The Metrics Department

Here's something that drives me nuts about how we typically build finance teams:

We're building them backwards.

Traditional guidance for how to build the Finance function when you're an early stage startup is:

• Start with the basics, hire a bookkeeper

• Consult with an accountant for taxes,

• Maybe consider a Financial Controller (basically a process manager) as you start to grow.

But until you reach the later stages, you "don’t have the budget" for:

• FP&A (Financial Planning & Analysis, aka Reporting)

OR

• Financial Strategy (a CFO)

Here's the problem:

When you're early stage, making every dollar count is mission-critical.

And when you only invest in a bookkeeper and accountant

You're spending only on the lowest-return roles in the Finance stack.

Historical financials (what you get out of a bookkeeper & Accountant combo)

1. Can tell the government how much tax you owe, and

2. Tell your investor how their investment in you is going

But they don't tell YOU (the CEO), what you need to know..

Because they don't attribute results to the actions you take in the business.

So, you don't know what to start doing

What to do more of,

Or what to stop.

Here's my proposal:

Let's destroy the term "Finance Department"

And rebuild it as "The Metrics Department".

In The Metrics Department, we start with your goals:

• What revenue do we want to achieve in Q1?

• How much profit?

• And what other market milestones do we want to hit?

Then, we extrapolate out to the drivers:

• What actions will we take to get those customers in the door?

• What budgets will we keep to hit the profit we want?

• How will we achieve dominance in that particular sector?

• What constraints or threats would prevent us from getting there?

Then, we ask ourselves:

• What will we need to measure to track our progress - and forecast our performance - against these metrics?

And 80% of our finance budget goes to building out the measurement and reporting of these high-impact metrics.

The remaining 20% can go to measuring and tracking stuff for others.

After all, it's OUR business.

Shouldn't our reports

Be for us?

Enjoyed reading this article? Subscribe to receive more via email here. 

Know a Founder or Entrepreneur who'd love this content? Please share it!