of those functions that you can just measure and compare more than any other.

Alex Diaz-Asper (40:03):

It’s beautiful.

Randy Wootton (40:04):

It is, in some ways, it is. People think, well, it’s just a machine, you just put a coin in. And it’s not that, there’s more to it. But you can certainly use a lot of data to help you better understand what’s working, what’s not, in your sales motion.

Alex Diaz-Asper (40:18):

Right. Exactly.

Randy Wootton (40:19):

Awesome. Well, Alex, we’re sort of at the end of our conversation. Thank you so much for your time. We’d like to close with our speed round, of which there are two questions. One, is your favorite metric, and why? And the other one is your favorite influencer, so someone that you read periodically, you subscribe to their emails, but you think he or she is really moving the thinking forward. So what’s your favorite metric?

Alex Diaz-Asper (40:46):

I still love gross margin payback. I still love gross margin payback.

Randy Wootton (40:50):

Gross margin payback. As like CAC payback?

Alex Diaz-Asper (40:55):

But without any sort of assumptions about … A lot of people play with the churn assumptions. It’s just, straight up, how long does it take you to get a customer, your customer acquisition costs. It costs you a dollar to acquire that customer, how long does it take you to get that customer back? It’s a very, very simple, hard to manipulate number. Just a good number.

Randy Wootton (41:18):

And do you have a rule of thumb for your early stage companies?

Alex Diaz-Asper (41:22):

Anything under 12, marvelous. 12 to 24 is good. And then anything above 24 could be a little bit of a problem.

Randy Wootton (41:30):

And is that different based on ACV, or deal cycle?

Alex Diaz-Asper (41:35):

On ACV? No, it should be independent of ACV. And I’m not sure about deal cycle, what you mean by deal cycle.

Randy Wootton (41:41):

Well, I just wonder, if you’re selling bigger deals, and it takes longer, it’s a 12-month deal cycle, versus a six-month deal cycle, it seems like you’re putting more CAC into it, when do you get the payback? It may be like a 24 month, versus a six to 12 month, if it was a $5,000 product that you’re selling in 30 days, versus a $50,000 product you’re selling over four months.

Alex Diaz-Asper (42:05):

Well then, if the ACV is the same, and it takes you that much more to get it, it’s a worse business. Unfortunately, if it’s really … And we see this in our enterprise customer, like our big ticket, like 250 a year, you got to get a lot of ACV back. You’re going to have a salesperson going out to these different customers, and stuff like that.

Randy Wootton (42:27):

Got it. So you think it’s a great equalizer.

Alex Diaz-Asper (42:29):


Randy Wootton (42:29):

It aligns with how much are you … Almost like your customer acquisition costs, how much are you spending to acquire, and getting in return?

Alex Diaz-Asper (42:37):


Randy Wootton (42:37):

Awesome. And then, who do you think is out there writing good stuff, or someone that you’d like to follow?

Alex Diaz-Asper (42:42):

On the SaaS side, I do like his emails, Ben Murray of SaaS CFO. He just does good stuff. I love this one he sent out recently about, what are the metrics for bootstrap companies? It was just kind of neat, a different perspective. Because we do work with bootstrap companies, and it’s different. They didn’t get the capital, so they’re not going to do the same things as these venture backed companies, because it’s a different path. But it’s still legitimate, it’s a great way to build a business. So it was just a neat perspective. It was kind of neat. And he does do a lot of that stuff.

Randy Wootton (43:16):

He does, and he does a great job promoting community. We just had him, actually, with Ray Reich, in Denver, as part of bring people together, bring dinner, bring folks together for a dinner and conversation. And Ben came in, and he’s just a great guy, just super low-key, and very helpful.


I, in fact, took his course, right before I started at Maxio. I had been in SaaS, but had been a while since I’ve gone back and really looked at the metrics, and I thought, well, gosh, I’m going to a company that … One of the legacy companies with SaaSOptics operating metrics. I better get my knowledge tuned up, because there are so many different definitions and ways of doing it.


And the other thing he does in his course, which is great, he provides a lot of benchmarks. And so he’s done all the work to read all the benchmarks, and then provide that. You begin by ACV or stage, if you’re looking at this type of company in this context, this go-to market, this is what a good benchmark is. And so it was great. It was a great refresher, I recommended it to everybody. And he’s a great guy, so that’s a great one.


Well, thank you, Alex. Thank you for your time. Really appreciate you being here and sharing some of your thoughts.

Alex Diaz-Asper (44:17):

This was great. Thank you, Randy.

Episode 22

Influence vs. Impact: Redefining Success in the Accounting Profession

May 15, 2024


Randy Wootton
CEO, Maxio
Rob Brown
Co-founder, Accounting Influencers Roundtable

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Video transcript

Randy Wootton (00:02):

Well, hello everybody. This is Randy Wootton. I’m CEO of Maxio and your host of The SaaS Expert Voices, where we bring SaaS experts and people working in and around the SaaS field to you to talk about what’s happening today and what is on the horizon. And with me, I’m really excited to welcome Rob Brown. Rob Brown has a very interesting background. Started off as a math teacher, which we will get into, and then worked on training accountants and how to build a reputation. In fact, actually wrote the book, Build Your Reputation, which we’ll talk a little bit about. And over the last six years, he’s been facilitating conversations with accountants and how to get to accountants through his Accounting Influencers Roundtable. One of which I joined. It was really fascinating to talk with people. As Rob will tell you, accountants are the second most sold to profession. The number one is doctors. Number two is accountants. We’ll get into that. And what does it mean to sell the accountants, the trends in accounting, what’s happening, what are the challenges they’re dealing with? And if you’re trying to sell to accountants, bookkeepers or sell at CFOs, what do you need to know? But Rob, thanks for joining us.

Rob Brown (01:06):

Randy, pleasure to be here.

