My career as a finance executive in both biotech and medtech Life Sciences companies has included many assignments where growth was imperative, despite prevailing countercurrents in the market and the challenges this imposed internally:
- At Lipid Sciences, a privately held biotechnology company pursuing HDL therapies for cardiac and viral applications, I needed to get creative to raise the capital we needed for growth given the tight capital markets following the dotcom bust. In 2001, we were able to successfully complete a reverse merger between Lipid Sciences and NZ Corporation, the oldest company traded on the American Stock Exchange.
- At Ventus Medical, the developer of a single nightly-use disposable over-the-counter snoring device, our team successfully expanded our sales opportunity outside of the core sleep apnea market to take it from a gross loss to a 35% gross margin within 12 months (and on to a 60% gross margin within two years).
- At Cutera, I was a member of the core team launching the company’s first recurring-revenue device in a very capital-equipment-intensive business.
- And at Pulse Biosciences, I completed a $250M shelf registration, two oversubscribed Rights Offerings, a $50M Private Placement, and a $60M At-the-Market offering so the company was prepared for commercialization in the US, Canada, and the European Union.
Through these experiences, I have learned that, as a CFO, it is imperative that you play a pivotal role preparing a company for these strategic growth inflexion points.
My four recommendations when it comes to helping a company scale for growth are:
Build infrastructure thoughtfully.
Be strategic when making investment decisions.
Create incentives for engagement in growth initiatives.
Hold stakeholders accountable for meeting growth objectives.
Build Infrastructure Thoughtfully
In my experience, scaling for growth begins with developing the infrastructure, but I also believe that you need to be thoughtful about this. For example, I have created numerous financial models where there were none, adding value to the decision-making process. A good quality financial model with evidence-based assumptions and likely scenarios, often becomes my bible.
As a CFO, I also know that you must also, early on, evaluate the quality of all reporting mechanisms, processes and disciplines that are in place at a company. For example…Are reports timely in terms of helping to make better decisions and take necessary actions? If you don’t have a robust reporting solution in place, how can you analyze data and business trends? And, if your reports aren’t timely, you will never have the time to course correct if needed. Do you have the required disciplines and automated systems in place or is everything a manual process? Although it’s certainly not necessary for an early commercial stage company to have a large ERP system, smaller companies can design similar processes and controls using smaller tools. An abundance of manual processes creates inefficiencies and is prone to human error. You don’t want to find yourself in a situation where you have to hire more people just to process more paper. Look for ways to create efficiency. And as the business needs change, remember that business processes also need to change. Question why a process is in place and do not accept “because we’ve always done it that way” as a answer!
Be Strategic When Making Investment Decisions
Finally, a common mistake in a bullish high growth organization is to go too wide on people resources right out of the gate, hiring a large commercial field sales force and entering new territories before proving success in more narrowly focused territories. This can really show up in international expansions. I have seen first-hand the many challenges of expanding internationally, with each country bringing its own unique set of requirements. The administrative costs and efforts supporting international growth, I find, are often underestimated. Go deep before going wide.
Create Incentives for Cross-Company Engagement in Growth Initiatives
I also believe that as a CFO you must always push for, and practice, organizational engagement in growth initiatives. For example, the assumptions you use for your forecasts about competitors and market dynamics should begin with the relevant “experts”, the Sales and Marketing leaders. While it is often the CFO’s responsibility to temper the enthusiasm of the S&M team, both in terms of expected revenues and required expenses, it is important to involve key stakeholders in building evidence-based assumptions. I believe this collaboration between Finance and other functional areas is essential to successfully engaging business leaders in the building blocks for growth.
Hold Stakeholders Accountable for Meeting Growth Objectives
Finally, as CFO, it is paramount that you actively hold those responsible for generating growth accountable for their results. Accountability for accuracy of forecasts, spending to budgets, the timely execution of projects and of course for the final results in terms of growth KPIs (unit sales/revenues, market share, landing new accounts, etc.) themselves. There should be corresponding consequences for both failures to meet growth objectives as well as rewards for exceeding them. These should be clear and communicated, in advance, before day one of each growth initiative.
So to summarize, my advice for CEOs trying to scale for growth is to carefully build a solid infrastructure, make the right investment decisions, then hire and engage a talented team with the right skills and ability to scale, and finally, then hold them accountable.