283.The Fractional CFO Files: How CFOs get Sales, Ops & Products on the same page with Roger Castle

0:00Welcome to CFO 4.0, the future of finance. The CFO role is changing rapidly, moving from cost controller to strategic visionary, and with every change comes opportunity. We are here to help you take advantage of this transition, to win at work, drive your career forwards, and lead with confidence. Join Hannah Munro, Managing Director of ITAS, a financial transformation consultancy, as she interviews key experts to give you real-world advice and guidance on how to transform your processes, people and data. Welcome to CFO 4.0, the future of finance.

0:48Hello, everybody, and welcome to this episode of CFO 4.0. As usual, I'm your host, Hannah Munro, and with me today is Roger Castle. So, Roger, great to have you on the show. Thank you for joining me. Pleasure to be here. So, obviously, you've been working with the CFO Center, but just give us a little bit of a background. What does your CFO experience look like? Yeah, so I did finance leadership roles for US tech companies, most notably Yahoo for Northern Europe at a time when Google was gaining traction, which was very interesting. A high growth company for 10 years, and then suddenly the growth tailed off.

1:27So that was a quite interesting scenario, implementing CostCut, where CostCut had never been seen before. and then I did a finance leadership role for Savvis which was a Nasdaq quoted IT hosting company and we grew those through introducing websites for the likes of EasyJet and ASOS very rapid growth grew that to 120 million of turnover from 30 million in three years which is amazing but we were one of the few hosting companies in town that was before public cloud really before Amazon Web Services and Microsoft Azure really started moving in the market. We built that company and then sold it to an S &P 500 company, CenturyLink, which was the US's third largest telco.

2:16And then I stayed on two or three years after the acquisition, integrated my role into the States, and then took a package under a compromise agreement. I was 51 and thinking what do I do next I've been commuting to town commuting to ready and working very long hours as you do in US corporates and and I'd looked at the CFO center and I thought that might be a good way forward for me to still continue to work but have more of a balance work life balance so I've been working with the CFO center now for for nine years actually covered about 10 or so clients, wide variety of different clients in different markets.

3:00Anything from half a day a month right the way up to three days a week, depending on what the client needs were. It's been a lot of fun. And, you know, to some extent, I've been able to work or as much or as little in that period as I like, subject to a minimum of two or three days. And it's been a really great way to spend my 50s, I must say. And you've got some really interesting experience. I'm actually going to pick on that first when you told about like Yahoo and going through that cost-cutting piece with an SMT that almost had a completely different view and culture. That must have been a real challenge in terms of mindset as well as obviously going through the numbers.

3:39Definitely, yes. I think I was there in my kind of early 40s. Most of the employees were in their early 30s. They'd known nothing but boom times the whole way through that growth journey. So trying to convey to them the challenge in the numbers, the need in certain areas to cut costs and implement that was very difficult. It was one that really required a lot of persuasion and collaboration and explanation of the numbers and the difficulty that we were in. And what, like, if you think about what you're doing now, how does that, you know, what were some of the challenges that you had in terms of getting everybody on board?

4:18Apart, you know, apart from obviously, did they understand the need for change? Or was it that they can understand why you're doing what you're doing? I think one of the skills of a CFO is being able to relate to the management team. So, you know, to have worked alongside in my permanent role to have worked alongside sales directors, IT directors, product directors, operations directors. I know intimately what their concerns and what their drivers are and how to appeal to them. And I'm a fairly diplomatic, collaborative type of individual anyway. So sitting people down, explaining them the facts of the numbers which are undisputable, and then working with them on a plan that will get us to a position where those numbers are better, that's equally valid in a large US public company as it is in a small SME.

5:10And what do you think the, and the secret, but what do you think the key factors are in building those healthy relationships amongst the SMT? How do you approach it? I think it's being there, it's building those relationships, it's understanding the personality types. You know, oftentimes your sales director will be a fiery red type of personality. So you don't beat about the bush with your numbers, you get succinctly to the point and take them with you. An operations director who's from a more technical background might be more patient, might require some more detail, might require working through the numbers and kind of more gradually accepting them.

5:48it's reading those personalities and appealing to them in the right way and make sure that the message that needs to be implemented in terms of business decisions coming out of the numbers make sure they fully understand that fully understand the rationale for that and that they have the mechanism to convey that to their team so that their teams work alongside them to accept what needs to be done. What's the most challenging scenario you've had in terms of either building relationships or managing those relationships within an SMT? I've worked with some very aggressive, particularly in US businesses, some very aggressive CEOs from a sales background who are very driven by the short term.