Randy Wootton (01:08):

So let’s start with that. You were a math teacher. In our pre-brief we were chatting a little bit about the fact that my first job after … Well, actually, I was still teaching in the Navy. I went and took a master’s and went and taught midshipmen at the Naval Academy before transitioning into the corporate sector. You were teaching math and we were talking about why you got out of math. Can you talk a little bit about what your hope was when you had spent those eight years teaching math to students and then what your realization was about what was happening in that dynamic of teaching?

Rob Brown (01:37):

Well, we’re all idealists at heart. We want a crusade. We want to cause a passion, a purpose. And like anybody I got into teaching hoping to make a difference and influence young people’s lives. And to an extent you do, but the education system almost everywhere is very structured, it’s very prescriptive. There are curriculums you have to adhere to. And rather than educating children and preparing them for life, I ended up coaching them to pass tests.


Now the UK is one of the most tested nations in the world where I am and I’m sure the US where you are around, is not too far behind. And to examine these children within an inch of their lives and put them through all these tests, you then end up having to teach to the test. And that’s not education. And when I’m going through trigonometry and algebra and Pythagoras and things like that listeners will be familiar with, how really do you use that in real life? Unless you’re an engineer and you need that, so you probably don’t. So the stuff I really wanted to teach, the stuff I really felt those children needed to know was not on the curriculum. And my metric for success became how many of your pupils can you get to pass this test at this grade or above? And that’s when I thought, this is not what I signed up for.

Randy Wootton (02:57):

And those are the A levels and the O levels construct. In England in particular, my understanding is they’re pretty draconian in terms of the way they wean people out. You take the test and based on that, you either continue tracking towards going to university or you end up getting tracked to going to VOTEC or vocational technology. So it’s much more deliberate and almost impactful than what we have in the States in terms of the SATs where kids can choose to do that to help influence which school or college they go to. But in England it’s much more of a pyramid system. At least to me it seems that way. And that’s probably what drives you to have to teach to the test because everyone’s just trying to pass it and get onto the next stage. Is that right?

Rob Brown (03:37):

You’re not far off. Schools are not fit for purpose in so far as they are academic institutions. And you know many entrepreneurs, Randy, they’re not academic. They’re vocational, they’re entrepreneurial, they’re business minded, but they’re not academic. So when you put kids through a system of having to pass tests and memory and recall and things like that, that doesn’t suit a lot of people. It warrants change for sure. One of my two daughters is actually in the American education system. She’s going to university in North Carolina. And now that we’ve seen the American university system and the electives and the credits and everything else where you can get a really holistic education with stuff you enjoy that will help you for life, that’s a much more preferable system to here in the UK where you would start a degree and from day one you would be doing organic chemistry and nothing else or accounting.

Randy Wootton (04:28):

Yeah. And I think there are choices there. So I have two boys, one’s 19, he’s in college at liberal arts school and I think that is the modus operandi of the liberal arts schools to provide a broad-based education, help you find yourself, discover yourself, and then through that discover what your passion is. So you have a vocation and an avocation. My other son who’s a junior in high school, so looking at colleges is pretty convinced he wants to go to computer science and is looking at schools where that’s where he starts and that’s the track he has to run. And to your point, I’m anxious because I know how I evolved from 18 to 22, and I started off wanting to be an aerospace engineer at the Naval Academy and graduated as an English major and then went off and took a master’s in the great books. Completely different, though I stayed in the Navy, just radical shift in who I was and what excited me. And so for my youngest son, I keep coaching him. I’m like, well, maybe go to the liberal arts school initially and if you really like computer science, you can go get a master’s. But give yourself time to be a proto-adult around people and ideas and figure out what lights you up versus what do you think you’re going to get paid for post-graduation.

Rob Brown (05:37):

That all sounds grand. You and I are not here to put the education system right. There are smarter people than you and I, Randy who’ve tried for thousands of years, but let’s move on. The education system will stay as it is. Let’s try and change the accounting system. That’s another-

Randy Wootton (05:53):

Let’s try and change the accounting system. Perfect. Well great transition. And thank you. I rarely meet other teachers that are in the commercial sector, so it’s wonderful to have a chance to share and empathize. So I think really the thing that would shift to Rob, with all your experience focusing on accounting as a profession, can you talk a little bit about how you’ve been bringing together these conversations and what are you seeing with regards to the trends that are happening now and what people are anxious about going forward with the accounting profession?

Rob Brown (06:23):

Well, just for a little bit of context for the audience here, Randy, you’re in the SaaS world, you’re talking to CFOs, CMOs all the time. Explain the relevance of accountants to their world. So I can speak to that question with much more context.

Randy Wootton (06:43):

Yeah. Well, I think there’s actually a couple of ways that people work with accounting firms. First, if you’re an early stage founder, CEO, you’re usually technical. And so the assumption is you don’t know a lot about accounting and you don’t speak that language, right? I went to business school, you have your training in terms of learning the language of business, which is accounting. What you end up usually doing is hiring a CPA firm. And so there are lots of CPA firms. There are a client advisory services is what they’re being called now. Who support from a bookkeeper function to really up to basically a fractional CFO where you’re helping the person get the accounting done, i.e. the three financial statements, but also be an advisor with you specifically around cash. How do you manage cash, what the different cash flows are and how long you have, what you earn and will usually help as an advisor, not the lead for a funding round.


So I work with companies. Mostly are ones who are privately invested either through VCs or PEs. So you think about the seed rounds, the angel, the friends and family rounds you probably have a CPA firm. When you get to series A series B, you’re working with a CPA. Maybe bring on a fractional CFO. Often your first hire in the finance department will be a controller. A controller who may have come out of the Big Four, Big Six who now is thinking about wanting to be a VP of finance. And so they’ll come on board and they’ll help run the books and create that financial operations. And so that’s the next inflection point is where we as Maxio sell to companies to help them with the revenue recognition and the reporting and the business office. At that stage at Series C, you’re using accounting firms for audit basically. And so there’s an evolving relationship initially they’re critical partners, the bookkeeper advisor, and then you move on with the relationship as they go forward.

