238. CFO Stories | Cashflow, Credibility & Creative CFOs: Scaling Startups with Andrew Brummer

238. CFO Stories | Cashflow, Credibility & Creative CFOs: Scaling Startups with Andrew Brummer

Hannah Munro  0:48

So, hello everybody, and welcome to this episode of CFO 4.0 I'm your host, Hannah Munro, and with I can't even get my words out this morning. This is a great start to a podcast. And with me today is Andrew Brummer. So, Andrew is the CFO of distributed. So, welcome Andrew, fabulous to have you on the podcast. Delighted to be here. Thank you very much for having me. Yeah, that's a bit of an inauspicious start, isn't it, stumbling over my words my own name, but hopefully you will get better, guys, I promise. So, So, Andrew, let's start with the hopefully the easy question, what was your journey to CFO?

Andrew Brummer  1:24

So, yeah, I started as well. I didn't start off in account for tea at all. I started my career in event management and did that for three or four years. Even in my wedding speech, I said, I'm never going to be an accountant. And then, having done event management for three or four years, decided that actually accountancy offered me a pathway to sort of the things that I was interested in doing. By that point, the bigger accountancy firms were not particularly interested in me. I was, I think 2627 they want people fresh out of out of university. So, I went to a smaller firm, the top 50 firm, Aaron Berlin Gardner. Trained there as a chartered accountant. And while I was there, got some I was parachuted into one of their clients, one of their clients, the Financial Controller left one Christmas, didn't come back, and left the books in a bit of a mess. And I was parachuted in there. Was there for about six weeks. Really enjoyed my time there, and thought once I've qualified, much rather go down the commercial route than going that staying in in practice. So, then took a couple of jobs in one in a startup business media audits, which was owned by Barclays ventures, private equity backed, helped them get through a successful sale process. So, that was due diligence on that. So, that was that's a great start. Then went to a sugar brokerage in the city, as their financial controller was there for three years, and then took my first number one job in finance at fitbug, which was really the first company in the wearable technology space. So, it was aiming listed company. So, it's in the space that's dominated now by bit. And I was there for six years, but that was my, that was my first foray into being a CFO. So, that's how I got, got to the CFO seats,

Hannah Munro  3:43

and what are you most proud of as a as a CFO, what is your, sort of, your biggest achievement? Do you think?

Andrew Brummer  3:50

Oh, that is a great question. I think, I think a couple of things have been, the businesses that I have tended to bean have been sort of early stage and growth businesses. So, a key part of that been raising finances to grow those businesses. So, it's really been the lifeblood of those businesses. And probably in my career, I've raised in excess of 75 million pounds of debt and equity finance to help those businesses and promote those business businesses to grow. So, I think that's probably the laying the foundations for future growth have probably been, is the thing I'm most proud of. Obviously, there's lots of things that come off of that and build on top of that in terms of getting involved in strategy and pricing and all sorts of things that the CFO. But I think, fundamentally, I think that setting the platform for future growth is probably the thing that that I'm most proud of.

Hannah Munro  4:58

And I think every CFO. Has a particular area or skill set. I know we all want to be perfect at everything, but I think we all, everyone has a particular area they're really good at. I've got a lot of experience in what's yours, so,

Andrew Brummer  5:13

it's probably not a good thing to say. But although I've raised lots of capital for growth, a number of the companies that I've been in early stage have potentially running shorter funds as well. So, a lot of work around cash flow management, cash flow forecasting, but also looking at a lot of work on sort of reducing costs, doing your sort of overview of the business, see what's performing well, what's not performing well, and also, yes, getting those businesses through those difficult times. So, I've had lots of difficult experiences, been in companies, in difficult positions, and to get them out of those positions. And as I say, present that platform for future growth is probably where my sweet spot lies. So, yeah, it they something they've gone on to enjoy growth, but I definitely seen some, a number of difficult situations, and work, worked the companies through those with, obviously, with the help of investors and other senior leaders.

Hannah Munro  6:26

That's an interesting, you know, area to explore is, I don't think we talk about enough some of those cash flow challenges, and how we look at that. So, you know, when you've gone into organisations where they face those cash flow difficulties. How? Where do you start?