6:32So don't necessarily think what the business needs over three or five years are very preoccupied with the current quarter or the current year. So I think trying to get that correct emphasis between the short term and the long term, developing a long term plan with a business, making sure that they understand that, making sure that they understand the direction that the management team want to go on, be that an exit or just a growth scenario for the business. I think getting the key players in the management team on one page on that and taking that forward and then setting targets within the individual teams that draw you towards those numbers is absolutely key.

7:13And that must be an incredibly challenging scenario to have your CEO just want to focus short term. Talk us through how you handle that. Have you got any tactics or tips for others to be how to handle, I guess, somebody with a different perspective? I think you can normally drag it out of people. Most CEOs I've worked alongside, in fact, in SMEs, I've never seen anything more than a one-year budget. So typically, where you've got owner CEOs, they will have a concept in their mind of where they want to take the business, but they won't have ever evaluated that. They won't have put that down in numbers or words.

7:55I think that whole process of taking somebody like me who's done that process a number of times and can tease out of them what it is they want from the business in three or five years developing a plan to grow revenues by product by region whatever the dimension is within the business if you can do that they they really value that that you can actually quantify that because that then gives them the mechanism, A, to understand that what they want is achievable, and then B, to communicate that to their teams to get their teams on side towards delivery of those objectives. And how do you approach business planning, especially at that sort of that small to medium level coming from that big corporate?

8:40What things did you bring from the big corporate realm and what are some of the changes you made to make it more palatable, I guess, or suitable for the SME environment? Yeah, I think one of the key things is to put market concept around it. So what's the size of the market that they're dealing with? So maybe looking at the trends of what they're selling by product or by geography at the moment, extrapolating that forward, understanding from the management team where that might differ from history, because they've suddenly got a new customer in a certain area or a certain market is closed down.

9:16and then relating that to the market in general, which, you know, you could do either these days, you could do that quite easily on AI. In fact, I've done that this week for a client. Or there are published informations on the size of the market. Or, you know, we sit in a group of approximately 400 CFOs in the UK. We're well-networked. So you can normally find somebody without breaching client confidentiality, you can normally find somebody who exists in your vertical where you can share typical gross margins, typical market size, typical growth rates, typical expense rates as a proportion of revenue.

9:55So there's a lot of intelligence out there that you can use for that type of thing. And I think CEOs and leadership teams really value that you can put their business in the context of the market in general. And how do you take, because obviously there's a lot of obviously benchmarking side of things, But how do you take the actual SMT through that journey? Talk about, I guess, some of the challenges you experience with that. How receptive are they to the journey that you're going on? I find they're always very receptive to that. I find it's a good way for me to familiarize with the business because it gives you the whole business and gives you a flavor for the numbers around the business immediately and gets you involved with the management team.

10:40So I think it's always really an easy sell, actually. It's something they want and something they value. They want that roadmap of where they're heading as a business. I think that's important for anyone. In terms of what you take from a big company to transfer into SMEs, it's really just the same methodology that you always use. It might not be as complex. It might not have as much detail, but it's still the same things. What are the key drivers of revenue? How do you trend those forward? How do they relate to the market size? What new markets might you go into? What expenses do you have today?

11:18How do those relate to the growth of revenue? How variable are they with the growth of revenue? Can you extract improved gross margin through growing the company? And then what are the overheads? Which ones are truly fixed? Which ones will grow as you grow the business? and really developing a plan, both from a revenue, a direct cost and an overhead viewpoint for how you take the business forward. And of course, I think one of the things that's much more important in an SME, which I didn't ever worry about because I work for very large cash generative companies, was how does that affect them from a cash flow viewpoint?

11:58So sometimes the growth plan that you and the management team want to come up with isn't possible because of constraints of cash flow. So in that instance, maybe you pair back on the plan or maybe you look at other sources of funding, be that bank lending, be that injections of capital from outside, be that outsourcing certain services to reduce the cash burn on the cost space. a number of levers you can pull. But certainly, I think working in the SME environment, I would say that I'm much more rounded as a CFO than I was 10 years ago, because I've learned lots of concerns that don't worry you in big companies or are taken care of by the central treasury function or the central tax function.

