TLP341: The Interplay Between Finance, Data and Decision-Making The Leadership Podcast

Jeremy Foster is the Chief Financial Officer of Austin-based Talroo.com, the data-driven job and hiring advertising platform that helps businesses reach the candidates they need to build their essential workforce. Jeremy shares insights into the key indicators of business valuation: 1) The necessity of leaders knowing the language of finance; and 2) The differences between startups, growth companies, and mature companies. He covers why alignment of the stakeholders is important for a company’s successful scaling, and when to use blitzscaling, if at all. He explains analytics and shares examples from his past and present work, in an educational overview of the interplay between finance, data and decision-making.     Key Takeaways [2:14] Jeremy started in marketing and then ended up leading operations and retail banking for a 15-branch community bank in New Mexico and West Texas. His background was not in accounting or finance. That changes how Jeremy tends to approach the numbers. [2:41] Jeremy explains how he evaluates a business by looking at three numbers: the lifetime value of the customers, the customer acquisition cost, and the total addressable market. Marketing is a key component of each of those numbers. [4:36] Jeremy has worked with startups and scaling businesses. He’s seen a broad spread of financial knowledge within company leadership. Sometimes an executive team has problems because of their different levels of understanding. Do you understand GAAP and income statements? What are revenue, gross profit, and EBITDA; the basic terminology. Some executive teams don’t know these terms. [5:33] The next big question is which financial statement is the most important to look at, the cash flow or the P&L statement? It depends on whether you are a startup or an established company. There’s a transition the executive team needs to make from a stage of perpetually raising capital to a stage of starting to generate capital and focus on unit economics, and understanding sound investments. [7:51] Super-mature businesses are balance-sheet-driven. These are companies like banks, oil, and gas, that have balance sheet sensitivities they need to pay attention to. [8:06] Get an executive team all on the same page with a basic background in finances and then focus that alignment in education first on whichever financial statement is the most important to the business, according to what stage your business is in. [9:27] There’s an element of leadership that’s getting people to follow you and there’s an element of knowing what the right direction to go is. The math of business is useful in helping you figure out what the right direction is. [9:45] The first step in identifying the right direction can be self-study. Sometimes it’s about understanding the terminology. Sometimes, it’s about looking at your business and thinking about what’s most important for your business. The easiest way to do that is to rely on the ability to identify a bottleneck. What’s the most immediate limitation on the business? Is it sales, product, or capital? [10:58] The first thing is to recognize the most immediate pain point in your business. Decompose it. Understand what the most important numbers are in that pain point. You don’t have to understand all the numbers in the business at once. You can learn over time. Start by figuring out what’s most important. [11:59] Jeremy explains scaling and growth. A scaling business differs from a startup in that as the business gets bigger, it juggles an increasing number of variables. Part of becoming a scaling business is looking in advance. If you want 100 new customers how much staff do you need to onboard new and maintain existing customers? Look for limitations and plan to remove them before you hit them. [14:06] Past guest Margaret Heffernan identified planning for limitations as adaptability. Jeremy notes that the amount of flexibility you have is contingent upon your availability