Supporting Fast Growth on a Tight Budget

By Kim Petry, CFO, itBit

Kim Petry, CFO, itBit

Startups are known for exploring multiple product ideas and business opportunities before finding their sweet spot. CFOs at fast-growth startups are typically tasked with balancing a constrained budget, while providing the appropriate amount of funds to support product development, talent acquisition and a positive culture that aids in employee retention.

“At itBit, we have created hybrid roles that empower employees and allow them to grow into well-rounded professionals with diverse skill sets”

In the case of technology startups like itBit, the product is typically developed and tested prior to obtaining a commitment from potential clients. This means it is critical for the CFO to have a deep understanding of the business, product, development needs and marketplace in order to make the most informed financial decisions when allocating funds.

Given the thin margin for error facing most technology startups, it is vital that CFOs play leadership roles in four key areas:

1. Defining Strategic Goals

My finance team plays a large role in not only establishing budgets, but also developing and vetting the company’s strategic goals. We receive strong input from product managers and are sought after to provide an objective assessment as well as financial and business guidance. We continuously collaborate with our CEO and the stakeholders across various business lines to ensure financial goals are in alignment with company goals.

As new technology needs surface from potential clients, each tangible idea is scoped out by finance. We will assess the current market for the product (if any), competitive environment, funding required to build the products, revenue opportunities and return on investment. This holds true across all areas of development, including new products and M&A activity.

Our finance team will then work with the requisite business leads to review the data and come to a conclusion about the viability and potential profitability of a product. The majority of these decisions are made on a real-time basis as technology and product blueprints are constantly evolving. At the end of the day, my team’s goal is to help the company maximize revenue and margins.

2. Developing a Dynamic Budget

Many well-established organizations spend a lot of time preparing budgets and analyzing the same data in many different ways. In a startup environment, this budgeting approach does not add value to the organization. A dynamic budget is initially created with a specific amount set for the entire company. The budget is then frequently changed to allow for the development of new products and to meet ever-evolving customer demands.

Dynamic budgets and financial plans also offer the flexibility needed to address shifts in the marketplace that often drive startups to introduce new products or completely pivot their business direction. For example, let’s say a top client suddenly asks for a “nice to have” technology product that could potentially be valuable to multiple clients and have a high rate of return. A dynamic budget is built to easily shift to fund that product.

In short, this type of budget environment allows the company to quickly and proactively pursue opportunities as they surface throughout the year while maintaining an organized budget.

3. Creating Efficiencies through Hybrid Roles

Most startups are faced with limited resources and employees often wear many hats. At itBit, we have created hybrid roles that empower employees and allow them to grow into well-rounded professionals with diverse skill sets. For example, a finance employee may support multiple roles within the finance team but also hold accountabilities in human resources such as managing benefits.

In time, the employee could be given an additional human resources role or a project outside of their core competency to promote continued growth. Hybrid roles allow employees to develop new skills while increasing their overall knowledge of the company.  After several years, the employee would have experience across various areas of finance as well as other related disciplines. Ultimately, this multi-faceted expertise would allow them to obtain a more senior role.

4. Implementing Supporting Systems

Tech startup CFOs are faced with many decisions concerning spend. A recurring decision point is where to provide an enhanced technological solution versus keeping a process manual. Many established organizations have countless purchased and proprietary systems that facilitate a variety of tasks.

In the case of a start up, it is typically cost-prohibitive to purchase large systems. However, the finance organization must also assess the cost against employees’ needs and the scalability of the existing process. In a fast-growth company where dynamics change quickly, we need to ensure that the infrastructure can support significant growth over a short timeframe.

Expense tracking is an area we are addressing with a supporting system. itBit employees, like their peers at fast-growth startups, log a significant amount of travel time to meet with clients and actively pursue sales opportunities. Last year, we implemented an expense tracking and reporting system which allows our employees to immediately upload expenses and maintenance all receipts and contracts. The system charges a small monthly fee and is an added expense. However, it is scalable and has eliminated much inefficiency across the organization, making it a valuable addition.

At itBit, we are building a nimble company that can compete in this exciting era of rapid technological advancement. Our team is using blockchain technology to build innovative financial infrastructure solutions including our flagship product, Bankchain that revolutionizes how financial institutions execute post-trade.

In response to the dynamics of the organization, I have built the finance team to ensure all members have multiple skill sets and that they can be flexible. This multi-faceted structure allows for faster adaptability and responsiveness and best supports the company in building products that will drive change and eliminate inefficiencies across the financial markets.

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