12:46It's been a good learning exercise. And as always, colleagues you can reach out to for advice and materials that you can draw upon to get that information. So it's never been truly scary because there's never been a question that you haven't been able to answer through being resourceful. What's your view on sort of top-down budgeting and planning first, bottom-up? Do you do a mix? What's your view? I think it's good to look at it from both angles. so i think from a top-down viewpoint as i say look at trends look at market forces and then and then also build it from the bottom upwards so get a certain amount of detail around revenues and margins by product type and by geography and then see how the two correspond so you might you might find that um in say a food vertical the growth hasn't been great within the company that you're working for but in looking at intelligence in the marketplace you might find that that there's a massive um massive sector in food for for the product that you're selling and actually you should do much better and then maybe the action for the business is to redeploy more sales people into that area to spend more marketing maybe the product set's not quite right for the market and that needs developing through investment um there's there's a number of channels that you can go through to affect that.

14:12You mentioned, obviously, the, you know, working with owners and helping them figure out where they want to go. How do you approach that if they've not really got that horizon past that one-year point? You know, what are some, yeah, what are some things you think about? Putting ideas into their head. So looking at the numbers, doing that sort of polite, constructive challenge. You know, you've been growing at 20 % for three years. You haven't even got a sales function. Why don't we say it's going to be 20 % plus some because you need to develop a sales and marketing function. And then, you know, you might help them to employ that type of expertise.

14:56You might get that type of expertise also on a fractional basis through some of our sister companies have certainly done that on a few occasions. And then, you know, you can persuade the leadership team that actually the growth is there and provide the mechanisms to unlock it. And if you're able to do that, they're incredibly grateful to you for that contribution. And that's very satisfying on a personal level. So let's just talk about the scale piece, right? Because you've obviously worked in some very fast growing businesses and done some, you know, dealt with some real scale of business. Tell us a bit about, I guess, how you think about that shift from getting bogged down in the day-to-day and surviving versus the growing and having that continuous ongoing growth.

15:44Yeah, I think in probably, I don't know, around half of the cases where we're bought in, the client's probably got some issue in the first place. You know, it might be cash flow. Oftentimes it's cash flow. It might be lack of revenue growth. It might be too high a cost base. But normally the problem that causes the difficulty in the numbers is, you know, an underlying cause like that. So I think, you know, understanding that and understanding what the mechanism to solve it is, is probably the way forward. And what's been your most challenging business to scale? I think I've certainly worked with companies that are selling services.

16:34So in the current market, which is not particularly buoyant, if you're trying to sell discretionary services like travel, like training, then those are troublesome at the moment. Because, you know, as a CFO, you know, the first thing you do when the numbers are tough and you're not achieving the numbers is you cancel hiring. You know, you don't replace staff. You control travel. You get people to do, you know, Teams calls rather than go to meetings. You cancel training that's non-discretionary. So I think those types of businesses are difficult because the market can be against you. And what's the bit you've enjoyed most, I guess, about the shift from big corporate to fractional?

17:23What was the bit that you... Yeah, I think the psychology is very different because in big corporates, you've got management teams who oftentimes aren't owner of that business and then shareholders who are obviously owners of that business, but are very remote and you don't meet them. whereas in the SME environment you're you're generally sat down with the owner might be might be a couple of owners there might be some shareholding amongst the staff but generally the people that own the business are in the room uh they they've probably created that business or their successors are people that created that business um and so they care really passionately about it.

18:06It's probably the only place they've ever worked. And it's very much their baby and they care passionately about it and its growth. And I think also the other good point about it is you don't get the political frustration you get in large organizations. I used to work in, as I said, in large US organizations and you'd go from one year you'd be reporting to the European CEO, the next year you'd be reporting to the US CFO and you'd be stuck in a matrix organization where it was very difficult to get things done. You know, you would probably have large deals that were particularly aggressive in the marketplace.

18:47You'd have probably have to go to the US for approval. That would probably be on a call about nine o 'clock at night because they were on the west coast of the States, which wasn't good for family life. But yeah, I think the satisfaction is you're talking directly to the owners they care passionately about the business and the solutions are there probably in one room amongst 20 or 30 people and it's really easy to get things changed and done for the better and oftentimes that wasn't the case when I worked in large corporates and what are the what's the flip side of that what's the downside to to that working with owners and in the smaller aspect outside of yeah so in my last role I had 50 odd people in the team so I didn't do much creation myself a lot of my job was go to meetings review other people's output requests for it to be changed review it again in some of these companies if they're bigger, you might have a small finance team.