Andrew Brummer  6:46

So, I think you start with what may seem the most straightforward things, but making sure that, from a cash collection point of view, that that process is as tight as it possibly can be. So,, in terms of invoicing, making sure invoices are going out on time they're correct, but making sure that they they're being sent to the right people, making sure that everything to do with the invoices is right, so, that when they receive the customer is at least in the position to pay them if they need purchase orders, make sure, make sure all those details are correct. I think that's the first thing. Then it's ensuring that there is a process for collecting those debts. So, whether it is and it varies from business to business, but checking that they the customers, received the invoices after two weeks, or whatever the correct period is, depending on the day, the number of days they've got to pay the invoice, but making sure that they've received their Checking that everything is in all days. There's any questions about it, just making sure, and then getting updates from them on payment dates. So, I think the first thing really is to look at the money coming in and making sure you're doing everything you can to accelerate that process as far as possible. So, a good example is, in my current business, our debt to days were about 100 days before I joined, and we have gotten down to about 30 days. So, again, this is just through, yeah, but the business has needed it, so, we have just been, and I've been supported by some fantastic people team, but it's really to make sure that we are on top of all the data issue, debt issues, making sure, as I say, the invoices go out on time. We're in regular communication with our customers, and if there are any problems that we are looking to resolve them. We even got one of our customers who, traditionally, we've been billing on so, they've been billing on 30-day terms, which is fine at the end of each month, but they actually agreed to for us to build them mid-month as well, so, we could invoice them 50% of the monthly invoice mid-month. So, we were, and we were able to collect the money much faster than that. So, it's just looking for greater solutions, and some customers might not mind. And for instance, we also have one of our other customers. We gave them a small like an invoice discount for them to make sure that they pay their invoices on time, but the value of the money to us in the bank was much greater than the small percentage we gave up. So, it's just looking at creative solutions to make sure that the cash is the cash is coming in as soon as possible. Uh, something that's on the on the on the cash collection side, and then you have the other side, which is a bit trickier. So, I think there's lots of things in relation to credit payments, so, it's priority. And I learned this very early in my in my first job, where media audits, where cash was short, and we also had to manage it internationally. We had offices in seven or eight territories, mainly across Europe, and some of those offices would have cash requirements at different times. So, it was about priority and different things. So, you have to find out what, the most important thing so, so, payroll contractors, HMRC, are things that are less flexible, potentially, than other things, but at the same point, also, again, it's about communicating, again, with your creditors. Don't just not pay them, if you can, at least tell them when you're going to do things while you're doing things, and you can stick to your plans. Then generally, I have found that suppliers are very understanding when you have short term cash flow difficulties. I think if you if you go quiet on them, don’t tell them anything, and just don't pay them. That's when they escalate things and it becomes much more difficult. But they're that. They're part of your, your stakeholder group, so, you need to, you need to work with them. So,, so, working with them, we have been able to get out of some very difficult situations through, as I say, prioritising, and then negotiations, and then, I think the third thing to look at is, is look at the overall cost, base number of businesses I've been into, been in they we've had to, have to cost costs, and whether that is personnel costs, or whether that's looking at the overall infrastructure, whether that technology costs, legal costs, of course, there are all sorts of marketing costs. I know one of the business I was in, they were spending a huge amount of marketing each month, but they were doing some marketing. And actually, there were areas that geographical areas that that we couldn't service as a business, but they were still spending quite a lot of money advertising the zero. So, it's just looking at what the business needs. At various times, some part of things can't be changed, some and again, sometimes you can speak to suppliers, renegotiate contracts that there's a myriad of things that you can do in order to lessen the immediate burden. And some people might say that that pushes, that pushes the problem back, but, but in many startup businesses, that's what you need to do. It's a problem solved today. And if it's yes, it might be a problem in six months, but at least you've got six months to find new revenue. Do other things? Find your best, whatever the other answers are, but to buy time and cash is king in these startup businesses.

Hannah Munro  13:14

So, you've worked a lot with startups, right? You've taken them sort of on that journey. How do you go about thinking about how to build a finance function for the future. So, you know, when do you know when to bring a new resource? How do you think about scalability, those kind of things?

