Is Your CFO Driving ROI? Here’s How to Measure Their Success

By Bob Finley

“Price is what you pay; value is what you get.”

This is what a shrewd, successful, and sharp Board Member and colleague, Jon Hallett (who presently serves on a variety of tech and VC boards), shared at a Board Meeting I attended. This sentiment stayed with me, and I often refer to it as a cornerstone of my CFO partnerships.

Identifying the Right CFO for the Job

The reality is that the right CFO can create millions of dollars in value. The right CFO avoids costly mistakes that prevent massive losses, sometimes even preventing enterprises from going out of business.

CFOs aren’t pushing papers and pencils around the desk; we are directly responsible for revenue gains and must communicate our wins by frequently expressing our value.

Here’s a look at what CFOs should be prioritizing and the ways they create, or should be creating tangible value:

1. Capital: CFOs must ensure the enterprise has enough capital to achieve its goals. They know how long it takes to raise private debt or equity or to launch an IPO. They should understand all the moving parts and ensure, from the initial pitch deck to well-rehearsed presentations and the Data Room, that they are executed smoothly.
2. Strategic Financial Planning: By aligning the company’s financial strategy with its overall business goals, the CFO ensures that resources are deployed to high-ROI areas. This involves scenario planning, analyzing the financial implications of strategic decisions, and helping to shape company objectives.
3. Driving Growth and Mergers & Acquisitions (M&A): A CFO plays a vital role in growth initiatives through organic expansion, partnerships, M&A, or roll-ups. They assess potential acquisition targets, perform due diligence, and negotiate terms to maximize value.
4. Data-Driven Decision Making: Through financial analysis and forecasting, the CFO provides data-driven insights that guide leadership in making informed decisions. This includes financial modeling, identifying key performance indicators (KPIs), and developing dashboards to track financial performance. For example, the CFO, CMO, and CEO will discuss the minimum ROI necessary for the given marketing budget and activities. This empowers the CMO to test a variety of marketing initiatives, identify which channels outperform, and double down in those areas accordingly.
5. Operational Efficiency: The CFO identifies areas where the company can reduce costs, improve productivity, and streamline processes. They work with other departments to optimize budgets, minimize waste, and achieve operational efficiencies without compromising quality.
6. Technology Mix: The CFO can help identify if the company has the right systems to support near- and mid-term goals: CRM, ERP, billing, revenue recognition, and cap table management. These may sound mundane, but I have seen examples where a company’s growth outstrips its systems, and the results can be disastrous. A big topic for companies today, for example, is what AI applications should be adopted to streamline and automate lead generation and sales, customer service, and software coding.
7. Investor Relations: The CFO serves as a main point of contact for investors, communicating the company’s financial performance, strategic goals, and competitive position. They build confidence among investors, enhancing the company’s market valuation and making future financing easier.

Real-Life Examples of CFO ROI

Survival of the Enterprise 

Restructuring Debt
Years ago, I was CFO at a cybersecurity company. We missed our Q2 numbers, and I could see from our 13-week cash flow forecast that we would run out of cash before Labor Day. However, we had a big Q3 with a pipeline full of Federal contracts. The problem was our A/R line of credit was limited to $5MM.

I met with our lender and asked him to increase our line of A/R line of credit to $10MM, up from $5MM. Initially, he resisted, but I channeled his “profit motive” and offered that we would pay an “expansion fee” and a slightly higher interest rate in the month of September. He loved it, and we lived through that crisis and were acquired in a year for a nice sum.

Creative Spin-out
One of my Partners worked at a tech firm developing advanced optics used in specialized glasses. We needed to raise money, but the CEO set a pre-money valuation of 150x trailing 12-month revenue. Despite my Partners’ objective reasoning to lower the valuation to a level where the market would accept it, the CEO wouldn’t budge. No investors signed up, and the company was within six months of running out of cash.

My partner suggested splitting the company into two parts: the R&D business, which produced the optics, and a second new business (“Newco”), which is devoted to selling specialized glasses. He positioned Newco as a Series A company at an attractive valuation. Part of the deal was that Newco would pay the R&D company an IP licensing fee plus a shared services fee sufficient to fund both companies for two years. This effectively allowed the company to raise money at a lower pre-money valuation through Newco, and both averted disaster.

Avoiding Costly Mistakes 

Lack of M&A Preparation
A few years back, I called into a consumer company that had embarked on a dual-path financing (looking for new equity but being open to acquisition offers). They had hired an investment banker, but they had not done the necessary preparation for a financing or M&A. The CEO sent out the banker who arranged a meeting with a large public US motorcycle company. This company was on the hunt for acquisitions, and this would have been a match made in heaven.

The banker gave his verbal pitch, and the SVP of Corporate Development at the motorcycle company said, “Great. Can you give me access to the data room?” The banker stared blankly and said, “Ah… we don’t have one.” That deal evaporated. When I came in, creating a data room was my top priority.

Systems Unable to Scale
I worked for a client that grew so fast it outstripped its billing system. In the logistics/shipping industry, bills to customers contained numerous items that all needed to be scrupulously documented. The existing CFO had let the problem grow until there was $34MM in unbilled/overdue bills. The CEO hired me to assemble a SWAT team to fix the problem. It was a huge project, but the root cause was not ensuring critical systems would scale.

A Deadly Lease
I worked for a cannabis company with two divisions, one in Colorado and the other in California. Colorado was profitable, but California was bleeding cash. When I dug into the numbers, the root cause was a poorly negotiated lease.

I worked to renegotiate the lease, but the landlord would not budge, so I recommended to the CEO that we do an ABC (Assignment for the Benefit of Creditors) to eliminate the California lease. We succeeded, and the company returned to positive cash flow.

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In summary, CFOs are uniquely positioned to work with CEOs and Management teams to generate significant incremental value. Whether this involves ensuring the enterprise’s survival, ensuring that companies effectively scale, or avoiding disastrous mistakes, CFOs can and should create awareness of their ROI.

If you are a CEO, Board Member, or Investor reading this, you may find it helpful to recall the wise words in Janet Jackson’s hit song, “What have you done for me lately?” Don’t be afraid to ask your CFO that question! And if you’re a CFO not proactively calculating your value (and you should be), you need to have your answer with data points ready to share.

And if you are considering whether or not to hire FLG, remember the sentiment I shared earlier: “Price is what you pay; value is what you get.”