19:51By definition, you're unlikely to have a CFO. You might have a financial controller or more typically a finance manager. So you're much more hands-on. So there's not a team to delegate to. So I must admit, I had to go back and backtrack a lot of Excel skills around things like pivot tables to analyze data where I would have just delegated that to somebody within the team. but actually that was really interesting and um you know i learned it all on youtube videos and and things like that um so yeah it's fine but yeah you you have to accept that you don't have the team and the resource necessarily yeah just a different a different way of of operating more hands-on yeah yeah definitely and you're also you're not there the whole time as well so you might be there you you know a lot of my clients I go to once a month so it's how do you how do you keep some kind of momentum when when you're not there will they forget about what you've talked about in terms of targets and so on when you've gone is there a way you can kind of keep involved through reviewing weekly dashboard reports or you know having access to their system so that you can kind of remind them have a look at how were the sales figures last week Are they good?

21:11Was one particular location better than it has been? Why was that? Was there some change that we could capitalize on? Those sorts of things. So I think I'm always in touch with clients on email. So I'm always reading my email wherever I am, even if I'm traveling, I'm reading my emails multiple times a day. So they can always get me and I'll do a call when I'm traveling if necessary. I don't mind that. So it's just making sure that, you know, we say you're their part-time finance director or CFO all of the time, which is true. You know, you need to be available to be called and to look at information and to try and keep in contact with that client.

21:52If you see something interesting from a colleague that's relevant to their market, or if you read something in the press or online that could be interesting to them, just shoot that to them and say what do you think about this could this help uh and i think again they they really appreciate that you know you've been through a lot of different environments and one of the things we we had a quick chat about prior to the podcast was you mentioned management buyouts yes so tell us a little bit about i guess the experience you've had with that and was that at an sme level or was it a large it was with a local health care company um who was servicing the NHS with outsource services and had grown quite nicely, wanted to get to the next state.

22:41They actually had a founder who wanted to exit the business at that point, and they wanted to raise additional capital to be able to grow the business quicker. So we actually did a management buyout in conjunction with they had an incumbent FD who um who didn't have that skill set so that FD concentrated on delivering the numbers and the day-to-day and then I kind of overlaid that person and and um worked with the management team to formulate a long-term business plan with you know balance sheet and cash flow projections explain that to potential investors we then found a potential VC investor who decided to buy the company.

23:27And then it's kind of liaising with the banks around the lending that goes with an MBO, explaining the situation to staff and taking it from there. That was around probably a two-year project, probably a day to two days a week, something like that. But again, very enjoyable. And how was it working alongside another sort of finance leader. How did you find that part of the process? Absolutely fine. You know, you just have to be clear about who does what. So as I said, that person did the day-to-day running of the finance function, the management accounts and so on. And I concentrated on the business planning, on the forward projections and the presentation of that to potential investors.

24:17So no conflict at all, really. In fact, you know, I think there is a position for us to work alongside incumbent FDs and CFOs, for sure, because there are always times, you know, when I was permanent, there are always times when you were doing an acquisition, launching a new product, you know, changing your market, divesting of the company, you know there are always projects where you were terribly stretched and and might not not necessarily have done them as well as you could have done or you didn't have that expertise yourself where you might want to reach out to somebody that's got that particular expertise or provides that additional bandwidth on a on a fractional basis yeah because i can imagine there's quite a few opportunities actually to have that extra pair of you know pair of hand it must work quite well because you know I think everyone wishes they've got two of them two of themselves yeah yeah it wasn't something that was available when I was doing it certainly at certain times you know the hours were were long and uh you know this you you kind of worked your way through it muddled your way through it but you could do with either the extra bandwidth all the extra expertise for the for the project at hand and we've talked a bit about obviously you know one of the great things about working with businesses is working with owners who are genuinely passionate about what they do and how they do it how do you how do you find the balance yourself within you know managing all of these because obviously you're working with multiple multiple sites how do you find the balance between being there and you know supporting that individual but also being able to split yourself across different businesses yeah I mean And I won't, if I'm working with a client's work in all different ways, you know, I've got some clients that like you for a dedicated day once a month, and don't really want to see you in between.

