Strategy of Finance

• Transitioning from a traditional finance role to corporate finance can provide a broader perspective and operating experience.
• The cannabis industry is highly regulated at the state level, which presents unique challenges and opportunities for companies operating in this space.
• Investor sentiment towards the cannabis industry has evolved over time, with traditional investors now showing interest and conducting due diligence.
• Metrics such as gross profit, payback, average revenue per customer, LTV to CAC, and churn can vary across companies depending on their business models and target markets. The role of the CFO has evolved to be more forward-thinking and strategic, acting as the nexus point between a company's strategy, capital investment, operations, and people.
• Advanced technology and data analytics have transformed the finance function, enabling CFOs to gain insights and make informed decisions.
• Fostering a culture of innovation and accountability within a team requires investing in people's development, encouraging problem-solving, and aligning decisions with the company's overall business objectives.
• In the first 100 days as a CFO, it is important to understand the business, build relationships with colleagues, prioritize key issues, and communicate a roadmap for the finance function.
• Young professionals aspiring to become CFOs should focus on developing a solid grounding in finance fundamentals, understanding the company's strategy, and how it operationally meets its goals.

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“My main interest area was really just understanding all the different challenges companies were going through.”

“If you ultimately want to influence the strategy of business and you want to influence the outcomes of the company then going to have to get into the operations, you going to have to understand the strategy, you have to go down into the model, you have to go down into how you actually affect change and decision making into the company.”

“Putting yourself outside of your comfort zone as many times as you can in the first five years of your career is tremendously valuable.”

“(Understand) how much trust you can put in people and what your role is in making sure that your team succeeds.”

“(Definition of Modern CFO) to really being the nexus point between the company strategy, it’s capital investments, as well as operations, and people.”

“Ultimately, the role of the CFO is making sure the company can see around the corner in all aspects.”

“Once the capital is gone, it doesn’t come back.”

“I think of it as a pyramid in that at the very bottom layer, you have to have the finance operations. If you don't have that, you're not going to have the accounting. If you don't have the accounting, you're not going to have data integrity. And if you don't have data integrity, you're not going to be able to do financial planning. And if you don't have the financial planning, and then above the financial planning is analytics and insights. So, you really have to create a team and navigate systems and data that can meet the maturity of your business.”

“It's not about raw data. It's about insights. So, you have to start with what insights you need to run the business one year forward or a little bit more, again depending on your scale, and work backward into what systems, what processes, and what team structure would best help you get to that state.”

“You want to understand as quickly as you can, what you can do to help the company see around the corner.”

Where to find David Yan:

LinkedIn: https://www.linkedin.com/in/david-yan-b597b11/

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Where to find Treez:

In an era where the term "strategy" is ubiquitously tossed around in corporate corridors, its true essence often remains shrouded in ambiguity. Alex, a seasoned strategist, sheds light on the multifaceted nature of strategy, debunking the myth that it’s all about lofty titles without the grind. This comprehensive guide provides insights from Alex's masterclass on strategy, navigating through the misconceptions, the integral role of various teams, and the intricacies of crafting actionable strategies. Basically, you'll get the framework to the eternal question - how to create a business strategy?

The Misunderstood Glamour of Strategy

Strategy, often perceived as a glamorous echelon reserved for the elite few, is, in reality, a domain fraught with misconceptions. Alex humorously notes the allure of incorporating "strategy" into one’s title, highlighting a widespread corporate fascination. However, he argues this dilutes the concept, inadvertently suggesting that strategic thinking is exclusive to certain roles. This could not be further from the truth. Strategy should permeate every facet of an organization, from finance to HR, necessitating a holistic and inclusive approach.

Strategy Across the Board: A Unified Approach

The conversation with a CFO revealed an insightful perspective: every team within an organization should imbue their operations with strategic thinking. This is not to say that every department needs to operate in isolation under the "strategy" banner but rather, strategic finance and other functions should collaborate closely, ensuring that every action aligns with the broader business objectives.

