When David Burt was leading a financial analysis team at Netflix in 2013, he saw a risk to the fast-growing streaming service on the horizon.
Under its core business model, the company entered into licensing agreements with providers to stream their content to its subscribers. In the children’s space, the company relied on just three producers: Disney, Nickelodeon, and the Cartoon Network. If just one of those producers pulled its content or escalated its licensing fees, Burt said last week in a CFO Thought Leader podcast, the company would have been dealt a significant blow to its model.
"If I were sitting in the FP&A teams in those companies," he said, "what would it look like? What risk would there be if one or more of those folks no longer supplied to us or they wanted to supply at such a high economic level? When I played that out, and looked at what was the underlying business models for those companies, I realized pretty quickly that we as a company needed to start investing in original content."
Burt said he, his team of financial analysts, and colleagues on the content acquisition side put together a business case for the company to make a big investment in original kids' content. "If you look now where the market is, that was a wise choice, and Netflix has been very successful with its kids’ original content strategy," he said. "It really started around that time."
Today, Burt is CFO of ServiceTitan, a software-as-a-service (SaaS) platform for companies that send plumbers, electricians, and other technicians into homes and commercial buildings to make repairs. Burt said his experience at Netflix and working with other fast growing tech companies when he was an analyst with JPMorgan Securities earlier in his career has served him well now that finance executives are assuming a more strategic posture.
"Finance is [known as] the 'House of No' and I think that’s very destructive in a high-growth business," he said. "Finance needs to be the 'House of Yes.' What I want people to say is, 'Finance is going to say yes, if I’ve thought through that the business end fits with the company priorities.'"
Burt started in his native Australia in the early 2000s as an analyst for Bain & Company before taking jobs in Asia and then landing on Wall Street and then, at the height of the tech boom, California. "It was at the time when things started to get really interesting and pick up," he said.
His goal is to help 12-year-old ServiceTitan maximize its growth potential as a subscription-based platform that enables real estate trade services to use technology to operate more effectively.
"What really fascinated me is that … the underlying [trade] services have not used technology in the same way we’ve seen in just about every other industry," he said. "The two founders of the company grew up with fathers who are in the trades, so they were doing this not only because it’s a great business, but for a personal passion reason. They saw how their fathers toiled in their businesses. They said there’s got to be a better way, and there is."
When companies subscribe to ServiceTitan, their technicians use the platform when in the field to manage the job’s technical aspects and paperwork, feeding data directly into the company’s back-office system and CRM program.
"Let’s say your air conditioning unit over the holidays breaks down," he said. "You call them up, and they come out to service it. Chances are the technician, who might be operating digitally with an iPad, [works for a] company that has chosen to use ServiceTitan."
Focus on growth metrics
Because it's a SaaS company, Burt said, he focuses on two metrics: new bookings for the quarter and annual recurring revenue (ARR).
He tracks quarterly bookings based on the number of new customers multiplied by the number of technicians per customer multiplied by the average revenue per user. "That’s a really important metric for us, because you’ve got to keep the engine going," he said.
The ARR metric complements the booking number, he said, because it opens the door to income for additional services. "The combination of those two things is ... really important because that allows us to forward invest into areas of R&D, sales and marketing and so forth."
He also looks closely at the company’s net promoter score and other satisfaction metrics. "It’s important because finance leaders [shouldn’t] just look at the numbers and the financials but what might be underlying indicators," he said.
The company generates about $100 million in annual revenue. When it initiated a series D capital raise last year, it was valued by investors at about $1.7 billion, putting it in sight of an initial public offering (IPO) as a unicorn if it decides to go that route. "While the company is smaller than the organizations I worked for in the past …. we’re at the very beginning of something," he said. "That’s what I see here."
"In a growth company, if you’re not taking bets, you’re not going to be successful," he said. "How do you put controls in place to make sure you don't make silly bets but at the same time make sure you are making bets? The framework [I learned over the years] for analyzing good decision-making and forward investments was pivotal for me."