Rob Brown (08:31):

Okay. So you touched on a lot of key things that are driving change in the accounting profession. We call it a profession here in the UK, you guys call it an industry to an extent, but tomatoes tomatoes. We’re proud of being aligned with say a medical profession or a legal profession. We don’t really say a legal industry. But however that works when you look at accountants as a whole, let’s first make a distinction between what is an accounting firm? Because you’ve got the big four that turn over billions, and there’s a huge difference between them and the number five and the number six and the top 10 and the top 20. Then there’s a big difference between them and the top 500. And you go right down to the one person that has a bookkeeping or accounting qualification that will do his nephew’s tax returns every year and that’s all they do. But they have a CPA or a chartered accounting qualification.


So when we talk about accounting firms, it’s really difficult to generalize. Equally when you talk about accountants, it’s very difficult to generalize because there’s so many different types of them, but we can make some generalizations. What we know about accounting is first, it’s a very aging profession. 75% of accountants are at or close to retirement age. It’s been run by the baby boomers. Now what’s going to happen when they retire and move on? There’s a massive transference of wealth. There’s a massive shakeup of business models. You’re familiar with the partnership model, the managing partner, the equity route. Let’s buy into that and get ourselves a pension pot. There’s all that going on right now. Private equity money is speaking to that because VC money, PE money is buying accounting firms for whatever reasons. We can discuss that.


So it’s an aging profession with aging firms. And what happens with that too is that coming in the top of the funnel, the talent funnel are fewer and fewer people. CPA qualifications, accounting degrees are not as popular as they were. There are many more options available to young people now to go at. So there’s a huge talent shortage. So we could speak to that. But the other thing that’s happening as a driver of change … You mentioned it briefly. Accountants are mandated by law for a business. Everybody needs an accountant. You need an accountant to stay out of jail to get your audit done, your tax returns, everything else. So they’re in a very enviable position that they’ve got an elegant business model where everyone needs them. And there’s money coming in every month, every year. However, the value that an accountant brings is going down because they’ve had a historically backward-looking focus.


What has happened? Let’s report on what’s gone on. And that historical focus is not valued. It’s called compliance. It’s called what’s necessary. And businesses can’t use that to a degree. They do it because they have to be compliant and fulfill tax regulations but where’s the value in that? So you hinted at that. The compliance versus the advisory debate. So there’s downward pressure on compliance fees, this downward pressure on the historical reporting because that’s not worth too much beyond what’s required by law. So accountants are now having to reinvent themselves as consultants, coaches, mentors, trainers. Throughout the pandemic we even saw accountants morphing into therapists, psychiatric counselors, shoulders to cry on. They’re helping businesses keep the lights on in the worldwide pandemic. So you’re now starting to look at the accounting role as something that requires a lot more than technical qualifications. So that’s just some of the drivers we can speak into here that might affect your audience.

Randy Wootton (12:29):

I think there’s a really interesting construct in terms of the … Because The SaaS Expert Voices is really focused on the office of the CFO, how that’s transforming and the role of the CFO, many who start as accountants and how that’s evolving and what are the new skills you need. One of the things that struck me in your comment was that the accountant now needs to think about how they add value, and that may be something that they don’t feel comfortable with. So I remember I did a stint with Bain Consulting, very short stint. But in the consulting model, they have three stages. You have your first stage, which is the analyst. So you got to crank out the spreadsheets. And so to your point, if it’s not historical, look back, you got to know your numbers and you got to put the spreadsheets together.


The second stage was a consultant or an engagement manager. And that meant really you had to manage the client relationship and you had to be able to get all the pieces together and construct the deck and come up with some insights. But it was really around the project management, client management. And third stage was the partner stage. And the partner stage was where you added the value. Is where you would build the relationship and you would add strategic value and scope out … I’m talking about strategic consulting, so the Baines, BCGs, the McKinseys, you would scope out a statement of work that would say, Hey, here’s the problem you’re trying to solve. Here’s our approach to it. And then you deploy your engagement managers and consultants and your analysts as a case team to go after that.


It is hard for those consulting firms. They have enormous amount of attrition to find someone coming out of college to be all three of those. To be able to come in and be an analyst and then go off to business school and then come back as a consultant, learn how to be a consultant, and then move into that third phase around client advisory and strategy. But it’s a very deliberate path and they have training for each of those. And so in the accounting profession, do you feel the way that the structure is set up or the training that people take or the way that the model works, the rewards and sense trains people for the different stages of what needs to happen so that the head of the firm or the accountant with 15 years experience is learning how to be that strategic advisor to the CFO, how to be the strategic strategic advisor to a VC or a venture partner as they’re looking to invest in different companies?


Or is that something that needs to be done? There needs to be this level. I know in Europe you have this … It’s not a CPA. It’s the CMAG or something, which is another certification around finance and strategy, and it feels like there is that piece there. So talk a little bit about how an accountant today, if they’re entering the profession, would think about the stages of their career and how they build those skills and capabilities.

Rob Brown (15:08):

It’s a super question with so many different layers and you’re pushing a lot of buttons here. Let’s talk briefly about the accounting qualification and ask the question, is that fit for purpose? You’ve got many governing bodies. You’re highlighting one there. The ICPA in the US is the ACCA here in the UK, the Association of Chartered and Certified Accountants. Whichever route you go down. And there are many others. They have a curriculum a little bit like me as a school teacher, which they have to teach. But the question is, does that turn out accountants that are fit for purpose in a modern day world? Because it trains them on compliance and technical qualifications. Now, yes, that gets you in the as an accountant, but you’re absolutely right. As you migrate through the tiers of relevancy and value, you need to be adding in different skills. So I’ve long since talked about the five skills or attributes that accounting types need to stay relevant and competitive. May I talk you through those?

Randy Wootton (16:05):

Of course. That’d be great. Thank you.

