How Future Driven CFOs Approach Crisis Management – Adam Metzger

How Future Driven CFOs Approach Crisis Management

In this episode, Adam Metzger, Managing Partner at ACM Consultants and ex-financial trader shares his unique perspective regarding crisis management during tough times, what sets top leaders apart in times of crisis and black swan events, and how to leverage the downturn as an opportunity for growth.

How Future Driven CFOs Approach Crisis Management - Adam Metzger

Speakers: Adam Metzger, Managing Partner, ACM Consultants

Adam Metzger has almost 20 years of leadership experience in finance & capital markets, investment management, and business development. For the past five years, Adam has been working as a fractional CFO/advisor for startups and growth-stage companies to provide them with strategic, financial, and operational guidance.

His financial and operational expertise in this realm spans a diverse array of industries including saas, media, healthcare, and CPG. Previously, Adam held positions with leading trading institutions including Caxton Associates, Morgan Stanley Asset Management, BNP Paribas, and Loop Capital.

Adam received his B.S. from the University of California at Berkeley where he majored in Political Economy of Industrial Societies and was Captain of the NCAA Men’s Division 1 Waterpolo Team. He and his wife, Jenny, currently live in Brooklyn, NY with their five-month-old baby.

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Notable Quotes:

How does your prior experience in the capital markets now apply to your role as a CFO for hire?

From Macro to Micro

It’s interesting because, in my previous life, I have been running a billion-dollar portfolio. And now as a CFO consultant, it’s obviously on a much more granular scale and smaller scale.  It is interesting, you know, a lot of what you’re hearing now from the standpoint of a CFO is that they are more than just a bean counter. So you want the strategic CFO – so you’re more than just an accountant, you know? Can you manage the books? Can you budget? It’s really about working with the different people and looking at the bigger picture and seeing how you could help a business grow and scale. And that’s one of the things that I really try and help my CEOs with – just how can I get you to the next stage of where you currently are? And a lot of it is through modelling, but also trying to help them look at an industry and see what they need to do in terms of steps, in terms of hiring, in terms of just general infrastructure and innovation to propel their business.

When I’d been trading, I loved really the macro aspect of just kind of looking at the different levers and different filaments of what you could turn in a market and see how you see the after-effects. I think so many people who got into trading like the first book they read was like Liar’s Poker or something like that, and it really was the first book that I read when I was in college.

The “What-If” Game of Risk Management

It was so interesting, just the idea that there is one chapter where they talk about like the what-if game, where one of the traders on the desk would just name a scenario or an event. And they played a What-If game saying, OK, what happens if this happened? And I think they use the example of in the book where it was real-life example. It was like Chernobyl hit — what happened? And I mean, it’s obvious, very dark. But like I mean, they use Black Swan events to see how you could predict different things. And then they looked at the immediate effects profile. What are the secondary and tertiary ones in terms of the different economies and beyond? What would interest rates do? And so I’ve been trying to use this kind of mindset. You know, when I work with my clients and try and help them look beyond the immediate and see just the long term vision of what their company could go and how it could grow.

So what advice do you have for CFOs in growing companies to conquer a black swan event based on both your tactical CFO experience and also as a trader?

Always Have a Contingency Plan

Yeah. Well, right now it’s just all hands on deck. I mean, it’s a terrible task. Crisis management is about circling the wagons and trying to see how you can keep your company afloat. You can’t predict when a black swan event is going to happen. That’s the entire nature of a black swan event. The idea is to prepare yourself in case anything happens. So, I mean, if you’re trading I mean, it was about buying out of the money calls and having any kind of insurance or buying out of money puts and has any kind of insurance to the extent of like the company that you’re covering. So, I mean, how does that apply to startups?

