We have all been there, right in the thick of it, pushing our growing companies to new heights. We know too well the delicate balance of fueling growth without burning before making it to the destination runway. It's like being in the cockpit of an airplane, where every decision can either propel us to the sky or send us spiraling. As we navigate this transition from flying around in growth mode to propelling to scaling, when the stakes are high, the turbulence is real and can be awfully scary.

I recently got into a deep dive about this with some peers, and we all agreed: founders need a finance team that's not just good, but great. We need a crew that can spot the critical issues on the radar and manage the risks we don't always see coming as we scale. The pilot’s rules are: 1) aviate, 2) navigate, 3) communicate. In keeping with the flight analogy, the CFO acts as a cash, direction, and risk navigator to support the pilot, or founder. Here are a handful of topics that came up when it comes to having the foresight and strategy of seasoned pros on your team:

Notice The First Signs

One of the first signs of needing a more nuanced financial approach is the impact of scaling on cash flow. As companies grow, they often experience a stretching of their cash flow cycle, growth sucking cash in general, or a lag between signing new business and getting paid. This is more pronounced when moving from a core customer base to a broader market, where purchasing behaviors can vary significantly.

On another note, scaling up the sales team beyond the initial few can bring about unexpected challenges in productivity and efficiency. A sophisticated finance team can foresee these shifts and help you plan accordingly, ensuring that cash flow does not become a limiting factor in growth, and supporting financing opportunities.

See What’s Often Overlooked

Even small shifts in pricing or cost of goods sold (COGS) can significantly impact a company's financial health. Routine margin analysis and a nuanced understanding of how changes affect the bottom line are crucial.

Merging operating metrics with financial metrics is a practice often overlooked by less sophisticated finance teams. Here are some key questions to ask: 

• What might we learn in identifying customers by cohort?
• What might we learn in identifying revenue and margin by product?
• What might we learn in analyzing sales by customer archetype, geography, product buying pattern, and more?
• What might we learn in analyzing customer longevity by sales rep?

The answers to these questions can provide invaluable insights into your company's operational health.

Be Realistic about Increased Demand

As companies grow, it’s vital to realistically assess the capacity to handle increased demands. This includes the physical capacity to produce goods or services and the organizational capacity to manage a growing workforce. Many companies underestimate the impact of the step function of growth that happens when a company grows enough that it has to move from a flat organizational structure to one with a management layer. We often see this "messy middle" happen when managers and directors start leading teams because it adds an entirely new layer of cost with growth and scaling. For example, three sales representatives might report to the COO, but eight reps now need their own Vice President of Sales to manage them. This VP of Sales is a substantial investment, which many founders don't see coming.

With growth comes increased complexity, especially when dealing with multiple channels or markets. A sophisticated finance team can anticipate and help you manage these complexities effectively.

Risk management is another area where financial acumen is essential. Issues like customer concentration, supply chain vulnerabilities, and human resource risks need to be identified and addressed proactively. Founders and entrepreneurs like you and I are naturally optimistic, but a balanced view of risks can significantly enhance decision-making processes.

Embrace Experimentation

You and I love exploring the unknown, but doing so without parameters or data can increase risk. One of the most powerful tools in a sophisticated finance team's arsenal is the ability to strategically support you in running experiments. This approach is not limited to product development or marketing strategies but extends to pricing, sales strategies, and operational changes. By testing hypotheses and analyzing outcomes, you can make data-driven decisions rather than relying solely on intuition. 

For companies, the journey from growth to scale is fraught with financial challenges. By building a sophisticated finance team capable of deep analysis, risk management, and strategic experimentation, these challenges can be turned into opportunities for sustained growth and success. This approach ensures your company not only scales but does so in a financially healthy and sustainable manner. The sky’s the limit. 

Stay relentless!