26:17I've got other clients that just take your time, you know, an hour or two at a time, I record it in the back of my book, and I bill them for that time at the end of the month, it's kind of, I think you have to be prepared to work in the style that the client wants. And that depends on the size of the business, you know, if it's a small business, they don't necessarily have the time to spend a full day with the cfo they've got a business to run you know so it's really horses for courses um yeah i you know i'll work in all sorts of different styles uh but generally speaking because you've got you know if you're say working three or four days you've got gaps between those meetings so you've got time to go back and look at the last set of notes and files and work out where you were last time.

27:04You know, the worst thing is to turn up at a client being unprepared and not remembering the characters or the situation you were last dealing with. So I always spend a bit of time researching where I was, preparing an agenda for the day ahead so that, you know, it's an expensive day rate. So you want to be fully productive from moment one that you get there. And then, you know, there's time afterwards to make notes, make follow-ups and so on. So there's always a bit, you know, for a day's work, there's always a bit of prep and a bit of follow-up. So, yeah, you just have to be flexible. But I don't think it's interesting.

27:42I think any of those businesses in their own right, at this stage, I probably wouldn't want to be there full-time and they don't need it anyway. I think that variety across different clients and taking learnings from one transferring to another, you know, the longer you do it, the more you've been through situations. So you can take experience of what you've done either in your full-time professional life or with other fractional clients and tailor that information to the client at hand. So the more you do it, the more you become productive because you have materials already prepared. I guess you're getting like the experience of working at 10 different businesses all all in parallel at the same time that's right you know and some of them like um i worked with the ppe business before the pandemic i didn't know what i had to have ppe explained to me from moment one i work with a rheology business which is to do with the science of the flow of fluids so they'll do things like um they'll do an experiment for denone to verify that oat milk froths as well as cow's milk for baristas, that type of thing.

28:53So again, rheology is a word I wasn't aware of that I learned and I've learned that business. But I think, you know, the finance process and the CFO process in particular, where you're working with a management team, trying to influence a business towards better, it's very much a generic skill set across all businesses. It helps if you've got the context of the industry. But as we said before, that's easily at hand through colleagues through information online etc um so you know you could you can really work to to put it in context for the for the client all through this podcast like we've talked a lot about guest planning and you know and helping owners understand sort of the direction where they want to go so if you know for those listening to this podcast um so other CFOs etc what were your top tips for going through an effective budgeting and planning process?

29:50I think you have to involve all members of the management team you have to understand what the owners really want from the business do they want a five-year exit at 10 million pounds or what what what is it they really want and then how can you achieve that as a team which means obviously involving the sales director, involving the operations director from what's practical, from a growth viewpoint, even if we can deliver it from a sales perspective and what will that cost. Maybe we need some new products in the set. There might be a product director that needs to go and buy or build those products.

30:30Understanding where the owners of the business and the management team, if they're part of the owners of the business, which they are in MBOs, where do they want to take that business what does that mean in detail how does that translate at a departmental level such that you can define their objectives at a departmental level that sit alongside what you want to achieve for the business that quarter that financial year and that as as part of the journey towards the three or five year number what things can you look at today if that's sales leads or marketing leads what things can you monitor today that will give you and the management team assurance that you're going to meet the targets of the business in in the long term well i want to say thank you so much roger it's been an absolute pleasure just talking through the differences in in that shift and thank you for sharing your experiences and to all of our listeners if you've enjoyed this podcast of course please do leave us a review share it on your favorite platform and if you've got any questions or feedback for me i'd love to hear it message me on LinkedIn.

31:34So a massive thank you, Roger, for joining me on the show. My pleasure. Good talking with you, Hannah. And we'll see you next time on the CFO 4.0 podcast. Bye-bye. One of the hardest things I think is actually putting into words what it means to work with myself and the team here at ITAS. Because not only are we a financial transformation consultancy, but we do it using Sage technology. So rather than me tell you how awesome we are, let me introduce one of our customers. Working with ITAS has dramatically made our lives simpler because there's just such a knowledgeable team there to help us. Before we felt the consultants we were working with at another company, it was always a challenge to get information out of them for them to understand the problem and it just didn't feel like they were on our team.

32:30Working with ITAS, it's almost we feel like you are all employed with us to work with us to do it. It's an absolutely fantastic relationship and it's just made it such a smoother process and an absolute fun process working in sage intact and coming on our calls. I look forward to it now.