How CFOs build a Goldilocks “just-right” budget – Jeff Epstein ex-CFO of Oracle
Dec 12, 2023
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Jeff Epstein, former CFO of Oracle, discusses the skills needed to be a top CFO and the different routes to becoming one. He shares insights on budget setting, including the right percentage of time to hit budget goals and balancing between aggressive and conservative targets. Epstein also talks about the critical role of FP&A in making strategic decisions and revisiting processes during mergers. The podcast covers topics such as the importance of forecasting accuracy, managing expectations with Wall Street guidance, and focusing on key drivers and metrics in budgeting.
Budgeting should be based on probabilities and incorporate different scenarios and likely outcomes.
FP&A plays a critical role in driving strategic decisions and resource allocation within an organization.
Embrace continuous learning and seek opportunities to gain knowledge and wisdom from experienced professionals in order to excel in FP&A.
Deep dives
Understand the importance of aligning budgets with probabilities
Budgeting and forecasting should be based on probabilities and not just single-point estimates. It is essential to have a clear understanding of the business and its key drivers to make accurate forecasts. Consider scenarios and the likely outcomes based on different levels of aggressiveness or conservatism in your budget. Communication and alignment with key stakeholders, such as the CEO and the board, are crucial. Regularly review and update your forecast to ensure accuracy and learn from your past performance to continuously improve your forecasting abilities.
The strategic value of FP&A in decision-making
FP&A plays a critical role in driving strategic decisions and resource allocation within an organization. Understanding the business at a granular level and identifying key metrics is essential. Analyzing unit economics, customer behaviors, and revenue drivers provide valuable insights. Effective financial planning and analysis help evaluate the profitability, price points, distribution strategies, and ROI of various initiatives. FP&A professionals should strive to align incentives and goals with company objectives, track performance, and adapt forecasts based on new information or changing circumstances.
The power of probabilities in budgeting
Probabilities and realistic expectations should factor into budgeting decisions. Rather than aiming for precise and detailed forecasts, it's often more beneficial to focus on the key drivers and major trends. Avoid getting lost in unnecessary complexity. Emphasize the big ideas and strategic metrics that will drive the business forward. By understanding unit economics and aligning incentives across the organization, finance leaders can make informed decisions backed by data and past performance analysis. Foster a culture of communication, transparency, and continuous learning to improve forecasting accuracy.
Lessons learned from Warren Buffett and Winston Churchill
Warren Buffett and Winston Churchill are both great sources of inspiration and wisdom. Buffett's value investing principles and his long-term mindset serve as valuable lessons in finance and business. Churchill's early life experiences and leadership qualities demonstrate the importance of resilience, adaptability, and courage. Drawing insights from these exceptional individuals can help shape one's approach to finance, decision-making, and navigating challenging situations. Embrace their teachings and apply them to the ever-changing landscape of FP&A to drive success.
Continuous learning and seeking mentorship
To excel in FP&A, it is crucial to be a lifelong learner and seek opportunities to gain knowledge and wisdom from experienced professionals. Connect with mentors, both within and outside your organization, and engage in open discussions to learn from their experiences. Networking is key. Reach out to individuals a few years ahead in their careers and listen to their insights. Actively participate in communities, online platforms, and forums dedicated to FP&A to exchange ideas and broaden your perspective. By embracing continuous learning and seeking mentorship, you can enhance your skills and grow as an FP&A professional.
Jeff Epstein is an operating partner at Bessemer Venture Partners leading its CFO Council where he helps CEOs and CFOs at their 200- portfolio company share best practices. Epstein, one of the most famous names in finance, is former executive vice president and chief financial officer of Oracle, with a market value of over $200 billion. Prior to joining Oracle, Jeff served as CFO at public and private companies, including DoubleClick (acquired by Google), King World Productions (acquired by CBS), and Nielsen’s Media Measurement and Information Group. Earlier in his career, he was an investment banker at The First Boston Corporation.
In this episode:
From Wall Street to first-time CFO
Running finance at Wheel of Fortune, Jeopardy and Oprah-TV hitmaker King World
The skills needed to be a top CFO
The 3 routes to CFO: Auditors, Wall Street or FP&A
What Andy Gove OKR setting can teach us about budget setting
What is the right percentage of time to hit budget goals?
Balancing between Elon Musk (Papa Bear) and Charlie Munger (Mama Bear) in setting targets
Giving people the opportunity to overachieve
Best case/worst case/base case at Oracle strategy
The delicate balancing act of Wall Street guidance
Using a stagger chart
Why FP&A is so critical; how the biggest strategic decisions involve FP&A advice
Revisiting the processes as Oracle bought Sun Microsystems
Merger integration strategy worked on our sales compensation
Truck drivers and sales commission – a must-listen to story
How in 1983 at the Washington Post I learned from Warren Buffet and ended up scrambling to buy 4 shares of Berkshire Hathaway. Guess much it’s worth now?
