How does the CFO of a start-up ensure that the company grows sustainably but still keeps up with and capitalises on burgeoning demand?
This was the challenge facing James Rumble, ACMA, CGMA, when he joined social relationship platform Hootsuite in January 2012.
The Hootsuite dashboard allows users to manage their posts and interactions on Twitter, Facebook, and LinkedIn, among others. The company was preparing to launch a premium subscription service targeted to organisations that were realising the importance of these channels as a means of engagement with customers and stakeholders.
At the time, the Hootsuite office in Vancouver, British Columbia, was home to 60 employees. Just three years on, the company employs 900 people in offices across the world and has 10 million users, including more than 725 of the Fortune 1000 companies.
Rumble, who relocated to Canada from the UK eight years ago, is proud of having built the finance team from three to 30 to support that growth, as tasks have expanded from paying the bills, month-end, and tax to include an FP&A team, M&A, funding, and a team that reports to investors. Rumble also is responsible for legal matters and facilities and has been heavily involved with the strategy and go-to-market teams.
People and culture
Rumble is no stranger to scaling up operations. He performed a similar feat at directory company Canpages, guiding the start-up from 100 people to 700. Hiring the right people with values that are aligned with the company’s mission has been essential to Hootsuite’s development, he said.
“We liken Hootsuite to racing downhill at 100 mph on your bike, but you’re also building the bike as you go. There’s just so much to be done, and you have to be so flexible, you’ve got to find a better way of getting things done all the time,” he said. “When you’re building incredibly quickly and the business is growing so fast, you have to think about the type of people that can come into this environment and thrive. The company needs to move at a certain pace, and finance needs to be out in front.”
In most finance functions, growth is built on an existing framework with ledgers, billing, and information flows from the data warehouse already set up, for example. A start-up environment in which those basics are not available requires a very different type of person, someone who is comfortable with a lot of change, not tied to what’s written in their job description, and willing to build that infrastructure himself or herself.
Getting those hiring decisions right and creating a positive culture are essential to growing at speed. “If you keep losing your people, you just keep resetting your clock. You have to start again all the time,” Rumble said. “So retaining people is incredibly important, and that’s why we put so much work into the environment, the culture, and living the values that we have as an organisation so people feel like this really is a great place to work.”
The next step for the CFO is to manage the expansion of roles within finance, identifying the right time to bring in people with the needed specialisms, and to keep ahead of the growth of the business. In the growth phase, there are constant demands for information and time to work on new strategies, Rumble explained. Finance has to work with various areas of the business and key decision-makers to give them the information they need.
Supporting new market decision-making
“When you’re in a super-fast-growing business, everything looks like a great idea. So you’ve got to put your effort and emphasis into things that are going to pay off big one or two years down the road,” Rumble said. “One of the joys of being in a software-as-a-service (SaaS) business is that because you have such well-established metrics and you have a very big base of customers that go from one month to the next, you have very high predictability of your revenue streams.”
Hootsuite’s enterprise-level customers subscribe for a year at a time, he said, “so that allows you to quite confidently build out according to your projections.”
Establishing Hootsuite in new markets involves high upfront (or acquisition) cost, as it involves developers creating new products and maintaining the existing service and a large go-to-market team with sales, new business-lead developers, and marketing personnel all involved. Managing that cost is vital when scaling up the business.
The data accumulated in the first year of expanding Hootsuite in North America provided a strong sense of the essential components of the business model, such as how long it takes for a salesperson to become efficient and how much work is involved in lead generation.
The next step when considering new markets is to think about how that insight would apply elsewhere and how KPIs might need to be tweaked for those markets, to evaluate whether the acquisition cost is acceptable.
In markets where the Hootsuite brand has a very high presence, such as North America and Europe, a sales representative can start hitting his or her targets fairly quickly after training. Reaching similar sales levels in other markets, where the brand is less familiar, will take longer and involves spending a lot more money to generate awareness.
