Wasted Capital and Where to Find It: The CFO’s Guide to Spoilage, Levers & Leakages
Run the Numbers
Unpacking Financial Metrics: The Importance of Inputs and Outputs
This chapter delves into the importance of analyzing both inputs and outputs in financial metrics, particularly net revenue retention rates. It advocates for a deeper exploration of customer satisfaction and product usage to inform better financial management strategies.
How can finance leaders identify where their capital is silently going to waste and where it can be better used to drive growth? In this episode, CJ interviews Russell Lester, the CFO of Tropic, where capital allocation is both the product and the mission. Russell introduces the concept of “spoilage”, deployed capital that fails to deliver its intended value. He also talks about “levers”, positive actions that force multiply your efforts, and “leakages”, headwinds or detractors that sap momentum. Russell believes it is the job of the CFO (or “Chief Alignment Officer”) to proactively go looking for these levers and leakages. He then explains how he uses his "center of the table" framework to redeploy the freed-up capital to fuel growth. Russell also covers how to address misalignment, what helicopter skills are and why you need them, what a data safari is and why you should take one daily, and why every CFO needs a spend management tool.
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LINKS:
Russell Lester on LinkedIn: https://www.linkedin.com/in/russell-lester-aa98463/
Tropic:
https://www.tropicapp.io/
CJ on X (@cjgustafson222): https://x.com/cjgustafson222
Mostly metrics:
http://mostlymetrics.com
RELATED EPISODES:
The Roadshow, the IPO Process, and Ringing That Bell, With CFO Amanda Whalen of Klaviyo.
CFO Jenny Decker Unveils Top Frameworks Used at Front.
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TIMESTAMPS:
(00:00) Preview and Intro
(02:34) Sponsor – Rippling Spend | Pulley | Navan
(06:18) The Business of Star Wars
(08:33) The Concept of “Spoilage” in Business
(10:27) How To Identify Spoiled Capital
(15:10) Spoilage Caused by Strategy Drift
(16:25) Sponsor – NetSuite | Planful | Tabs
(20:06) What Are “Levers and Leakages”
(21:40) Identifying Levers
(25:52) Identifying Leakages
(26:37) The Center-of-Table Framework for Budgeting
(31:03) The CFO As “Chief Alignment Officer”
(33:06) How To Address Misalignment
(34:57) What Alignment Looks Like in a Founder-Led Business
(35:54) What Helicopter Skills Are and Why You Need Them
(38:07) Data Safaris and Curiosity as a Secret Weapon
(42:54) Aligning Data and Defining Metrics
(45:08) Using Tropic for Capital Allocation Decisions
(48:13) Spend Management: Cutting Costs Versus Driving Growth
(51:08) Why Every CFO Needs a Spend Management Tool
(52:59) Long-Ass Lightning Round: Alignment With Investors
(55:13) Auto-Renewals: Good or Bad
(56:25) Advice to Younger Self
(57:08) Finance Software Stack
(57:57) Craziest Expense Story
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SPONSORS:
Rippling Spend is a spend management software that gives you complete visibility and automated policy controls across every type of spend, saving you time and money. Get a demo to see how much time your org would save at rippling.com/metrics.
Pulley is the cap table management platform built for CFOs and finance leaders who need reliable, audit-ready data and intuitive workflows, without the hidden fees or unreliable support. Switch in as little as 5 days and get 25% off your first year: pulley.com/mostlymetrics.
Navan is the all-in-one travel and expense solution that helps finance teams streamline reconciliation, enforce policies automatically, and gain real-time visibility. It connects to your existing cards and makes closing the books faster and smarter. Visit navan.com/Runthenumbers for your demo.
NetSuite is an AI-powered business management suite, encompassing ERP/Financials, CRM, and ecommerce for more than 41,000 customers. If you're looking for an ERP, head to https://netsuite.com/metrics and get the CFO’s Guide to AI and Machine Learning.
Planful’s financial planning software can transform your FP&A function. Built for speed, accuracy, and confidence, you’ll be planning your way to success and have time left over to actually put it to work. Find out more at www.planful.com/metrics.
Tabs is a platform that brings all of your revenue-facing data and workflows - billing, AR, payments, rev rec, and reporting - onto a single system so you can automate and be more flexible. Find out more at: tabs.inc/metrics.
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