Andrew Brummer  13:33

So, I think many startups, when they when they're looking to build bring in a finance leader, or CFO, the finance function has often been lags behind the rest of the business. So, I've been into businesses where it's 20 million turnover business, so, they've grown the business quite, but they don't have a finance function. Then you just think, how do you survive this long? And they've been using like an outsourced accountant and that sort of thing. So, I've tried to work with the with the management, the rest of the management team, to become much more of a business partner. The finance function shouldn't just be about providing financial reporting, financial numbers. I mean, that's a key part of what they do, but it's adding much more value. So, again, it's not building an empire in a day. It's not looking to have five or six people bring them in immediately and say, this is my finance team. It's building small, agile teams, which you then add to as and when the business requirement so, need it. So, first thing is to understand whether you are able to do the basics in terms of the financial accounting and the reporting and making sure that that reporting is done in good timelines and that you're. Adding value to the reports that you're providing. Again, there's, it's no, it's not a huge value doing management reports which are received two three weeks after the month. Then, because they're it's old information, and you want to give them as current information as possible. I've also particularly found that having an FP and a function is it what that often that goes under the radar and to do the analysis that was required about how the business is performing in all sorts of different areas and adds a huge amount. So, that is a the if I ever sort of have to champion a particular resource or a particular area that the business doesn't have. That's often one where I will try and seek an additional resource. But again, it depends on, on, on the business. But I think an FPNA, you can add huge value and huge analysis, look at huge amounts of data and provide some really top-quality information that can help the business make much smarter decisions. So, if I can't give you a precise time, and this is when to do it like you get to this much turnover or this many, it's different from for each businesses, and generally, what I've done is relatively small teams and then added to them as and when it feels right for the business to it on its growth journey that it requires it, but, and I've done it the other way as well. So, I've started with much larger teams and sort of cut them down to two or three, because, again, the business may not require the board of level of detail, or the level of detail is probably the wrong word, but the probably doesn't need the amount of resources that they're dedicating. I think very much as finance in a startup, you feel you have to justify the cost to the business. Because I've been in situations where they've just said, oh, yeah, we think the finance department is costing too much and we're going to get rid of you. So, yeah, that was an interesting experience.

Hannah Munro  18:07

with the FPNA resource. That's an interesting spend point, even for a smaller business, because that can be quite an expensive resource, depending on how you approach it. How do you how do you justify the value of that? And in what instances have you found that really valuable?

Andrew Brummer  18:25

Yeah, so, yeah, that's a great, great question. I think, I think what you always have to do as a CFO with management is senior management, particularly I've worked with a number of founders and CEOs, is if you can convince them that the quality of the information, the speed of the information that they're going to get, is going to help them make better decisions, smarter decisions, quicker decisions, and be if you can prove things with data, I think that is really valuable to founders and to leaders, and I think, I think they can see, they can often see The benefit of that information on the business, because they often they are like all the founders I've worked with have been incredible people, and they're so, passionate about their businesses, but they often see them see the business in one or two particular ways, whatever has been worked successfully for them. So, they never necessarily see other ways of looking at it so, often, I think it's the job of a CFO to sort of bring up other approaches and to look at other ways of looking at things. And I think often an FP and a person do. Can, can help with that, with that analysis. Think, yes, they are. They're not necessarily the cheapest resource, but also great FPNA People can probably do things on Excel and all sorts of databases and things that I'm that are much quicker than me. So, they either probably pay me even my CFO salary to do all this data analysis, or they're going to or that, or we can look to bring a resource in who's going to be much more agile, much savvier, and sort of let me, as CFO, concentrate on other areas of the business where I can probably add much more value.

Hannah Munro  20:47

And talking about, sort of concentrating on other areas of the business. So, you mentioned, obviously, that you've worked in private equity. You've worked with different, I guess, business structures, shall we say, you know, yeah, just focusing on private equity piece, you know, how, how do you find working with private equity? What are the pros and cons? What's good, what's not, you know? What have you seen?

