Peer Effect
As founders we’re sold a lie. The journey has to be tough. Isolation is normal. We have to choose between work and life. On this podcast, James Johnson, renowned coach to Series A+ founders, explores a better way. One where you build a great business and a great life.
It’s time to take back control. The answers are out there. Your peers have already uncovered hard-won insights, practical tips and people to look out for.
That’s the Peer Effect.
Tune in every Wednesday for 30 minutes that will inspire new thoughts, avoid expensive mistakes and keep you energised.
Peer Effect
Do you trust your CFO? with Dr. Veronika von Heise Rotenburg of Everphone
Veronika is the CFO of Everphone, a one-stop solution for corporate smartphones and tablets, with over 300 employees and over 350k devices out in the market.
Looking back at her journey, Veronika can confirm being a CFO is more than meets the eye.
Veronika opens up about the vital role of trust in her relationship with the founder of Everphone.
With her financial insights, see how marketing strategies and operations decisions can be informed and directed.
In this episode, Veronika and I take a deep dive into the world of a CFO and the value they bring beyond the balance sheet.
In today’s episode, we also talk about:
- The importance of involving the CFO in key business decisions
- When a founder should consider hiring a CFO
- The broader scope of a CFO’s responsibilities.
Veronika also shares some valuable advice for future founders.
Building and retaining the right team, fostering trust, and maximising resources are essential for success. Involving the CFO in key decisions can help founders make the best use of their resources and reach their goals.
This podcast episode is a testament to the unseen value of the CFO, providing a fresh perspective on the pivotal role they play in business success.
Tune in and listen to Veronika explain that CFOs are not just number crunchers, but strategic powerhouses shaping the success of businesses.
More from James:
Connect with James on LinkedIn or at peer-effect.com
So I'm delighted to welcome Veronica to the show today. She's the CFO of EverPhone. They've got 300 employees and they've got over 350,000 devices out in the market. Welcome, veronica.
Speaker 2:Thanks for having me.
Speaker 1:Well, I'm so happy to have you because I think we're going to start a new type of episode today. This is the first one. It's perspective, it's super exciting and I think what's going to come from you is around CFO and CEO relationship.
Speaker 2:I guess that's an interesting one, because oftentimes the CEO comes first and is the founder of the company, whereas they would start operations oftentimes with an accountant or a team lead finance, external accountants, whatever. So typically the CFO would come later to the company and obviously they would have to collaborate closely with the founder or CEO to make the business successful.
Speaker 1:Sophie. I mean, maybe a good place to start on this is maybe where you joined EverPhone, so that was an existing founder team. How did you guys meet?
Speaker 2:It was so. Everphone was founded 2016 and has been operating in its current business model since 2017. The first CFO stepped back as the company was growing heavily and they kind of got an interim CFO by one of their main companies.
Speaker 2:They had a lot of their major investors at that time who would obviously have to go back at some point in time, and that's when they wanted to hire an external CFO. It was actually a funny story because they asked me whether I could send over my CV as a kind of briefing for their headhunters and also ask me if I could recommend two or three headhunters that would be yeah, would appeal to CFOs of my type. Then they went on the search and I guess it didn't go too well because at a certain point in time the founder called and asked whether he couldn't have the original one. They dropped their chops back against.
Speaker 2:So that was me, and at that time my former company had made the exit. We had gone live with the business model of our acquirer in several countries and was, I guess, a good date to prepare the leave. Also, the founders were preparing their leave, so it was actually a very fitting offer. I guess we had one call. We met twice in Berlin just because I was there per chance. We had a long stroll in Gleispark and that was it.
Speaker 1:For a little founder who listened to the show. They may not have a CFO yet. They probably don't have a CFO yet, or they're new to having one. From your perspective, how important is that relationship between a CFO and CEO?
Speaker 2:Well, I'd say it depends a bit. So the first criterion I'd like to mention whether finance is critical to the business model or not. So let's say you're a dropshipping company, you're doing payments via a payment provider and you have an external auditor and accounting who's doing all that nitty-gritty accounting work, then probably you don't need a CFO, because if the CEO or the founder is doing fundraising, there's not much finance stuff to do. As a asset heavy model, like Everphone is, we're offering mobile devices as a service. So each of our 350,000 smartphones, tablets and laptops that we rent out to customers is debt financed. Raising that debt, being able to operate that debt structure, that's a key component of the business model, as it is for N-PAL, the energy provider, as it is for Grover, who are doing similar things like we do on the.
Speaker 2:B2C market, as it has been for my previous company who was doing CAR as a service. In those business models, as well as in fintech business models, it's vital to have someone who is owning the full finance value chain and not just doing like bread and butter accounting.