Rob Brown (16:06):

So level one is the technical skills. You’ve got to know what double entry bookkeeping is to an extent. You’ve got to know your way around the tax regulations and everything else. So that’s technical qualifications. That gets you in the game. Then there’s technological skills. So accounting finance types these days, they don’t need to be nerds and geeks and be able to write code, but they need to do more than turn a computer on and off. So you’re now asking accountants to do a whole lot more than you did 20 years ago because they’ve got to be tech-savvy. They’ve got to know the apps. And the average accounting firm uses about a hundred different pieces of software. So you’re now asking a lot more of your accounting professionals than you ever did. So that’s the second level, which is your technological skills. Then you need commercial skills.


You’re going to be a CFO, you’re going to be an advisor, you need commercial acumen. Business awareness. Now, accountants are not business people. They know how to help a business, but they’re not entrepreneurs. They’re not business owners by and large. Some of them are. But they’re generally employed people on the staff maybe with some equity in it, but they’re not entrepreneurial by nature. So by commercial awareness, I’m saying accountants need to think like business owners, and that is a skill gap that is difficult for them to breach. Some of them do it well, but there is a leeching out of accounting where people are going into tech, going into CFR roles, going into industry, going into tech companies because they’re not getting the skills they need in an accounting firm. So you’ve got three there. You’ve got technical, technological, and then commercial awareness.


The fourth is people skills. Mental health is at a premium, isn’t it, Randy? We talk about this. Hybrid working, remote working. So now as an accountant, you are also a manager, a boss, a leader. How do you lead a firm? How do you lead a vision? If you’re in a CFR role or an accountant in industry how do you lead your team, your finance team? How do you lead your clients? So all of this comes into play with people skills and empathy and presentation skills. And the final one, which is the top of the tree, is selling skills. And what I mean by that is accountants are more and more being encouraged and even expected to sell their services, to be a rainmaker, to make opportunities for their firm to open doors. And even, let’s take a very basic CFO role or accounting role. You’ve got to sell an idea. You’ve got to sell the story behind the numbers. You’ve got to sell the narrative. You want board level, buy-in for your analysis, you’ve got to be able to sell that. You’ve got to be able to talk about what the numbers mean.


So you’ve got to be able to sell an argument, an opinion, an excuse, a statement, a fact. You’ve got to be able to get behind the stats. So you’re asking much more of an accounting and finance professional now than you ever were. And that’s why it’s rarefied air to get somebody that can do all of those things and this is why we’ve got a problem.

Randy Wootton (19:18):

Agree. Can you speak a little bit to … I think we were talking about the accounting certification that gets you at level one, and then I think there’s another accounting certification which helps you, I think probably with the business awareness, that level three, that’s that CMAG. I think it came out of England actually, and now is integrated to the AICPA construct and certification. And we’ll get to your book in a second because I think that really speaks to level five. But how do most accountants develop these skills around selling skills today within the firm or if they’re a single proprietor? To your earlier point in the US at least there’s 60,000 CPA firms or 300,000, something like CPAs, but of the number of firms, there’s 60,000. So there is a very long tail of people who are running a single proprietor shop or a small shop with a couple of accountants. But how do people learn the selling skills? What’s the way they’re embracing this new reality of having to be more strategic and come up with ideas versus just reporting on the historicals?

Rob Brown (20:18):

The short answer is, Randy, they don’t.

Randy Wootton (20:21):

Ah, hence your training.

Rob Brown (20:23):

Not so much my training. I’m not in the training game anymore, and there are plenty of good coaches, consultants, trainers out there. But to the point, you will never meet an accountant that has time on his or her hands. These are super busy people and they’re really overwhelmed. There’s tax deadlines, busy season, you’ve heard of that phrase before.


So where accountants learn this stuff is in their discretionary time. Often they’ve got to do it on their own. The main professional development they do, the CPE that they continue professional education … We call it CPD in the UK development. Where they learn that is the mandated stuff, the changes in tax regulation, keeping their qualification up to date on the technical side. Beyond that, the learning skills on the job. A little bit of coaching here, mentoring there, learning it as they go along, making mistakes. You send people out of an office and make them work remote, they’re now not rubbing shoulders with people in the corridor saying, Hey, how are you dealing with that or I have this situation. So driving culture and change and informal mentoring is really, really difficult.


Now, the formal training, getting accountants on sales programs, on commercial awareness programs or making them do an additional qualification that develops commercial awareness or entrepreneurial business sense or people skills or leadership, they don’t have the time for that. They don’t really have the inclination for that a lot of them. They are getting paid very well, doing what they’re doing. They’re super busy doing what they’re doing. All accounting firms are growing. So where is the incentive beyond that intrinsic motivation to do better, serve better, add more value for them to take up their spare time in acquiring all of these new skills and attributes?

Randy Wootton (22:12):

Well, just going back to your earlier point, I would think there’s a couple of things at play. One is the overall value and price that people are willing to pay for the traditional compliance work is going down. And that’s a bidded environment. And so number two is, I think you see, especially with … I know client advisory services has been around for 30 years and people are still trying to figure it out. But I’ve talked to several firms that are really embracing this idea of CAS and the idea of doing a retainer. So not just doing time and materials. So setting up to be … And if I do a retainer with someone like I do with an agency, a marketing agency or a consultant, the expectation is there’s value being delivered on a regular basis though it’s not a piecework. It’s not I’m paying you for an audit, I’m paying you for your advice.


And if there’s fewer accountants, people coming into the accounting profession, they’re not going … And I think the other thing we haven’t talked about obviously is I think AI is really going to impact accounting. It’s going to make the job, the dotting I’s crossing the T’s, the compliance easier. You can get to a zero-day close, for example I think using AI. I think you can use AI to help you better understand what’s happened. And so you don’t need the work and time focused on getting the dotting the I’s and crossing the T’s, producing the reports. Now it’s all about the value add.


They may be getting paid well now for what they’re currently doing, but if they’re early in their career and want to move forward, they’re going to have to transition in terms of how they think about what they offer their clients. I’m coming obviously from 25 years in technology. I think it may be different in other industries, manufacturing, retail, your mom and pop shop on the corner. But if you’re the accounting firms or you’re an accountant one and making that transition into the commercial sector to be on the client side, I do think developing those skills is a critical … There’s a clarion call to take it on.

