Bubbles, recessions, IPOs, exits, acquisitions, pandemics - Brian Hughes has seen it all.
With decades of experience in the Big 4 under his belt, Bian knows firsthand the complexity of a company lifecycle.
That’s exactly why he was a partner at KPMG for 17 years and is now a trusted consultant and advisor.
For Brian, being a talented and resilient CFO boils down to one thing: Preparation.
Here are four ways that Brian thinks modern CFOs can do just that.
A successful CFO is dialed into all communication channels, both inside the company and out.
Internally, that starts at the very top with the CEO.
According to Brian, fostering a strong relationship with the CEO is critical, setting the stage for smooth operating.
“I think being the CEO's trusted business partner is probably by far one of the most important things that you can do as a CFO. And you need to really establish that on day one, because that's the individual that's helping set strategy and direction,” said Brian.
But it goes beyond the CEO. Think the CFO role is all about being the “numbers guy”? Think again. You also need to be strategic, collaborative, and adaptable.
Being collaborative means being aware of your weaknesses, and who can complement them.
“It used to be you thought about the CFO just within the financial function. I think it's also extremely important now for the CFO to really get outside of their swim lane and really become more cross-functionally across the organization, supporting all the different functions that help a company operate,” Brian said.
A good CEO isn’t just savvy internally. They have the confidence and ability to communicate with external partners, such as investors and board members.
“The CFO and the CEO tend to be the folks that are interfacing the most with investors and board members. And therefore that requires a unique set of skills as well in terms of understanding sort of what their needs and wants are, and presenting that in a way in which they can understand it,” Brian said.
Understanding those needs and desires is phase one. Phase two consists of knowing how to implement them.
“I think you need to also be somebody who can fix things that get broken quickly, right? That happens in organizations, whether it be through acquisitions or divestitures. But you need to make sure that you're able to act quickly to address issues that need attention on a real-time basis,” said Brian.
When you set yourself up to have a high-level vantage point of the operation as well as multiple touchpoints, you can truly make an impact.
Being prepared starts with preparing for what you already know is coming.
Is an acquisition in your future? Start preparing now. Brian emphasizes that acquisitions are not just financial processes; they are also deeply operational undertakings.
Take for example John Chambers of Cisco. Chambers was well-known for his acquisition style, as he integrated nearly all of the operations of the acquired company on day one.
That may be an extreme example that won’t work for every company, but the moral is that operational integration is critical.
“You need to operate that company in a way that adds value to the existing shareholders. And obviously, it takes care of whatever capital you're raised to do the acquisition. So I would say on the acquisition side for the CFOs out there is if you're anticipating an acquisition, anticipate, what is the integration plan? It's not just financial, it's operational,” Brian said.
Another big mover you can prepare for is the IPO process.
Currently, available capital is fueling growth opportunities for both public and private companies at an astonishing rate.
Unlike the dot-com frenzy of the early 2000s that resulted in a burst bubble, this time is different.
“I think there was the euphoria, if you will, around dot-com that created a unique opportunity for companies to go public, but unfortunately they shouldn't have been public,” explained Brian.
“The companies that are even going public through SPACs today are fairly mature, well-established, later stage either venture backed or private equity companies that have a business model, have a management team, typically are obviously generating revenues. They may not be generating profits, but it's a very different feel and type of company going public today than it was back in 2000.”
Brian believes that the SPAC model will only increase in popularity. Overseas, the European community is beginning to embrace the model wholeheartedly.
Whether your company will go public through a SPAC or traditional listing, you need to have your financial ducks in order well before you seal the deal.
“You've got to be prepared to be a public company before either you one, do your SPAC transaction or two, do your direct listing or do your traditional IPO. Because you've got different financial reporting requirements around quarterly and annual. You've got different governance requirements around board composition and audit committee meetings. You've got, depending upon the size of your company, internal controls, Sarbanes-Oxley testing that needs to be done,” Brian said.
In addition, you've got to close your books on a timely basis each quarter and at each year-end. You’ll also need to hone the ability to forecast so that you don't miss your guidance.
Up until now, we’ve mostly covered preparation for large but expected events. But sometimes surprises are in store, such as the recent global pandemic.
When you have talented teams and proven processes in place, you are better equipped to handle any curveballs that are sent your way.
Brian likens this type of preparation to keeping up on the maintenance of your proverbial house.
“You better make sure your house is in order if you're going to have something unexpected occur,” Brian said. “Being the trusted partner, being strategic, having elite teams, having the right processes, people and systems in place - if you don't have all those things operating effectively, it doesn't allow you to prepare for what I would call the unexpected. So I think for CFOs out there, you never know when you're going to be called in to raise new capital. You never know when you're going to be called in to potentially think about doing a public offering. You never know when you're going to be called in to do a major acquisition.”
Each of the above scenarios involves different complexities that your organization may or may not have been prepared for previously.
Other big-picture things to think about are those like inflation. The Fed may not be worried about inflation - but should you be?
Brian says it’s important to read subtle signs and plan to act in advance.
“I think people probably should be thinking more about looking inward at their own business. And they're probably seeing things like supply chain disruptions. They're probably seeing labor disruptions. They're probably saying, you know, commodity price increases, you know. So typically where there's smoke, there's fire,” Brian said.
“If there's going to be an increase in inflation and interest rates, be prepared to start thinking about what you're going to do now, so that when it does happen, you're prepared to act. And if it doesn't, then you take advantage of the market cycle.”
Each of these lessons boils down to being proactive over being complacent.
If you take the time to hone your preventative maintenance and foresight skills, you’ll be prepared for almost anything.