A CFO's stress-tested model bears out
When Christian Geyer took over financial planning and analysis for the Center for Naval Analyses in 2012, he created a model to forecast how the organization would do over the next year or so. What he discovered stunned him; despite the organization's 75-year history of steady operations, his model showed a steep revenue drop within the next 12 months.
"I took a few days to kick it around," Geyer said in a CFO Thought Leader podcast. "Where did I go wrong in my modeling, in the math and statistics? I tried to punch holes in it."
Once he concluded his work was sound, Geyer took the news to the CFO, who did his own analysis and asked him to share the forecast with the organization's board.
"I remember it clear as day," said Geyer, now CFO of data security and analysis company ActiveNav. "I got a call that night to come into our CEO's suite. It was the first time I had walked into a board meeting."
The organization's leadership directed him to work with his team to develop contingency plans. Before the 12 months were out, revenue in fact dropped by half, but the organization was prepared.
"Credit to the C-suite," Geyer said. "They really absorbed it. They believed in the model."
As an organization that depended on federal government contracts, it was hit hard by the so-called fiscal cliff in 2012 — when Congress couldn't agree on a federal budget and forced the executive branch to shut down non-essential operations and furlough much of the federal workforce.
"Sure enough, the budget uncertainties came to reality," Geyer said. "Budgets were cut, funding was pulled back. We were looking at pulling in 50% of funding we expected. Our rap rates, consistent with the model, were skyrocketing."
As bad as the experience was, it showed Geyer how powerful finance can be, which helped him last year.
Just two weeks after he started at ActiveNav in his first CFO role, he was at the company's U.K.-based main office when the United States began issuing lockdown orders.
"I had to decide in my second week to close all our global offices and send everyone remote," he said. "That was a shocker to me."
Even so, the company wanted him to stay focused on why they hired him: to create a plan for using money the company had just received in its series A capital raise to scale its operations and accelerate growth.
The company decided it would hold back for a short time, then rapidly go to market with new branding, a new website, a ramped-up sales team and a bigger back-office operation. "That's where our investment was best-suited," he said, "penetrating large markets, squeezing margins to increase profitability, building out the sales force and getting in front of clients."
Geyer started in finance 15 years ago as an accounts payable specialist at SSI, a construction company specializing in government contracting work.
From the start, he saw his AP role as a launch point for gaining experience in all aspects of finance and accounting.
"On a sheet of paper, I wrote down what I wanted to do in one year, two years ... to reach the CFO seat in year 15," he said. "I lived and breathed that. It's like a contract to yourself."
He advanced to management at SSI after identifying and solving bottlenecks in the AP process.
"I put in 12-14-hour days, looked at purchase requisitions, the purchase order process, the payment approval process," he said. "After a month or two I had whittled down what was a 160-hour-a-week job with four full-time equivalents (FTEs) to 10 hours a week, and saved the business $300,000 a year."
At ActiveNav, Geyer is closely involved with the company' sales operations to help ensure it has flexibility to customize deals to get them closed.
"I'm embedded in every deal," he said. "My rapport with the sales team can be on a daily or weekly basis, depending on deals coming through. I speak almost every day with the global sales leader — how we can structure something to turn a cold client warm again, using incentives for different methods of penetrating that account again."
With his finance team, sales metrics are top of mind, because those measure how well the company is doing to meet its forecasts. "Are we generating enough pipeline?" he said. "We know our win rate, how fast we can close a deal. So, do we have the number of deals out there to grow the business?"
He also looks at churn, new clients, time to close, and win rate, among other metrics. For the company's services division, he looks at bill rate, average bill rate per client, profitability in markets, and use rates.
All of the metrics lay the groundwork for the one he cares most about, which is enterprise value. "That's the most important metric," he said, "I look at the other metrics to help us get there."
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