An interview with Perry Offer, Founder, Time to Exit
Please share your key experiences as a CFO.
I've worked in both finance and general management for over 40 years and I’ve noticed three common themes. First, we constantly overestimate our capacity to get things done. Second, we create businesses that are far too complicated. And lastly, we consistently fail to understand that not all customers are equally profitable, not every pound of revenue has the same value.
What has been your biggest learning?
At college I learnt about the Pareto principle, or the 80/20 rule, which was a lightbulb moment. In business you can strive to get 100% of the results, but the cost of doing so could bankrupt the company. I've worked in companies where there have been five chimneys pouring out black smoke seven days a week, and they were losing shedloads of money. Activity doesn't mean profit. You've got to understand how to get the highest possible return in value added. This requires focus because you don't have the bandwidth to do everything.
What are the critical steps for growing companies?
First, understand your total addressable market and be comfortable with the margin you are likely to realise. Second, understand your value proposition and how it addresses the three major pain points of your target customers. You don't want it to be price, you're usually talking about either something innovative, a new way of doing things entirely, or somewhere on quality, flexibility, service and lead time. Third, operations needs to reshape what they're doing to deliver on the promise. If your proposition is to collapse lead times from three weeks to three days, how will you achieve that? How are processes going to change, what non value added activities can be removed? Lastly, when you have a plan, you need to invest in people to deliver it. Many SME owners believe that the best way to scale the business is to hedge your bets. Completely and utterly wrong. We live in an age where customers want to buy from specialists, so you have to bet the farm, in a measured way, by picking one dimension of value that you know you can deliver.
How has the CFO role changed?
The modern CFO understands that business is a tripod, with three legs, commercial, operations, and finance. You must raise those legs to the same height at the same time or the whole thing topples over. Just doing the numbers is no longer enough; you've got to understand how customers measure value, help operations reshape to deliver more, and position the business to make it more profitable. That means understanding which opportunities to focus on and how that translates into profit. As the saying goes, revenue is vanity, profit is sanity.
What are the key skills for a CFO?
Walk the business, talking to people in their own language, especially those down in the trenches; they often know if a business is in trouble before management! Use that to build bridges with people and address those business challenges. Numbers are critical because an ounce of evidence is worth a tonne of hyperbole and that way better understandings emerge. Understand that things are always unpredictable. Consider adopting an approach I term ‘Ready, Fire, Aim.’ Embark on journeys, review progress along the way, and if they don't work, be prepared to shut them down quickly. Competition is no longer three doors away, it's three continents away. You must be swift, agile, cost effective and profitable in order to defend yourself and your place in the market.
What role does technology play?
Every business needs a single, enterprise wide platform to deliver their key business functionality, using automated workflow processes, with high quality reporting and analytics. The benefits in accelerated cycle times, improved quality, and becoming more flexible and agile, are just obvious. Digital transformation is fundamental, you can't embark on a growth journey without it. But you must get the flashlight out, peer into some dark corners of the business and challenge people. Financial transformation can be exciting, taking the business somewhere that you never dreamed was possible.