“It’s a matter of recognising where you are in the markets you’re going into and reflecting that in the plan,” Rumble said. “When we’re going into new markets, we’re constantly asking, ‘Can we set this up efficiently?’ And the answer is we’ve been very successful at that.”
London is one example. The company opened its London office a couple of years ago. Today, 150 people are employed there, and clients include Adidas, IKEA, Swarovski, and the North Atlantic Treaty Organisation.
Capitalising on opportunity
With the right people and metrics in place, Hootsuite has been able to capitalise on the burgeoning demand for social media by taking operations to several new territories simultaneously.
“You’ve got this massive opportunity in social media right now,” Rumble said. “A more traditional approach … would be to just grow out in North America and then go into Europe and then go into Asia-Pacific. But we’ve chosen to advance on all fronts because we’re very much at the front of this market and the opportunity is really forming now.”
Choosing the right funding strategy is another crucial element of sustainable growth. By September 2014, the privately held company had attracted a total of $250 million in investments to fund expansion and acquisitions.
As CFO, “you’re managing all this growth inside the business, but you’re also delivering the funding strategy as to when to bring money, how much do you take, and all of those things,” he said. “You’ve got to find that balance between being comfortable in terms of having the money to expand and taking too much money.”
How to go from start-up to success
James Rumble provides entrepreneurs with a blueprint for scaling up their business by drawing on his experience of taking Hootsuite from a start-up to serving blue-chip clients from offices around the world.
For finance professionals who are looking to raise funding for their start-up: “It’s going to be exhausting! Sometimes it can happen very quickly, and there are other times where it actually takes quite a bit of time. You’ve got to do a lot of work with roadshows, you’ve got to get your investor deck really tight. … You’ve got to get to the heart of your business very quickly and concisely — you don’t have the luxury of a long presentation.
“When you get into the actual business side of the transaction — the terms, investor agreements, and so on — it’s very important to have the right group of people around you who can execute on that. You need really high-quality people that can support you in your legal and finance teams because you can’t bear the load on your own. You’ve still got the business to run.”
On seizing opportunities in a booming market: “When presented with a growing market and a massive opportunity, you’ve got to do something. When companies are growing at a 100% year-over-year sort of rate, you’re going to make some mistakes, but that’s better than not doing anything at all. If you wait for the right answer, the moment will pass. So you start to build an offering for your customer, and it gets more sophisticated as you go. You develop the product in relation to the customers’ needs. But if you waited for the perfect product, you would never have sold anything. The customer would have gone elsewhere, and it’s very hard to get them back after that.”
Having a robust execution plan and monitoring how well things are progressing are key, said Rumble. Don’t give up the first time things deviate from the plan. If you’re entering a new market and something is not working as expected, find out what the root cause of the problem is. Your business model and your research should be good enough to know that you should succeed in that market. Ask whether you need to provide your people with additional training or adapt or internationalise the product, for example.
Be a partner to the business: “In the places where I felt most successful, I’ve had very, very good relationships with the non-finance people that I’ve worked with. And to execute on these huge transformations, you have to work really hard not to be the finance guy on the outside. You need to recognise everyone’s trying to get to the same success, and that you are all aligned, and that you guys should trust each other and work really hard with each other. That’s incredibly important for any successful team. Because if you’re not like that, the group under you won’t be, and the group under them won’t be. You’ve got to lead by example.”
On setting career goals: “You’d better be sure you’re willing to make the sacrifices to get there, and you’d also better be sure it’s what you really, really want to do, because it’s going to dominate a big chunk of your life. To be successful, you’re going to have to work through some really difficult things, whether that’s business situations or your own development situations.
“You’ve also got to be really aligned with the values of the company you work for, because you’ve got to live them. I keep coming back to the question: What is it you really, really get a buzz out of? And guess what, if you’re doing that, you’ll be great at it. Ask yourself: How is the work I’m doing making a difference, and how can I make it better? How can I give people what they need to deliver on our strategy?”