Well, prior to October where many startups were starting their IPO prospectus, it was all running and gunning, you know, I mean, just grow with reckless abandon. To some extent. And just get that top-line growth and nothing else mattered, gross margin didn’t matter. Budgeting really didn’t matter. I mean, as long as revenue is going higher, you know, I mean, we are on our IPO. We do not see a path to profitability, which is amazing that you can actually put that an IPO.  With this pandemic, the entire kind of dynamic has changed and shifted VC mindsets, you know, forever. And they do need to see the path to profitability in terms of what to do now.

Now, it really is just about trimming whatever you can. You obviously try and want to save the human costs as much as possible, and sadly this might mean layoffs. You have to take away what you don’t need anymore. Like office spaces, for example.  Work is going to be remote for a while. So can you just get out of your lease? I mean, one of my clients has we recently did that. And the fact, you know, everyone’s gonna be remote for the next eight months, probably. And so in January, what are commercial space leases going to be doing? Probably a lot lower than they are now.

Cutting Costs is a Short Term Strategy – But Start Looking Towards the Future and Building a Conscious Spend Culture

At this point going forward, you really are going to need a buffer, right? Ideally, it would be amazing to have six months of expenses in the bank to manage your way out of any crisis. Then the ability to have your revenue just drastically cut. Some startups don’t even have like a six-month runway, which is the crazy part. I think a lot of newer CEOs in earlier-stage startups don’t think about this, especially if they’re at that early growth phase. Their mentality is often “let’s spend in order to grow and let’s make bigger moves so that it pays off in the future”. But then, you know, this whole pandemic thing came out of the left field and now people are kind of forced into this position. People’s mentalities need to change – we need to start looking towards the future and also making sure that we’re being fiscally responsible.

How do you think the startup landscape will shift after this downturn? What should CEOs start thinking about in regards to crisis management? 

Yeah, well, I mean, crisis management is really just forcing people into fiscal discipline, kind of as you mentioned before. And you should always be doing it. And a lot of companies, just the horses out of the barn. Right. Because if you’re an industry that’s hurt and your runway isn’t significant and your revenue has been just drastically reduced, you have to take drastic measures like you really do. That’s everything that we’ve seen. I think a lot of companies might have been on this path anyway, in terms of their eventuality. But with an economy that was doing very well and continued VC funding, there was no reckoning. And that’s kind of what we’re seeing.

A lot of companies will just die in some industries and something new will spring into place. But it really is just about this dramatic shift in how and how leaders, finance leaders are going to have to manage their company spending and their budgets going forward and you know, forever. It’s a good thing. There are so many horrible aspects that are coming along this downturn that trumps everything else. But companies shouldn’t grow with reckless abandon, its reckless abandon. This period of time is a reckoning.

Since every dollar counts right now, how can someone determine what to actually invest in within a startup?

Oh, it’s a difficult one. It’s really hard to think of “Oh, where shall we put our money?” Now, all my clients are thinking about questions such as:  “How do I maintain the status quo right now? How do we keep our company whole?”

Streamlining Operations Through Tools You Actually Use

This is really not a good time to be putting money in an ERP or anything like that and doing like a massive change in the tech stack. But a lot of it is just kind of incorporating some efficiency tools and also streamlining your operations. For example, if you have a bunch of software that lead into one vertical, there are ways that you can actually cut out the different pieces and go to one. For example, just one streamlined software that just does all these jobs but does it cheaper. And I think that’s just part of the budgeting process and being savvy and resourceful. That’s kind of where we are right now. That’s what you need to ask your leaders. It’s really about how can I save money but not sacrifice efficiency and not affect any kind of sales or any kind of operational mobility that my company has. How do we do this and still maintain this level of efficiency that we have?

Understanding What Problem You Are Trying to Solve

It’s interesting because this is almost going back to Simon Sinek’s classic book Start with Why. I think during a growth phase of a company, you tend to want to chase shiny objects and tools. For example, oh, let’s look at this tool that can help us do project management. But during crisis management, companies are looking back at their tech stock and being like, why did we have this in the first place? Why do we need it? Do we want to have it moving forward? Or is there a better solution than this that we can just clump it all together?

This interview is taken from an episode of the Spend Culture Stories podcast. 

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