Alex emphasizes that true strategy intertwines operations, finance, and strategic planning, far from the hands-off approach some might assume. He shares examples from his own career where the most impactful strategic roles involved a deep engagement with the operational and financial aspects of the business, contrary to the misconception of strategy as a purely abstract exercise.

Good Strategy vs. Bad Strategy: The Differentiator

At its core, the efficacy of a strategy hinges on its ability to propel the business forward. Alex outlines the attributes of a well-formed strategy—comprehensive, actionable, and communicable. He stresses the importance of operational integration, where vague directives like "Go big on enterprise" must be dissected into tangible action plans detailing the what, how, and when.

The Strategic Role of Finance

Alex underlines the pivotal role finance teams play in bridging strategy with operational reality. This synergy between finance and product development underscores the transformative impact of strategic planning when executed with a nuanced understanding of the business’s core offerings.

Decentralizing Strategy: A Collective Endeavor

Contrary to the notion of centralizing strategy within a dedicated team, Alex advocates for a dispersed approach, encouraging strategic thinking across all levels and departments. He shares insights from Stripe, where a senior leader played the role of a "synthesizer," harmonizing diverse strategic inputs across the company. This exemplifies the value of having strategic liaisons embedded within various functions, fostering a cohesive strategic vision that is reflective of the entire organization’s insights and expertise.

Strategy in the Age of Data and Technology

In the contemporary business landscape, data and technology play a crucial role in shaping strategy. Alex warns against the pitfalls of basing strategic decisions on anecdotal evidence or hearsay. Instead, he advocates for a data-driven approach, leveraging technology to gather comprehensive insights that inform well-rounded strategies. Moreover, he encourages a first-principles mindset, urging strategists to question the underlying assumptions and innovate beyond mere replication of competitors' tactics.

Conclusion: Strategy as a Collective Art

Alex's masterclass demystifies strategy, portraying it not as a realm reserved for the select few but as a collective endeavor that demands involvement, critical thinking, and creativity across the organization. Strategy, as unveiled through Alex's insights, is a dynamic and inclusive process, one that thrives on diversity, collaboration, and an unwavering focus on the company's overarching goals.

Reba distinguishes between direct and indirect procurement, outlining the unique challenges and strategies each entails, particularly in managing software contracts. She emphasizes the necessity of understanding and planning for demand, alongside the crucial task of setting baseline prices to secure savings.

Further, Reba touches on the broader role of procurement within both manufacturing and tech industries, underscoring its strategic placement under operations in manufacturing firms and under the CFO in tech companies.

Additionally, Reba highlights the focus on security and scalability, especially in tech procurement, reflecting on the significance of these elements in today's industry. She also discusses the evolution of procurement tools and their value in facilitating the work of different teams, advocating for the integration of new technologies to streamline processes.

Moreover, Reba speaks to the personal side of her career, sharing insights on building a positive reputation, transitioning from a gatekeeper mindset to one that's more collaborative and aligned with business goals. She offers career advice and shares her ambitions, looking towards the future of procurement with an eye on innovation and efficiency.

Reba concludes by emphasizing the need for the procurement function to evolve alongside the industry, incorporating more advanced tools and strategies to address the complex challenges of today's business environment. This includes a strong focus on security, scalability, and aligning procurement strategy with the overarching goals of the organization, highlighting the transformative potential of procurement in both manufacturing and tech sectors.

Takeaways

Procurement involves managing contracts, spend, and vendor relationships for a company's non-salary expenses.

Building relationships with stakeholders and understanding their needs is crucial for procurement success.

Demand planning and setting baseline prices are important strategies for achieving savings in procurement.

In tech procurement, security and scalability are key considerations, while in manufacturing, savings and project-based initiatives take precedence.

Managing software contracts requires careful negotiation, demand planning, and consideration of non-financial elements such as SLAs and security measures.