Rob Brown (24:08):

No question. Randy. You are in a fight for relevance.

Randy Wootton (24:13):

Yeah. That’s right.

Rob Brown (24:14):

Let’s speak to AI for a moment. The compliance trap, time sheets, billable hours, everything else. There is a move away from that. It’s slow. It’s very glacial. Accountants have done it their way for centuries. But the automation, the AI will help in making compliance work easier. And that will free up some accountants to take on more advisory roles, which actually is actually what they love doing by and large. They don’t position it well, they don’t package it well, they don’t price it well, but they’re moving into that space and they know it’s an inevitable transition. However, if I were to say this to you, only 30% of accountants automate a bank feed. That speaks to what impact AI will have. So say two thirds or more of accountants are not tech-savvy enough or have the wherewithal to get an automatic bank feed coming in to reconcile day zero close as you said. Why not? Because they’re on desktop, some of them. Some of them are still working with checkbox and shoe boxes and Excel spreadsheets. It’s an old profession.


So you’re telling me AI is going to change the game? It might but it won’t be anytime soon and it won’t be with the rapid impact you expect. There are some great early adopters out there, but there’s not a lot of them in accounting. There are some on the real bleeding edge that are doing AI stuff and really making it count and some of the software vendors to accounting are folding it in. But honestly, it’s not going to be the massive game changer everyone thinks. And if it does, it will take up some of the fallout from people leaving accounting. It will pick up some of that slack, the attrition. But if you’re asking what’s going to change the game, yeah, it is going to be those accountants that say, I really want to move up the value chain. I really want to be more relevant. I’m going to invest in my skills, invest in my professional network, invest in my reputation, invest in my commercial awareness, invest in my leadership skills, and they will have the most opportunities and the biggest money.

Randy Wootton (26:26):

Great point. I think it’s a nice segue to the conversation why PE firms are buying accountantcies. I think that there is this interesting … Part of the reason I moved from AdTech Martech into the office of the CFO was because I saw the revolution workflow automation and what it did for marketers and sales people and service people. Now there’s north of 12,000 vendors in the marketing space. It’s a frothing battle to sell the next new cool marketing tech. But I think the office of the CFO hasn’t yet faced that revolution. And to your point, with a bunch of companies doing things manually, that seems to me like that’s ripe for PE to come in, roll up services, drive efficiency, consistency, global talent. So if there’s not enough talent in the UK or in the US. I know for example, we have some accountants based out of Manila in the Philippines that are supporting us in our field. And so taking advantage of the global talent market. What are some of the things you think are driving PE buying up firms at this point, or how’s that playing out from your perspective?

Rob Brown (27:35):

Well, private equity people are super smart. We know this. They look for opportunities. They look for uplift and profit. So they must be looking at accounting firms and seeing inefficiencies. They must be seeing money left on the table, otherwise they wouldn’t be coming in for accounting firms. And they’re coming in for SaaS firms too. A lot of the technology ecosystem that supplies accounting firms now is owned by private equity. So the big play is that there is money to be made. And accountants, the billable hour, they’re not value pricing very well. They’re not doing advisory very well. They’re not doing subscription pricing very well to your earlier point and retained services. So private equity is seeing a whole new way of setting up the firm, moving away from the partnership model towards maybe a C-suite model. Accounting firms being run by non-accountants, the same as some schools are being run by non-educationists.

Randy Wootton (28:33):

Yeah. I think there’s a lot to the business model. I think there’s this idea of how do you take a service firm and turn it into a tech-enabled service?

Rob Brown (28:40):

Yes. That’s a good way to put it.

Randy Wootton (28:42):

So to your point, you have a hundred pieces of software, they’re not using it and deploying it. Well then that’s a waste of time and money. But how do you create a tech stack that then the services firm used to be smarter? And then to your other point, you can have a tech enabled service firm that’s AI powered or augmented intelligence. How are they leveraging the best? And I find this at my firm, every single … Firm. My company. Every single function is thinking about how AI changes what they do from sales to marketing, to support, to development, to finance. It’s how are you using the tools that are available now or how do you build?


I think that was your second skill around technological savvy. Part of this is working into this new world. The world is different post-ChatGPT, and I know this because I was a CEO of a first gen AI company where it was a huge … We invested an enormous amount of money in our own servers. We had 30 data scientists on board. We had 30, 40 people that had to deploy the models that we were building. We had 20-something models that we were updating every day. But the cost to engage at that level and have a predictive analytics, logistic regression analysis type analytical models was so cost prohibitive that people couldn’t do it. Today with ChatGPT and all the other user interfaces that are available, everyone needs to embrace and be playing with it.

Rob Brown (30:09):

You touch on an interesting point, Randy, if I can just jump in.

Randy Wootton (30:12):


Rob Brown (30:12):

Accounting firms and accountants finance people are not good at buying tech strategically. So you spoke briefly to there’s many legacy platforms and you buy this piece of software because it does its job, but it doesn’t necessarily serve the client best or it doesn’t fit in with what we’ve already got, but they don’t join the dots particularly well. So maybe private equity has seen that as well as streamlining our conformity or joining the software stuff together in a much better way or buying software services and products and platforms in a much more cost-efficient way. That’s pleasing.

Randy Wootton (30:49):

I think you’re right. And that’d be a great way for us to shift to the next part of the conversation. You opened with … Or it was in our pre-brief that you said that accountants were the second most sold to profession outside of doctors. Maybe you can help us understand how do you sell to accountants? How do you be relevant? How do you make it successful? Obviously at Maxio we’re trying to sell to … Well, we are selling to accounting firms as well to support them in their BPO and their client advisory services. That’s a channel that we’re building. Our primary channel is direct to CFOs who have been accountants, so they have that same orientation. Can you maybe talk a little bit about what you’ve seen in terms of the evolution of how to sell to accounting firms successfully and accountants?