Andrew Brummer  21:12

Yeah, very much depends on the on the different, on the different organisations, and also, and also, sort of where you are in your journey and what their expectations have been. So, also sort of depends where, where I have come into the business, and the credibility I have brought to that stage. So, I think that, generally, I think that they want. They obviously want the businesses to succeed, but it, as I say, it sort of Can, can very much depend on what their experience of the business has been so, recent. One particular recent experience was that the business had been hitting it, it's, before my time, but consistently it hadn't been hitting the milestones, and the VC or the private equity backer had been sort of, they've been very much focusing on growth of the business and growth at all costs. And then it gets to a point where they actually say, well, oh, actually, it's not growth at all costs. Actually, we want a much more sustainable growth. And it's not necessarily something that we just want to keep throwing money at it. So, it's then some difficult decisions that have to be had internally to keep you on the journey path. So, it's but I think good VCs, good private equity companies, I think they tend to be very, very supportive. They understand some of the they they've seen it and done it as well in the same way that I've probably seen and seen it and done it a few times. So, generally, I found them to be very supportive. And the understanding of some of the trials and tribulations that that startups go through. So, I think one of the other things is, is I've been in a couple of businesses which have sort of had to pivot as well in terms of their commercial structure. So, an early company I was in, as I said, was fitbug, which was a one of the first wearable technology companies, and it became much more difficult to compete against the likes of Fitbit or watch because obviously you have very, very well capitalised businesses that are in the same space, and It's just very difficult to compete. So, again, looking to find other solutions, and making sure that your backers, whether, as I say, whether BCP can understand that journey and support you in that and understand why you're making those decisions.

Hannah Munro  23:59

And do you find a massive difference in how the VC versus the PE world operated

Andrew Brummer  24:09

slightly they certainly have slightly different they potentially have different timeframes and different interests. So, I found PE backers have been much more generally supportive, and not that VCs haven't been, but much more, potentially, much a bit more patient. And again, it sort of depends on where they are in their own journey as well, but that's been my experience so, far.

Hannah Munro  24:46

And I like that term. They're a little bit more patient, not a term you would normally associate with PE but it's a good so, that's an interesting piece, and obviously you've. Worked with, you know, businesses at the early stage. How did you, I guess, manage the conversation around, like we want to grow and want to grow fast, but maintaining, I guess, this the getting the right speed of an organisation and making sure finance can match it. So, you know, how did you think about speed of growth, and how did you build forecasts and models that are actually achievable versus something that's a bit pie in the sky, one

Andrew Brummer  25:31

of the great, one of the great difficulties of being a CFO in a in an early state, a relatively early-stage business, because, yes, as you say, anyone, not anyone. But it's relatively easy to build a model saying you're going to go from 2010, to whatever, whatever the figure, 10, 2050, 100 million in four years. And it's, you're going to get this many clients. So, it's, I think you have to build up credibility with the backers, and I think you have to, I mean, the way I do it is it's no point finance, just building a model, and saying to everybody else in the organisation, here's my model. Have you got any comments? I think it has to be a much more collaborative efforts by the whole team. So, generally, I will start off potentially with the CEO to get an overall impression and maybe to understand sort of what he sees the numbers are and then speak to the individual heads of departments. So, whether that's so, that would be a chief revenue officer, what is a realistic set like, how you like, how's that made up? How you it's not just saying it's going to go from this to this. It's how it's going to go to this. What's, what are the different metrics within that? So, how many new customers are you going to get? How many customers are you going to lose over the period? What size of the customer, looking at all those different things, which also means the model is much more flexible, and you can change aspects of it, and that will sort of change you. I think if you just say it's going to go from this to this, it has to be much more detail in the same with things like marketing technology is like, okay, sales are saying this, you're going to need to get this many clients, how many? So, it's a much more involved process to everybody in management. It's not, I don't think it should just be looked at. Is finance is building a model. It has to be. Everybody in the organisation is brought into to a model and part of that model is then, well, if we can grow at this speed, and that is what we need, and how do we then grow teams? It's not just the finance teams; it's teams throughout the business. When do you need to bring on additional senior resources? How many there's, there's probably there's hundreds of questions about, about the about the team and functions in the business, and how you're going to do it. So, yeah, I don't think it's just a question about building up the finance function, or when you need extra resources, it's, it's resources throughout the business.

