CFO Impact in Private Company Board Meetings

Personal Experience

The day after starting as the CFO at a SAAS company, I attended my first board meeting. Early in the meeting, there was confusion about the sales results being presented due to a misunderstanding about the meaning of “revenue” versus “ARR.” The company was reporting revenue but calling it ARR. So my first official interaction with the board was to assure the members that I would drive alignment, understanding and accuracy around metrics before the board next met.?

The impact of this confusion extended beyond the implications of the data issue (both the accuracy of what was being reported and the clarity of definitions). Did the company really understand its progress and what was driving it? How did this impact board confidence in the exec team?

[If you're in the SAAS world you know that these measures are related but have very different implications on valuation and understanding business growth and health (let me know in the comments if it would be helpful for me to write a quick follow-up post on driving clarity around these numbers and what they mean).]?

The example I gave may sound minor, but I give it because no CFO wants to have a board meeting derailed due to disagreement over terminology and definitions. Worse still is showing inconsistent data between teams. If your sales team reports one ARR number for a closed deal and the finance team reports a different number, it's going to focus members on the discrepancy and invite questions about data sources and why the teams aren't working together.?

That takes time away from what you want to focus on - the story the data tells about the business and what is being done about it – whether that’s trying something new, stopping something that’s not working or continuing with successful programs. This may sound like common sense, however I have seen many times that with the time pressure of trying to get a deck shipped before a board meeting, if the right checks are not in place, it's very easy for data to not match up.

So how can a CFO work strategically with their CEO to prepare for a private company board meeting? What is the CFO’s role?

Board meeting prep starts soon after the end of the prior board meeting. What follow up was promised? What goals were communicated? What metrics were presented and are we continuing to track those? And then as the meeting gets closer: What are the most important learnings that need to be communicated and discussed? How does that tie into the company's goals and metrics and results? At the last board meeting, what did we say we were going to accomplish?? What has progressed, what has stalled and what big changes have occurred since that last meeting? What support is needed from the board?

It's far too easy to focus on the board deck as the deliverable rather than the story and message behind that deck. The board deck can serve as a great calibration document before a meeting, a guide to the story during the meeting, and an important leave behind after for reference purposes.

It's important to remember that even the most involved board members are not thinking about your company day in and day out, and most members won’t remember the key details of the last meeting. A quick review brings everyone up to speed so you can focus on highlighting the most important learnings- be those successes or stumbles.? In that way, you paint the picture of where the company is headed, bring board members along on the journey, and also introduce ways they can help.

It is imperative that the CFO and CEO are in lockstep about the expected flow, message and theme of the meeting. The CFO can then help orchestrate preparation with the rest of the leadership team and then make sure that when those individual sections come back, they tell a cohesive story. I also see the CFO as ultimately responsible for ensuring that all data in a board deck is accurate and consistent (which of course starts far upstream from board meeting preparation).

Some Nuts and Bolts

When it comes to the finance specific data being presented, keep in mind that not all board members are going to be experts on the financial statements. Make sure to highlight the most important data about the business that you want to make sure the board understands. Ideally, detailed financials are in an appendix and the financial information provided is summary form with explainers about key business drivers. There should not be any consequential surprises in the financial slides (or elsewhere)- this is not the first time to bring attention to something like cash flow concerns, deteriorating margins, or a significant deviation from a prior forecast.?

It is likely most key business drivers will be reinforced in other sections of the meeting- such as sales progress and drivers discussed by the sales leader, expansion and churn data presented by a customer success leader, or margin improvement celebrated by your engineering leader.

Keep in mind that once you present a metric you should assume you will need to keep presenting that metric until it makes sense to make a change. Consistent data sets and formats help keep the focus on the progress rather than requiring reorientation. Think evolution over time rather than a revamp every meeting.

When presenting the finance data, I typically try to be over prepared with a script along with analysis and details at my fingertips where I expect questions. If there are questions about details that I cannot answer on the spot, I have no problem saying that I need to do some research and revert back. I may ask questions about why they're looking for that data in case I can get them comfortable with their concern in a different way.

Often, a CEO and I will create an FAQ together before the meeting as we anticipate concerns, objections or deeper questions that a board member may have. Creating the FAQ may lead us to add additional material to the board meeting deck, often in the appendix as supporting information that we may reference during a meeting.

It's also important for a CFO to tightly collaborate with the CEO on the closed session of the meeting.? As a private company CFO, I typically lead the part of the closed session where we attend to corporate matters like stock option approvals, prior minute approval, and discussion and approval of other board actions. Although I typically leave the meeting before the CEO meets alone with board members, that doesn't mean that I haven't had a hand in helping shape other messages that the CEO will deliver to the rest of the board once I'm out of the meeting.?

Preparation prior to a board meeting needs to include a regular cadence of communication outside of official meetings. This helps lay the groundwork for a great meeting that unites a group of people around a common mission, creates a common focus, and generates new ideas and approaches.

Ultimately, the board must fulfill certain governance requirements. The members are also assessing progress, providing outside perspectives, identifying opportunities for helping, and addressing potential pitfalls. A CFO has the opportunity to show up as a steady hand and partner to the CEO while helping the board deepen their understanding of the business, the opportunity, and the risks.?

Please let me know in the comments if there are additional topics related to private company boards that would be helpful for me to address in a future article.