Rob Brown (31:33):

Yes. Accountants are the gatekeepers of business because every business pretty much needs an accountant. Let’s go back to the doctors. You can imagine how every pharmaceutical company would want a conversation with a doctor because there’s a lot to be sold there with the drugs and the medical stuff that’s required. Same with an accountant. All the software vendors want to get to an accountant so that the accountant uses their stuff, but also the accountant becomes that advocate, that introducer, that affiliate, that referral partner to all of the businesses that they serve. So the average accountant … And goodness, what is an average accountant? But they’ll be getting hundreds of emails a week on, can we have a conversation? Let’s chat about this. There are some opportunities for us to work together. I think our solution might really help you. Our software will really help your business clients do this, and we can really help you do this. So they’re bombarded by sales messages. They’re hit up on LinkedIn every day. Not many accountants are on social so LinkedIn is the de facto place where you might get them.


But then there’s all kind of nuanced marketing campaigns. I’ll give you an example. Intuit, they’re a big player. Intuit QuickBooks. They’ll sponsor the Super Bowl or do something ridiculous like that just to get the attention of accountants. Why did Coke spend two billion a year advertising Coke? Because everyone knows Coke. Well, it’s this drip, drip, drip of stay in front of mind. Anyway, there are three ways you get to accountants. So we’ve acknowledged that accountants … You’re right. If you can get a relationship with an accountant and they trust you and they like you and they see the value you can offer their client-based business owners, you will have a great advocate there. But actually while we’re on that, accountants are so busy with their own business, do you really feel they’ve got time to mention your business as well? So think about that for a moment.


But in terms of getting the attention of accountants and getting above the noise, it’s extremely difficult. You can do it three ways. The first way will cost you a lot of money. The second way will cost you a lot of time. And then I’ll mention the third. So the first way is to throw money at it. If you have an unlimited marketing budget and you want to get the attention of accountants, you can pay for all the pay-per-click and the advertising spend and sponsor the Super Bowl and go to all the accounting conferences and you show up everywhere they do. Everywhere you go, you are there and that will cost you millions. If you’ve got a budget like Nike, you can just do it and be everywhere and it’ll cost you a ton of money.


You can go down the second route, which is the organic route. So that’s content, thought leadership, social media posts, drip, drip, drip. Won’t cost you as much money, but it will take you a long time. Because are accountants looking at that? And the average duration for a social media post is 48 hours. After that, it’s gone. It’s disappeared. No accountants are really looking at that. Podcasts maybe have a longer tail where accountants will go back and listen to older episodes, but most marketing methods are very instantaneous. And if you don’t hit it, then it’s gone. Social media, you can write content, but there’s a lot out there. A lot of it’s rubbish. Are accountants really looking at that? Is that how they’re learning? Is that how they’re taking on new information? Is that how they’re staying informed? Possibly not. Whose life was ever changed by a social media post or a blog post or a PDF or a white paper? Not many.


So that second route, it’s a slow burn. The third route to get to accountants is strategic partnerships. Now, there are a few different ways to describe strategic partnerships, but effectively it’s build relationships with people that have big audiences of accountants. So build commercial alliances with people that hold databases, email lists, customer bases, client bases, audiences, communities, followers, fans that are accountants. Here at the Accounting Influencers Roundtable, we do that. We bring in software companies, tech companies, consultancies, coaches, trainers, podcasters. They all serve the accounting profession. And you know what? They’ve all got a list of accountants, big, small, medium. If you build relationships with people like that, you then start to have conversations about, well, who are you working with and who are we working with and could you maybe introduce me to them and could you get me a phone call there? And it’s more of a warm introduction. Now that again is a slow burn, but it’s trusted. It’s accelerated because you’ve got a warm introduction. So somebody’s advocating for you in going to their accountants that are super sold to. We’ve established that.


But you go to an accountant that you’ve got a relationship … And Randy, you have some great relationships with accountants at Maxio. So you would say to them, Hey, I know we’ve been together for a long while. I trust this guy. I think you should really have a conversation with him. They would take that call. That accountant, that CPA would take that call because you told him to. So that’s a strategic partnership. So building them, there are lots of different ways to do that. There’s alliances out there and communities that you pay to get exposure to their accountants and have a seat at the table with their meetings of accountants. It’s doable, but it’s noisy. You’re fighting for attention, you’re fighting for relevance, you’re fighting for air time. And it’s wading through treacle sometimes. And trying to be innovative … Accountants are not innovative. They might buy bright shiny things, but honestly, they will go to what they know and they’ll go to what they’re familiar with. They’re very risk averse. They don’t take many chances as you would expect. They’re not early adopters. So you’ve got a battle on your hands, but it’s doable. What you can’t afford you have to do is be bland and just make more noise.

Randy Wootton (37:43):

Yeah, I think you’re spot on. Just resonates on a bunch of levels. In terms of one being a relatively large company of 2300 customers, we do have some money. So we are focused on marketing. We are trying to get in front of people of the digital, but we can’t afford the big events. We can’t afford the Super Bowl so there is always this balance between how much of your marketing program spend are you spending on paid media versus the number two, which is around the social posts and the content. And I think to your point, they only are up for 48 hours. What you’re trying to do is hook someone. Hook them to come to your site and then do a little bit of an exploration.


I do think one of the things we’ve been exploring, which is unique to the accounting profession is the idea of CPE credit. And we’re working with a company that’s helping us take our webinars and some of our other shows, like even the podcast and convert it to CPE because every accountant in the US need to be in credit. So if you can have relevant, interesting, fun content that they have to take, then you’re aligned with their incentive and they start to get to know your brand.


I think you’re spot on with strategic partnerships. That’s one of the things that we invested in over the last 18 months is finding those influencers out there. Ben Murray, the SaaS CFO, Ray Rike, the CEO of Benchmarkit. CJ Gustafson who runs metrics that matter. There are people out there that have a bunch of accountants and CFOs and others follow because they’re writing good content in their trusted brands. And so how do you establish those partnerships and getting the balance right?