Speaker 1:But who is?
Speaker 2:doing debt raising, who is doing equity and debt reporting, who is building a scalable financial model and also a sound digital finance landscape on which all of those reporting requirements can be fulfilled without just adding capacity.
Speaker 1:And.
Speaker 2:I believe that that would be the lines alongside. I think is finance strategic to the business model, then you'd need a CFO rather sooner than later. Or is there someone else who can handle the operative part of finance just as well, be they internally or externally placed?
Speaker 1:Okay, so there's sort of a should even have a CFO ties into whether it's strategic or not for business model.
Speaker 2:The next question would be what is owned by the CFO? So in my case, I'm also owning legal people and culture and data. Obviously, someone needs to do that. But if you decide your people's business and you're having a CFO, or if you decide that data is so strategic in your company that you want to achieve information or achieve data officer but the remainder is just accounting, well then maybe you're well with a head of accounting or a head of finance and just let them do the groundwork and that works for your business.
Speaker 1:So actually you think that to be a true CFO it needs to be slightly wider than pure finance.
Speaker 2:I'd say yes, definitely, that's quite interesting. We need to be the one that are strategizing in finance, not just getting or organizing the operational stuff.
Speaker 1:But even let's say they say the wider limit, legal HR data Ops sometimes.
Speaker 2:Maybe that's also a combination that's often seen in the market like a CFO combination could be wildly interesting. In my previous business models we were always heavy on logistics. That obviously work totally different for phones than for cars, so I was never too involved. I'm not a logistics person, but if it was rather like internal operations or deployment could definitely happen.
Speaker 1:Okay. So this kind of actually what a CFO role is actually wider than people might realize. So there's sort of like a what does your company to CFO? There's what is the right timing for it, and it seems like what you're saying is the timing when to break. The time to bring in a CFO is related to how strategically important Num numbers and potentially cash are to the business.
Speaker 2:Yeah, so I guess we can all agree that cash is ultimately the one important criterion, at least right now, where fundraising is difficult, but even um in times where fundraising is easier or cash is cheaper available in the market for startups, this is a big thing.
Speaker 1:But it sounds like what you're saying. Even if a company has a fundraising strategy, they don't necessarily need a CFO if it's not forced their business model.
Speaker 2:It depends on the founder.
Speaker 2:So if it's bootstrapped it's probably not that interesting if the founder is a very strong fundraiser they would probably employ external help for all the legal side of it anyways, and the financial side is not that difficult. So if the founder is a serial founder, if they know the fundraising environment and have the right contacts, probably and at a smaller scale probably that works just as well. That's maybe another criterion to consider scale. So I do believe up from a certain size, be it in millions of revenue or be it in number of people, you need to have someone senior on the finance side. Whether you call them a CFO or a director of finance, whatever, um, probably doesn't matter that much, but um, they should have more experience than enthusiasm. Let's put it that way.
Speaker 2:You know, there can be great salespeople who are like 25. Um, they know the company, they know the product, they're enthused about what they're doing. I don't think that's sufficient for a finance person. They need to have all of that too, but they also need to have seen some situations, they need to have solved some problems, because if they have seen that someplace else or have helped to solve it someplace else, they will be able to solve it for the current company if need be.
Speaker 1:But there's also just having experience, know what systems are needed, what systems work, where those systems are going to break down, um the range of like having experienced the key challenges at least once.
Speaker 2:That's true and actually it's pretty repetitive. Thinking of the selection of an ERP, obviously we need a different system at Everphone than we needed in previous companies, but the process scoping with the departments, um, doing selection criteria, writing an RFQ, preparing and comparing the offers Well, that's pretty similar.
Speaker 1:Even how to set up your team.
Speaker 2:It obviously helps, helps, helps a lot.
Speaker 1:Okay. So there's kind of like a function of apparently just like do you need a CFO, when's the right time, which you've helped with. From like a human perspective, what can you share around sort of the CEO CFO relationship and how a CEO or a founder might really make best use of a CFO and build that relationship and trust?
Speaker 2:I guess you mentioned the most important, trust, so I would expect that the founder is brutally honest on everything finance. If there's something looming on the horizon that might lead to expenses or that might lead to risks, um, they need to communicate it, for which I need to create that trust that I will be able to, on the one hand, keep quiet about it and, on the other hand, contribute to the solution, whichever that might be.