Procurement is best placed under operations in manufacturing and under the CFO in tech companies.

The lack of comprehensive tools is a major challenge in procurement.

Automation and AI are key technologies that will transform procurement processes.

Supplier collaboration and relationship building are critical in manufacturing, while in tech, procurement is often brought in only when something goes wrong.

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Quotes

“Procurement, by nature, is a function of functions.”

“Procurement is sales without the quota.”

“The more you absorb, especially when you're younger in your career, the more you'll be able to understand and piece things together.”

“The best thing to do when you come in is just absorb, ask questions, learn about other functions because your job as procurement is to make sure that everybody else's functions are basically happening and being protected.”

“Zero dollar touch means that we don't have a high threshold for spend at the company that doesn't go through procurement.”

“If you're an inquisitive person, it's a great place to be because you kind of know everything about everything that's going on.”

“Procurement handles contracting and spend and vendor sort of management at the strategic level for all the dollars that the company spends that's not on salary.”

“So I think that's one, I think, unique thing for procurement leaders. You really have to be a good relationship builder internally and externally.”

“I try never to have a new vendor with more than a one-year deal.”

“The first deal you do set your baseline for all renewals. And I think that a lot of people, especially in a software deal, don't understand that.”

“Procurement and sales actually have the same goal. We wanna close the deal as fast as possible.”

“The worst case scenario for a software deal is that your sales rep has forecasted a number that's just well bey...

Takeaways

Profit should be a driver in business, not an afterthought

Allocate money for profit, owner's pay, taxes, and operating expenses

Measure and track the return on investments - Understand the cash flow implications of scaling a business Focus on profit from the start and manage cash flow effectively

Make hard choices and let go of employees or projects that are not driving profit

Apply profit first principles in different business situations, including during market dislocations or crises

Explore the intersection of spirituality and business and live in alignment with one's beliefs and values

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Quotes

“I think in many cultures, people don't talk about money. It's a taboo subject. People don't ask questions about money.”

“I was shocked to learn that business owners were really bad with money.”

“I don't believe in grinding it out.”

“As a kid, I just knew I wanted to be wealthy. And so I would read and learn and figure stuff out.”

“Why don't we do sales minus profit equals expenses. Now, profit is the driver and we constrain our expenses.”

"Profit First makes sure that the taxes are there, the profits there, your pay is there, and that you're appropriately taking the right amount of money out of the company."

"Growth requires cash. And if you don't know how much cash you need to grow your business, you can grow your business and quadruple it and run out of cash."

“Most bookkeeping is not up to date. It's always behind... So this bank account shows you how much cash came in. And at the end of the day, that's what matters.”

“Business owners are resourceful. The problem is they're also lazy.”

“The problem is the P&L doesn't equal cash.”

“Wealth is built on the balance sheet and it's an area nobody talks about.”

“Hoping and dreaming are not profit levers.”

“One of the top reasons for bankruptcy is scaling and growth.”

“As long as cash is flowing, you can keep going.”

“Everyone wants complicated solutions... Just do simple.”

“We do a lot with marketing because it is the number one wasted area of money.”

“Don't talk, do. Show me your actions.”

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Where to find Rocky Lalvani:

Website 1: https://profitcomesfirst.com/

Website 2: https://richersoul.com/

LinkedIn: https://www.linkedin.com/in/rocky-lalvani/

X: https://twitter.com/rockylalvani

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Where to find Rohit:

LinkedIn: https://www.linkedin.com/in/rohitagarwal001/

X: https://x.com/podcast_SoF

Email: [email protected]

Sponsor:

This show is brought to you by Krayo - the Unified Operating System for Corporate Spend. Krayo is bringing together the whole journey of Corp Spend - Buy > Pay > Manage - into one single platform in an intelligence-first and automated design. We promise to make you more profitable. Visit at https://www.krayo.io/