Many times, expansion stage CEOs are a bit taken aback when we ask them to define their company exit strategy. A common response is, “Exit strategy? I’m building the next Google, or Facebook, or [fill in the blank].”
Often these CEOs are the same CEOs that view finance and CFOs as a necessary evil, rather than a strategic partner. Well, I have news for you. A good CFO is one that partners with the CEO to help define company strategy, including the company’s exit strategy. Chances are, while your CPA or controller might be doing a marvelous job at closing your books, preparing financial statements, and filing tax returns, he or she isn’t looking forward with a strategic and objective lens providing that much-needed balance to the CEO’s entrepreneurial vision.
- Who else but the CFO can help the CEO quantify not only the company’s target market size, but also the addressable market?
- Who else can help the CEO compile and analyze the data around the life-time value of a customer?
- Who else can marry that life-time customer value with customer acquisition costs in order to validate the company’s base economic model?
- Who else can extrapolate and project the company’s current cash burn with the projected cash requirements of the company’s economic model to quantify the most likely attainable revenue levels of the company (and profitability)?
- And ultimately, how else can the CEO obtain an objective view on what his baby is going to look like as an adult? The analogy of a baby sort of breaks down when it comes to the likely exit valuation of a company, but I think you’ve probably got my point by now.
My friends, as an expansion stage venture capital firm that also provides management consulting services and financial consulting services to our portfolio, we are familiar with the cost justification for not hiring a CFO. Our viewpoint is that if you really want to ensure that you have a home-run and not a swing and a miss, you’d be foolish to avoid bringing in that trusted partner, the CFO, and you’d be just as foolish not to have an eye on your company’s exit strategy.