Speaker 2:So, for a founder to be open, they need to be sure that I'm not complaining to investors behind their backs, that I'm not running to the insolvency court and finding for insolvency just because someone mentioned there's a big payment outstanding, that I'm not doing funny deals with investors or whatever. And that's probably also part of, on the one hand, personal trust building. On the other hand, of what have people observed you do in the market. So if you have collaborated with several founders successfully and if you have gained that trust, probably the next founder will be easier to trust you.
Speaker 2:And on the other hand, what could a founder expect? I believe also the very honest and brutal truth, what's in the numbers and, if possible, some advice on how to develop from there. This obviously depends very much on the business model. The easier it is, the less high level finance input is needed, but the more complex it becomes, finance can be a value driver and can help analyze the factors that contribute, for example, to profitable unit economics and to making the company more successful, and often times this is hard. This is like we need to stop operations in country XYZ, or we need to stop product line such and such, or we need to stop discounts. We need to stop Facebook advertising, if at least honestly reflected with the founder or with the C level. As such, I believe this adds value to the company.
Speaker 1:Because those sounds like from a say you've got a founder who's not particularly financially savvy and they're judging their company success by and a judge sometimes by their VCs based on like growth purely, and you're having conversations going. We need to cut discounts, we need to stop advertising, we need to shut this unit. That might sound like you're killing my growth metrics, you're killing my next fundraise. I don't want to do that.
Speaker 2:Well, maybe, but this is why you align both with investors and with the founder and with the C-level team on your strategy. And I believe focusing a company's success purely on growth might have worked in 2019. I'm pretty sure it doesn't in 2023. So I wouldn't think that any founder needed to be convinced that reaching profitability rather sooner than later and being cost conscious is something that is just a requirement of the market.
Speaker 1:I would totally agree with you in 2023. And I agree with you. I think it's much deeper than the top line. But let's say in 2020, you're having that conversation when the market is different and it is more bit more about growth at all costs. How do you land that message?
Speaker 2:Well, if growth at all costs is what we aligned on as a strategy and if we have the funds to sustain that, that's okay, but if there are points that we can handle more efficiently, I will certainly voice them. And the Facebook advertising was actually a very acute example. I learned at that car as a service company, so we did different channels to get our leads in, and they would be automatically filled through Solvency Check, which was my domain. And we just learned that iPhone users have a higher net income and Facebook users usually don't pass the Solvency Check, and so each euro spent on Facebook brought us a huge number of leads, but none of them were financially stable enough to actually be offered a contract. So what we do? We cancel it because we attracted leads, yes, but we didn't attract the right leads.
Speaker 2:And having the insight into that data helped the company to understand this dynamic and to focus the ad spend on more valuable channels and valuable more, let's say, a customer selection that would, with a higher probability, meet our internal credit requirements, because that's really interesting.
Speaker 1:I mean that that is not something that you like, I found with it. Oh, that's not part of the CFO, like marketing is not part of the CFO remit, but that is a very clear impact on marketing choices, profitability, success, growth.
Speaker 2:It is definitely.
Speaker 1:So what you're, what you're saying, is that accountants and CFOs are not just about reporting the numbers, saying no, it's actually really about adding a lot of value and a lot of places that you wouldn't. You might not assume that that can happen.
Speaker 2:We try to say yes. Most of the cases we say yes, but in some of the cases and Solvency Check, unfortunately, is one of those and I guess, like from a from a personality's perspective, most CFOs might be perceived the grown up in the room. If I may that expression from Charles Sandberg, we're probably rather non enthusiastic, we're probably rather introvert. So if it's a no, it's not an impulsive no, but it's a well thought through no and it should be definitely considered.
Speaker 2:Obviously it's a discussion point. But if the finance realm has considered a topic and comes up with, we don't think this is a sensible decision. I don't think that's just a pure gut feeling, but that's really a numbers driven analysis, a lot of considerations going into that decision.
Speaker 1:So it sounds like a founder use of working with the CFO. The trust really does need to go both ways because it's actually trusting that response. Trusting analysis has been done, making some fairly significant changes to strategy, marketing, execution, operational based around, and the more trust there is, the quicker that improvement. And what does improvement can happen.
Speaker 2:I'd hope so and I like to see finance not just as someone who's handling the operations stuff but as a real key value driver in the business. And to be able to develop into such well, we have to have, on the one side, insights and, on the other hand, be able to participate in strategic discussions and decisions.
Speaker 1:So how do you build that trust them? So you start off and you come in and you're sounds like one is. You come in and you've got a reputation in the market for having worked with founders and having helped them grow businesses.