We’ve talked to the AICPA, we’ve gone there, and what we found at the AICPA for example, is there are very few firms to your earlier point that are actually on the cutting edge of wanting to take technology and move to this new business model around subscription-based services and adding strategy. So the long tail is probably not a good set of customer’s prospects for. So I think really understanding what your value prop is, and of those 60,000 accountantcies, which ones are you going to serve? Offering something for a single proprietor is very different than trying to support the big four. And so trying to figure out where you fit in the middle.

Rob Brown (39:48):

Here’s another angle to that, Randy, you make some great points. If I introduce you to an accounting firm with your product service solution, there might be three, 400 people, 30, 40 people, three 4,000 people in that accounting firm. So who do you want to talk to in that accounting firm? Because you’ve got myriad of different roles, a myriad of different seniority levels, a myriad of different passions and areas of expertise. Accountants work in different sectors, different verticals. So getting an introduction to a firm doesn’t necessarily work because is that the right person? Is that going to be your champion? You’re looking at multiple levels of advocacy and trust and being passed on down or across the line to the right person that will ultimately buy or endorse what you’re selling.

Randy Wootton (40:44):

Yeah. But we’ve seen this a little bit play out in VC and PE firms where they have investing partners and then they have operating partners. And I think as accounting firms start to embrace technology, consolidate technology and say, Hey, here’s our tech enabled service, here’s the stack we’re going to use there will be people within the firms who are going to be the primary gatekeepers to vendors like us, software selling to them.


Last point I just wanted to cover off. I think you’re spot on with this fear of messing up versus fear of missing out. And there’s a great book called Jolt, which is produced by the same folks that produce the challenger sales method, which is my go-to sales bible forever. But what they found as they evolved their research was that a lot of people end up in this area of uncertainty, and it’s not driven by fear of missing out, it’s fear of messing up.


And I think that’s especially true for accountants and CFOs is they don’t want to get caught making the transition from a general ledger or to a new financial reporting system and then have it be wrong. And they’re comfortable in their current Excel model because they built the model and they know every single assumption and they know every single formula and how it connects between the hundred tabs. And they at the end of the day know if they push the wrong button, it’s their fault. But relying on a new technology, relying on a new way of doing things, I think can really help them … It can feel threatening. At least that’s what I’m finding, which it’s very different than-

Rob Brown (42:11):

That speaks to the risk averse nature of accounting. They have to get it right. It’s a binary right or wrong often. Some gray areas. But yeah, they hold the line. The buck stops with them. Take off outsourcing for instance. We hear that this is a solution for accounting firms and really any businesses that want to lock into a global workforce. If you go down the outsourcing offshoring route as a representative of your accounting firm or your organization and you get that wrong, you go to the Philippines instead of India or you go to South Africa instead of wherever else, there’s a lot of risk on you. Their reputation is at stake. Same with AI. You want to bring an AI tool into your firm, you better be absolutely 100% sure you’ve got the right, otherwise you’re fear is messing it up. So any change, any adoption, any tech solution, any hire comes with liability if you’re not careful. And you can do due diligence until you’re blue in the face, we still get it wrong don’t we? And accountants are, you’re right, very fearful of that, which is why they try and play it safe.

Randy Wootton (43:26):

Yeah. And I think to your point, I think one of the big challenges with AI right now and ChatGPT in particular is the potential hallucination. And you can’t have a hallucination on your financial statements.

Rob Brown (43:38):

Well, there’s the data security as well, Randy isn’t there? What you put out there in the public domain that has repercussions.

Randy Wootton (43:46):

I think a lot of people are actually working towards with company confidential information and having the AI powered within their own system, trained on their own corpus of data. We for example, have 2300 customers. We have about $15 billion of billing and invoicing data going across the system. And as we’re looking to incorporate AI into our own systems and models, it’s using the model within our constraints. So I think that’s one of the things all those providers are working on. They benefit from having aggregated data, but they know that they need to take models in specific situations, have them custom-built. That’s what I did at Rocket Fuel. We had 25 models, but it also was $250 million of investment to do that and took 30 data engineers and data scientists to build it.


Well, Rob, we’re coming up on time. Sorry. I meant to tell you this at the beginning. I have a speed round. So the speed round are three things. One, do you have a favorite book? What’s your favorite book? Other than yours, which I didn’t know you had written. I’m going to take a look at it. I think it’s great. Build Your Reputation. So it has to be something other than yours. A favorite metric. So what metric when you are working with business in particular or accountants that you think they need to focus on more than anything else. And the third one, to your point around strategic partnerships and finding people who have relationships. Who’s your favorite influencer? Like on LinkedIn, who are you following? Who do you look at when they make a social post? What comes to mind? You can pick one or all three of those? What would you like to start with?

Rob Brown (45:15):

Let’s start with the book that’s had the biggest influence in my life, which is-

Randy Wootton (45:20):


Rob Brown (45:21):

And I’ll confess, I don’t follow what this guy says like I should, but it’s Cal Newport’s, Deep Work.

Randy Wootton (45:29):

Deep Work. Okay. What’s the premise.

Rob Brown (45:31):

By Calvin Newport. He’s a computer scientist and he’s written a lot of great books. He has a podcast as well. I don’t listen to the podcast because I don’t have enough time to listen to many podcasts. I was really profoundly hit when I discovered that his book, the ultimate message is the world will belong to those people that can focus for an extended length of time on very meaningful work.

Randy Wootton (45:59):

Hence Deep Work.

Rob Brown (46:00):

Hence Deep Work. We’re so fragmented in our attention, we’re so easily distracted, we’re so quickly interrupted and developing the muscle strength, the focus to stay with it on deep work and block out distractions. That’s what Deep Work is about. So I tried to encompass that and sticking with task. It’s not easy. In the social media world and everything we’re looking at. So I’d put that.


