Recessionary pressures bring all-time high demand for CFOs
During the pandemic – a time of great economic turbulence – chief financial officers (CFOs) largely served as technicians, rather than leaders in crisis. Claire Trachet, a serving CFO and CEO/founder of leading tech business advisory, Trachet, says CFOs today are the most crucial element for businesses to successfully navigate current market conditions – something many tech scaleups have been forced to understand. Serving as testament to this, CFO appointments are up by a third across Europe, Africa, and the Middle East since this time last year, according to executive-search firm Spencer Stuart.
As last year’s steep drop in tech valuations – triggered by inflation and high interest rates – marked an end to the era of cheap capital and finance, companies are now looking for more from their finance directors. Priorities have massively shifted for CFOs since the beginning of 2022, where the focus for scaling businesses largely relied on growth at all costs and vision statements.
Claire Trachet is currently acting as CFO of French cybersecurity company YesWeHack, following her tenure as CFO of cybersecurity company, Dathena, where she successfully sourced and completed their M&A with Proofpoint. Claire affirms the increased focus on defensive strategies is being driven by a sharp rise in the priority given to improving cash flow, meaning business models are increasingly embedded with detailed plans which will help drive tactical decisions.
Due to the highly agile nature of startups and scale ups, in the past, many have steered away from the same level of quality analysis seen in big corporations. However, this is evolving as detailed models become a key tool for visualisation, which if balanced properly in terms of time and effort, will be crucial for the next 18-24 months. Having a firm grip on cost control and cash accumulation should remain top balance sheet priorities over the coming year.
Finding the right candidate that will help an organisation adapt to a changing landscape is not easy, however there are some key traits which can help your organisation identify a versatile CFO within your budget.
Claire Trachet (CEO/Founder) highlights the importance of experience for CFOs and the shift in the current landscape after the pandemic: “In times of crisis, you need to lean on people who are experienced. You don’t have time to teach someone at the expense of your company, and you cannot be abundant with your time and resources.
“You need people who can get you where you need to be, quickly, someone who can anticipate the hurdles that will come as optionality begins to open up again. If you find someone that’s really ambitious but still rather early in their career or mid-career, you can combine them with an external or fractional CFO because they can be coached, however, without the latter this could prove challenging.
“Alternatively, we as a firm recommend building a strong accounting team in the company, and then hiring a CFO later. It’s better to have more experienced and expensive people on a short fractional basis, rather than someone who is laying the foundations at a very high cost.
“The landscape is evolving faster than anticipated, compared to a year and a half ago when the focus was on growth at all costs. Even though there were business plans, they weren’t super detailed and were not helping drive decisions like the big corporations were. At that time, we were offering the same level and quality of plans as big corporations, because even though scaleups and startups are smaller they can still benefit from these models.
“This kind of model is now fully accepted as a tool for growth and has become critical in helping discussions with the CEO and the board. The main commonality for CFOs between then and now is the time it takes in getting to the next phase. We’re still looking at 18-24 months as a common runway period towards an M&A or funding. The science of that outlook has not changed, if you look further it’s too much, any closer and you won’t have enough time to get there. It’s still 18-24 months down the line, and it’s still about the cash in the end. It’s about how fast you’ll burn the cash and how risky the plan is to get you there.“