Hannah Munro  28:18

I think that's a really good point. I think sometimes, you know, we can just throw numbers on a spreadsheet without actually digging into how you know, and validating the numbers that that go underneath it, and playing the what if scenarios as it were

Andrew Brummer  28:33

correct. Yes, yeah. So, when I build models, I build some flexibility that people then can change various numbers, and obviously that will then impact the numbers throughout. So, if, if you're going to say you're going to get three big clients one year, or if it's five big clients, and it makes a huge number, a huge difference to the overall numbers, and that will impact everything throughout, throughout the spreadsheet. And if you can follow it, if the whole model follows through, and that's why I say that. Going back to your original question, if you can get good FBA person, they are much better financial models than I am, although I have done my fair share over time,

Hannah Munro  29:20

absolutely I'm starting to see the value of that FP and a person emerge from this conversation. So, we've talked a lot about, obviously, the joys of working in a small business, how to build it for growth and how to take forward. But when you look back on your career as the CFO, what was your biggest challenge?

Andrew Brummer  29:41

There's that's essentially thinking about this before we started, before we started just thinking, oh, there were that might be like that. That's the sort of question that I would ask someone I was having a conversation with about this. So, I think I. Thought of, I think two or three particular examples. I think one, I was in a business where the CEO had many outstanding qualities, that the person had raised a huge amount of capital for the business. Managed the board brilliantly, very passionate about the business, but I felt when I came in as a finance person, that they didn't necessarily share all the information with me, and that I found really, I think if you're going to go into a business as the main finance person. You either have the whole picture, or it becomes very it becomes almost impossible. So, so, the only decision then you can have is help them, which I did, and then if that, if it doesn't, if you don't feel things change, then you move on. So, I was there for just over a year because I just didn't feel that I had the sort of the full picture. And I just think you can't make informed finance decisions if you don't have the full picture, because it's just impossible. I think another example, as I said, I've worked with many passionate founders, and sometimes, as I said, sometimes they have a particular vision for the business. And I'm not saying they're not, not saying that's wrong, but as I say, I think part of the job as CFO is to is to provide an alternative view of what may be, or looking at other solutions. So, I remember particular conversations one of my businesses where the CFO, sorry, the founder was, was particularly on, particularly set, on one particular approach, and was very passionate about it, and I didn't feel it was necessarily the right approach. But I can't just there's no value in me arguing with it. You have to provide them data and rationale. So, I went away and tried to prove it through, through that way, rather than, as I say, I'm not going to compete. I shouldn't be able to compete with their passion, but I think with my analysis, and as long as I'm all headed remain calm under pressure, I think that's what they want to see in a CFO. So, I I've had some situations where through that, I've then been able to have conversations, whether my way, at least, you can have a meaningful conversation. So, I think that that's definitely been, been one of the challenges throughout my career, is to is to work with CEOs, founders who are very passionate, but just look at alternative ways of looking at some of the problems and issues facing the business.

Hannah Munro  33:05

Yeah, and I think most of us would agree that founders and owners like they've got to where they've got to, because they've had very strong views and passion, and they've just left, perhaps before they've looked how do you when they're bringing you in, they're obviously at a point where they need that extra pair of eyes looking over the precipice before they jump. How do you help a CEO, a founder, to kind of lean into your resource for that? Because, you know, they might have been if they've not had a CFO before, particularly, that might be a new piece for them. So, how do you approach that,

Andrew Brummer  33:42

yeah. So, normally I try and have sort of a sort of a 30-day plan, and then a sort of 100-day plan, just as a as a sort of a way of going into a business. So, always look for some if I don't know if they're called easy wins, but if there are things that you can improve quickly and provide, whether it's helping the profitability or the cash flow of the business, then then I think they can see straight away that you're adding some value to the business. So, if you can get some of those easy wins, please, please go ahead and chalk them off, because that, I think that that provides shows your value very early on. So, I think that's a really good, good start. And then I think once you've, once you've been able to do that, you can sort of put your imprint on other areas of the business. And again, being cool under pressure, calm analysis of situations showing where growth is possible, where savings can be made, where cash flow can improve, where time timelines can be shortened, or whatever, things and getting involved also in in also in sort of non-five. Natural areas of the business, which is also something that they may not have expected. So, I know somewhere very early on, I went in, and they didn't have any KPIs in the business. So, again, speaking to other senior stakeholders in the business, understanding what the key drivers for each of their departments were, and stepping out a series of KPI. So, it doesn't just have to be financial metrics. It can be a whole gamut of things in the in the business, which, which, and I think through that, you can show, show the value are providing.

