All the good reasonsJan 01, 2022
"If I hire a CFO, they will make me do things I don’t wanna do, because they only care about the numbers.” This is a concern I hear quite often from founders.
That may be true, if you hire a bad one. But as a founder, you should remember that there are three good reasons to make any major decision.
First of all, emotional. Yes, this does belong here, right at the top of the list. Really wanting to do something is a perfectly valid reason on its own to go ahead and do it. If you’re a founder CEO with no other shareholders, and whatever it is you want to do is legal, go for it. Sure, you may want to think about how you communicate it to your employees, customers, or anyone else affected. But I’m guessing that one of the main reasons you became an entrepreneur is because you like going after what you want, so do it, and be suspicious of anyone telling you that you can’t, shouldn’t, or that you should do something else — including your CFO. (This gets more complicated if you have co-founders or other shareholders, and if you’re the CEO of a publicly traded company, pretty much nobody cares about what you want – so enjoy the fact that you probably aren’t.)
Then, strategic. There are lots of things that don’t make sense financially, or at least not in an obvious, immediately measurable way, but are of strategic importance and make a material positive difference to the big picture. Building a community or a brand (rather than focusing on revenue or profit growth alone), or launching a product that will open up new customer segments could be some of those examples. Just be careful not to fall into the much-frequented trap of “whatever makes zero sense financially, we’ll call strategic” – this is easily avoided by capping the number of “strategic” initiatives to something like three per year, and forcing yourself and your team to really choose. No, Dan, throwing a Bali retreat for all our customers is not a strategic initiative.
And finally, financial – reasons that are backed up by the numbers, along the lines of, “it will cost us $10M to successfully enter the US, but it will bring us $100M revenue in year one”. This one is pretty clear, I guess.
In an ideal world, all your major decisions would make sense on all three levels – or at least two of them. In practice, a lot of the time, something will have to give.
That said, it’s a good mental exercise to think about any big decisions in terms of whether they make emotional, strategic, and financial sense to you – and examining each of these perspectives honestly and separately, rather than, for example, really wanting to do something that makes zero sense financially, convincing yourself that you’re making a rational financial decision, and then being surprised when it spectacularly backfires. Much better to say “I really want to do X, it doesn’t seem to make sense financially, how can we make it work?
Love and cash flow,
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