Speaker 2:So I guess the reputation helps you to start, let's say, the plus one, and if you have a bad reputation, you would probably start as a minus four. I don't know. So there are people who's reputation precedes them, also on the people side, and I truly believe that if I came in with a reputation of being a harsh lead or an unempathic lead, that the Everphone team, who kept the company rolling, who is, who was really super committed and creating great things for the company they would have left and I couldn't have achieved anything with that. So, like, both the strategic side or the analytical side and the leadership side need to be well aligned in order to create trust into the organization that this hire might contribute.
Speaker 2:Let's put it that way and then it's just individual trust building and each person is different. From my end, what helps me a lot is just communicating who I am and how you can collaborate well with me, and asking especially team members, but also like C levels or someone else in the company whom I share regular meetings with, to share their details as well, because something like, if I say no, it's well thought through and it's not something I do on a whim To share that might help them understand that I'm not being particularly picky, but that I have invested time and efforts into their course and that this is just a balance of the arguments.
Speaker 2:Also telling them listen, if, if you select me, you get your response super quick but you don't get any why and how, you just get the response no, which isn't unfriendly, just means I don't have time to type more and whatever our next meeting comes up.
Speaker 2:Then you get the explanation and the data or whatever else is required for you to understand how that decision was made. That's something that that you can actively communicate and also Ask your team how they want to collaborate, what's what's best for them. So there's quite a lot of education going on in this communication.
Speaker 1:Both ways kind of CEO and existing team are sort of Educating you on the business and processes and how things are done and turn your kind of Education in the back and, like your mindset, what you're thinking is which data you're looking at.
Speaker 2:And I guess it's also about you know, extending that trust, asking them the difficult question but also Offering help whenever you can and maybe fixing some easy problems for them. If People approach you with a problem and get a solution Relatively fast, that creates trust that you might also be able to tackle bigger problems or that you're at least willing to try.
Speaker 1:And some of this is a strong under a commerciality to this as well. So it's like what, what? What are we trying to achieve as a business? What are important drivers? Okay, the answer I'm going to give you is dependent on us moving towards those, and if those drivers shift, my answers are going to shift.
Speaker 2:Definitely.
Speaker 1:And then let's say when, from the, from the CEO side, what? What are? Let's say three things that you think CFOs Might do with CFOs, that they shouldn't.
Speaker 2:I'm struggling a bit so. So the one thing is Communicate honestly. If you tell me that customer is going to come or that investors going to come, I Rely on you for all my future decisions. If you're unsure and tell me I'm unsure, but I hope it will come, then this might Swing a whole lot of things. So.
Speaker 2:So if you can share, share honestly and give your level of confidence on the, on the information, Mm-hmm otherwise I believe it would be rather personal stuff such as Like don't micromanage, give some leeway of when and how to do the things. Give, give the direction, give your urgent asks, like I need to have Auditored accounts, but such as such date in order to do the next financing round, but don't don't like Talk over CFOs. Haps to the. To the auditors or the bike.
Speaker 2:So so let Let the CFO be the voice on all things finance. Give them guidance and directions on what you need, by when, and then let them organize it to make it work.
Speaker 1:And it sounds like also not pigeonholing going this to your just finance, involving Bring them into the room for big decisions.
Speaker 2:Yeah, definitely. I Assume that most would be involved anyways, because usually CFOs are also part of the board meetings and the like.
Speaker 1:So at this point.
Speaker 2:They would be Preview to the information coming directly from the investors. I'd assume that we have a bit of advantage against any other sea level function. Normally don't take part in such meetings, but this might vary from company to company.
Speaker 1:But mostly quite chance that say, let's say you've got a co-founding team and they're used to having, like, before bringing a CFO, they're used to having regular conversations, they're used to making quick decisions together. That must be a bit of a challenge sometimes, because Actually that's the sea of having the CFO in the room for some of those conversations would be very helpful. There's board meetings, but then there are these kind of Quick meetings or not so quick meetings, but kind of where things can change. Do you find the CFO becomes almost like a third part of that team and kind of like co-founder plus CFO becomes quite a regular conversation.
Speaker 2:Oftentimes yes, and I'd also say, you know, maybe it's time that the founders step back to their area of expertise, because actually, they pay the CFO to take care of all things, finance all things, legal, all things, whatever it is, in their company.
Speaker 2:So doing the work themselves and paying someone to I don't know what, stand at their side and observing how they do the work, isn't really efficient. So if you get a person that is matching your vision, a person that has experience in your business model or something similar, leverage them to the best of your possibilities.
Speaker 2:And from what I saw in my previous employer, cluno, one of the co-founders was a tech co-founder and we loved having him in board discussions whenever we made the big tech decisions. But there was no use for him in taking part in fundraising decisions and people decisions just because he was not involved. He was not actively working on them. He was obviously informed the minute that board meeting closed, but he wouldn't have influenced it. He would have just sat there and listened and actually spent time there. He could have used for something else.