In terms of metric I am in a stage in my life having had a bleed on the brain, a brain hemorrhage where I count my blessings. Now, this is not going to be a counseling speak I’m giving you right here, Randy, but I’m still grateful for many things. We’re all contending with something. We’ve all been through stuff or we’re going through stuff. So I keep a little journal of good things that happen in my life or stuff that I’m grateful for.

Randy Wootton (46:58):

Oh, that’s great.

Rob Brown (46:58):

I’m not allowed to drive. I take medication for epilepsy after my stroke. But I’m so thankful that I’m still in the game and can still do some things. So I have a little journal where I log things that I otherwise would forget. I’ll stick this podcast in it Randy, because it’s been fun. And another thing, things that happen with your kids and your clients, had a good day at work because, and went for a lovely walk or this happened or whatever it is. So that would be a metric. Is to just be a little bit more conscious of the good things that you’re grateful for.

Randy Wootton (47:31):

Being grateful. That’s a great way to have that … Be ever-present for the grace around us and the joy of living and just, it’s better to be vertical than otherwise.

Rob Brown (47:45):

Absolutely right. Growing old is not something that everyone gets to do.

Randy Wootton (47:53):

Yeah. That’s right.

Rob Brown (47:53):

God promises tomorrow to nobody. I’m a committed Christian, but you get that sentiment there that we don’t know what’s coming up. So let’s not let tomorrow’s worries rob us of today’s joys. You know that phrase.

Randy Wootton (48:06):

Oh, I love that. I love that. All right, well then influencers. You clearly have covered a lot of territory, so I’m not going to limit you to accounting influencer, but who are you following on LinkedIn that you think is writing good stuff?

Rob Brown (48:19):

You know what, Randy, this is going to surprise you, but none.

Randy Wootton (48:25):

Really. Okay.

Rob Brown (48:27):

There’s so many different ways to define an influencer. There’s a lot of people that make a lot of noise on social media and they look popular and they have thousands of followers, but their content is lousy. It’s lame. It’s unoriginal. It’s not innovative. They’ve regurgitated it from other people or they’ve said the same thing for years. So there’s a lot of that. But you would look at them and think they’re influencers. There’s also a lot of people that blow hot and cold. They get an idea and they run with it. And then for six, 12 months you don’t see anything of them. So I measure influence by relationships rather than noise and social media metrics.


I’ll give you an example of somebody that’s got a really good reputation in the accounting world that is super well respected. He’s been around a long time. He doesn’t put out a lot of stuff that you would see him as influential. He’s called Randy Johnston of K2E, and then MGI. He’s written most of the software for most of the accounting firms in the US. He’s dealt with most of the top 100 firms. Randy Johnston. High integrity. Everything he says has merit and has weight and has gravitas. He’s got a really wonderful way about him. Now, you wouldn’t necessarily view him as an influencer because he does a lot behind the scenes, but he powers a lot of engines, if you like.

Randy Wootton (49:58):

That’s making impact. So influence versus impact. Who’s actually impacting firms and people and how they think about things and do business?

Rob Brown (50:05):

That’s a good way of putting it. Who’s moving the dial? Because influencers generally do not change behaviors. Influencers don’t change opinions. They should do, but they don’t. Influencers tend to just echo what’s going on out there or their comment on what’s going on out there. And they’re not true influencers in that they’re making think, Hey, that’s different or that really makes sense. So there isn’t one.


There are little quotes here and there that you hear from different people and you think, I like that quote. Just like if I asked you to put together your top 10 songs, they wouldn’t be from one band or one artist. You’d like that song from that person and that song from that person, and that would give you your top 10. So there’s quotes, there’s thinking, there’s frameworks, there’s models, ideas I like from different people. But there’s no one that is really rocking my world to your point.

Randy Wootton (51:00):

Okay. Well, I love the distinction you’re making between influence and impact, and I think you’re probably right. I got caught up in the influencer game as well. In part because of what you were describing as your third way of getting to accounting firms is through strategic partnerships. But I think the distinction you’re making is around authentic relationships versus followers and people that are making an impact versus just providing influence. And that’s a really powerful one. So thank you.

Rob Brown (51:28):

Possibly. I heard a lovely phrase recently. What would you need to do in your life to have a crowded funeral?

Randy Wootton (51:36):

Yeah. Yeah.

Rob Brown (51:39):

That speaks to impact and influence doesn’t it? It speaks to what are people are going to be left with after you’ve gone? What do you leave-

Randy Wootton (51:47):

Yeah. And I think it speaks to how do you invest in authentic relationships? People will show up at your funeral if they feel like you valued them and have been a positive influence and made an impact in their lives. And that just may be, Hey, you’re a good person who shows up and makes their life better each and every day to your earlier point around what brings you joy.

Rob Brown (52:08):

Yeah. Well, that’s been a wonderful conversation Randy.

Randy Wootton (52:14):

It has Rob. So thank you very much for your time. I wish you best of luck. If people are trying to find you, they can find you on LinkedIn. Also, your Accounting Influencer Roundtable is something that you’re hosting and facilitating. Again, I participated in one. I thought it was great. And as you say, hey, join the conversation and joining the conversation around building relationships, authentic relationships with people that are interested in this profession and where it’s going. So thanks for your time Rob.

Rob Brown (52:38):

[inaudible 00:52:38] for your audience, Randy. Accountinginfluencers.com is where that is at. The whole point of being relevant these days is being in the conversation. You don’t want to be on the outside of it looking in. You want to be in the middle of it letting people know what you’re doing, what your message is, what you’re thinking about. And this curiosity in the world where we do want to look over the garden walls of our neighbors and see what they’re planting and what they’re doing, or I want to look in Randy Wootton’s bait box to see what he’s using to catch this or Randy’s medicine cabinet to see what he’s taking for that. That’s where relationship-

Randy Wootton (53:12):

There’s a lot of high cholesterol, high blood pressure-

Rob Brown (53:14):

And there you go.

Randy Wootton (53:15):


Rob Brown (53:16):

There you go.

Randy Wootton (53:18):

Well, Rob, thank you sir.

Rob Brown (53:19):

Thanks Randy.