Hannah Munro  35:40

And, and we've talked a lot, I think we started, actually the conversation with that concept of value and being more than that number cruncher, you know, bookkeeper, finance person. So, maybe it's my last question. We'll see how this one goes. It may not be my last, but how do you really make sure that in that CFO role, you're offering strategic value? So, you know, how do you get away from that perception of finance, from being a cost to more of an investment?

Andrew Brummer  36:15

That's good. So, I think, I think you very much have to be a right-hand person to the CEO. There's no point being there's no point being a yes man. You have to be someone there who can sort of challenge them, but someone whose opinion they're going to value. If you say yes, the whole time, then you're not a that's not a CFOs role. Some people think the CFOs role to say no all the time. It's also not to say yes, all the time. It's to be a different a different voice in the room looking at sort of but looking at the sort of the financial impacts of the decision-making process. But I also think it's getting involved and not I've been in businesses where, as I said, we've had to pivot. So, it's coming up with you. As a finance person, I know not necessarily meant to be the most creative or have strengths in marketing, but I think you have to have strengths in all sorts of areas. So, whether it's marketing, product innovation. You should know the business better, almost better than anyone else. So, it's looking for new ideas in the business and analysing those ideas and suggesting those it's being an ideas generator as well as a number crunch. And I think that's how you can get involved in more strategic areas. It's coming up with solutions, not just It shouldn't just be saying, oh, we've got a problem here, or this is our numbers aren't looking good. It's coming up with solutions. And those don't have to be financial solutions. They can be, as I say, new products, new target audiences, target markets, whatever they are, just maybe something else that someone hasn't thought about. Because often people in the assessment in the startup world are very focused on this is, this is how we've done it. We'll look at creative solutions. So, it's to be creative, but not with the numbers, but in other ways as well.

Hannah Munro  38:22

Yeah, creative and accounting don't brilliant Well, this has been an absolute blast. Angie, thank you so, much for sharing your knowledge and insight with our audience and to our audience. If you've enjoyed this podcast, then, as always, please do leave us a review. Send me a message. If you've got any questions I should have asked Andrew. I'm always happy to follow up and come back to you. So, Andrew, you know final question for the day, if you had to give some advice to a new CFO as a new into the CFO role, or new into a new organisation. What would it be

Andrew Brummer  39:09

that's interesting? I would advise them before they go in. First of all, I would, I would always say to them, do some due diligence before you go into an organisation, so, you know exactly what you're getting into, if they've had a CFO before. Find out exactly why your predecessor has left and see if there are and make sure you get to see the numbers, their growth plans. Various other things before you, before you know it. It's definitely the right opportunity. Because I I've been to a couple of places where they promise you, they promise you the earth, and you go in and very soon it's a very different, different picture. So, the first thing I would say is whatever, in terms of. Numbers forecast, if they've got things that you can see and ask them questions about those, those forecasting about those numbers. And have you what customers have you secured? And various things be the exact thing that you should be doing when you're CFO. Don't be afraid to do it before you're the CFO, because I think they would potentially that. They would potentially value that as well. Once you're in the organisation, I would make it your point to make sure that you understand the product fully and that you meet people throughout the organisation, at different departments, different levels. So, I would spend as much time as you can getting really under the skin of the business, to understand what each of the different departments do, what their strengths weaknesses are, identify areas where, where you can add value. And as I say, if you can get some of those easy wins in the first 3050, day, whatever it is, then immediately the organisation will see your value, and obviously from that, from that starting point, you'll be able to hopefully grow and become very successful, and the company will grow alongside you

Hannah Munro  41:17

amazing. Well, thank you for that brilliant piece of multiple pieces of advice. Actually, I will say, Andrew, to finish our podcast. If people want to know more about you, about your organisation, where is the best place to learn more?

Andrew Brummer  41:31

So, just about me. I'm on LinkedIn, so, you can just find out more about me there. And if you want to know more about distributed in distributed, it's on the website, distributed.com and, yeah, you can follow us there and follow our journey.

Hannah Munro  41:51

Fantastic. Well, thank you so, much, Andrew. And of course, we'll pop all of those links into the podcast and show notes. Thank you to Andrew for sharing his story and thank you to our listeners for joining us on The CFO 4.0 podcast.