Speaker 1:How did he feel about that?
Speaker 2:Judging from the collaboration, judging from the fact that we're still in contact, well, not too bad. Let's put it that way. It might be also relief, you know investors aren't always easy.
Speaker 2:And how do you feel as a co-founder if you're sitting there and the other co-founder is a tech and it's actually not your business? Maybe that's not that comfortable, I don't know. It's not your core competency to handle finances, to handle investors, to handle those discussions. So, as uncomfortable as I would feel if I had to do, let's say, the implementation of Salesforce into our company, they might feel the same level of discomfort in participating in activities or discussions that are just not their core experience.
Speaker 1:I think it's interesting. It's part of the founder journey of in that kind of early stages, zero to one. It's all about getting involved in everything, being really hands-on, driving it forward and then that sort of when the scaling it's flipping and going. Actually it's about being hands-off, empowering other people. But that sounds like quite a powerful but quite extreme version of actually not being involved in certain high level discussions because that's just not their area, not where they enjoy. But it feels quite empowering for people going. I've got the right people in my team who I can just trust to take care of this and it feels like something I would have always been involved in when we were smaller, but now that we're bigger that feels almost counterintuitive.
Speaker 2:Yeah yeah, and so I can definitely tell that was what the Cluno founder did. He closed their first refinancing contract. He didn't understand one bit of refinancing, he was self-taught. He hired an advisor, he learned everything from scratch. He was even able to do the monthly reporting for that first bank Wow. But he wasn't for that second bank, because I was there and he was totally like yeah, if you need me for a founder pitch for the next refinancing partner, I'm happy to do it. If you need me for a high level contract negotiation and to add my weight as a founder, totally happy to do it. But I don't want to be doing the rest of it and like, aside from just timing difficulties, this distributes responsibility and I believe founder has much more leverage than just doing single jobs for which someone else could be hired or could be found inside the company.
Speaker 1:Well, that may be a really nice thing to focus on, then. Yes, at the same bit, founders have struggled with this idea of letting go and taking a step back, and it's quite hard to evaluate your own role when you're doing it, so you don't have that perspective from your side. Having worked with founders of these bigger businesses and they've got to the stage what should have, I don't know what could a founder really be focused on when they're really adding value to a business? So what is it okay for a founder to look at when they're when inside they're going? Oh, I should be in the detail. I should be getting this right. I should like. What does a really good founder look like at that stage?
Speaker 2:What a founder always has to do is aligning everyone on the vision and on the mission of the company, doing fundraising strategy and exit strategy if the company is scaling. And then I also see a founder as a kind of a troubleshooter not the person that solves the problem, but rather the person who puts the finger in a wound and finds someone who solves it from them but also adds weight to whatever they need to do as a founder in order to align the organization that this is the most urgent problem that needs to get solved right now.
Speaker 1:That's really powerful. So it's just almost prioritizing the sequence of problems to be solved but still not doing the work themselves making sure the team's right measure the cultures there.
Speaker 2:Sounds about right.
Speaker 1:And that people are like oh, that doesn't sound like a full-time job in your experience.
Speaker 2:So from what I've seen in founders, it's like more than 80 hour job, because there's always problems, there's always a strategy, there's always something to be considered.
Speaker 1:Yeah, I would agree. I think what's found is finding hard to themselves, permission to do that. It's like, oh, I should be doing more stuff, or I should be more involved, or I need to demonstrate that I can do this.
Speaker 2:But isn't that a leadership discussion anyhow? So as a CFO, I'm also not the best in doing whatever needs to be done within my department. I'm just best in bringing together a team and aligning them on a mission and give high-level input and make the connections to people who could know better than us or who have done that before. That's my value at.
Speaker 2:My value at is not that I'm doing the best financial modeling or that I'm the best accountant. I'm actually no accountant. Also, I don't have a clue about what they're doing, but I can add the strategic perspective. I can tell that this balance sheet structure is not working. We need to find a way of doing it differently, or we need to, I don't know. Do it with different tool sets, but I'm not the one who's doing it actually.
Speaker 1:Okay. So if you were to give one piece of advice to founders, what would it be?
Speaker 2:Hire and retain the right people and trust them, build trust with them, and that's actually that's not fine and specific. I guess that goes to every department.
Speaker 1:I really like that. Veronica, thank you so much for today. That has been super useful and I'm sure lots of founders listening are going to have a rethink about A. Do they need a CFO, when they need them and also, how are they using them to the best of their ability?
Speaker 2:Thanks for having me and see you around everyone.
