The 3 Things Your CFO Wants You to Know
Is Your Business Acumen Good Enough?
by Dan Parisi, Executive Vice President at BTS
Imagine you step into your company elevator and you are alone with your company’s CFO for a few floors. What would you say besides hello? Part of your job as a ‘citizen’ of any publicly traded company, regardless of level or function, is to know the health and trajectory of the business. You should also be able to connect your work to your CFO’s biggest priorities - and know the levers you can impact to drive them. If you cannot connect what you do every day to the CFO’s priorities and deliver results, your job is at risk, sooner or later.
There are three main things you need to know about your CFO’s challenges that can be readily found on your company’s Profit & Loss Statement. If you know and understand these three things, you will increase your business acumen and better understand how you contribute to profitable growth. Plus, you can finally break the awkward silence with your elevator-bound CFO by asking thoughtful questions about these topics. Or, better yet, perhaps you can share a quick story about how you, your team or your function helped accelerate results in one or more of the areas, listed below:
1. What’s your company’s expected Revenue Growth Rate? Take the time to dive even deeper to uncover more insights about what’s on your CFO’s mind: What’s your revenue growth trend over the last three years? Is it increasing or decreasing? What are revenue growth expectations going forward? How does your revenue growth compare to your top competitors? What are the biggest challenges to growth, and the biggest opportunities in the next one to three years?
2. What’s your company’s Gross Margin Percentage? Here you can dig further into: Is your Gross Margin Percentage increasing or decreasing over the last 3 years? Why? How does your Gross Margin Percentage compare to your top competitors? What are opportunities for increasing your gross margin? Is your company’s pricing power increasing or decreasing over time? Why?
3. What’s your company’s Operating Margin Percentage (also commonly referred to as EBITDA or Operating Earnings)? These additional questions will help you uncover more insights about what’s on your CFO’s mind: Has Operating Margin been increasing or decreasing over the last three years? Why? How does your Operating Margin Percentage compare to your top competitors? What are your company’s biggest opportunities and challenges around Operating Margin Percentage? Are Operating Expenses (typically SG&A and R&D) growing faster or slower than Revenue?
Now What?
If you work at a publicly traded company, go to the Investor Relations part of your website and look up the most recent quarterly earnings report by your CEO and/or CFO. Very often the above topics are covered in detail and have accompanying slides and audio for your company’s investors meeting. Be curious, ask questions about the above, and be ready to articulate how you help drive profitable growth. Include those insights in the cadence of your performance management discussions, both with your supervisor and your direct reports. By doing the above, you will greatly increase your business acumen and your relevance to the business.
About the Author
Dan Parisi is an Executive Vice President at BTS, and heads up the Strategic Alignment and Business Acumen Practice. For more on business acumen, read Business Acumen for the 21st Century.