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The Role Forward

Breaking Down Annual Planning with CJ Gustafson of Mostly Metrics

In this episode of The Role Forward, CJ Gustafson, CFO of PartsTech and the man behind Mostly Metrics, discusses what it takes to run a successful annual planning process and set your company up for success from the finance seat.

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Episode Summary

In this episode of The Role Forward, host Joe Michalowski welcomes CJ Gustafson, CFO of PartsTech and the mind behind Mostly Metrics. They dive into the intricacies of annual planning, a critical period for finance professionals. CJ shares his unique journey from M&A consulting to private equity and finally to his current role, emphasizing the importance of understanding business models and resource allocation.

The conversation shifts to the practical steps of strategic planning. CJ outlines a three-month timeline for annual planning, stressing the collaboration between CEOs and CFOs. He breaks down the process into digestible stages, focusing on setting realistic goals for revenue, productivity, and profitability. His approach demystifies the complexities of financial forecasting in the startup ecosystem.

Joe and CJ also tackle the challenges of planning with incomplete data, advocating for a proactive start and the ability to adapt. CJ’s insights offer valuable lessons on balancing ambition with the realities of startup finance, providing a blueprint for listeners navigating their own annual planning.

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Featured Guest

CJ Gustafson

Writer, Mostly Metrics // CFO, PartsTech

CJ Gustafson is the author of the popular business newsletter Mostly Metrics with over 10,000 readers. By day he’s the CFO of PartsTech, a next-generation automotive parts procurement platform.

Key Themes from the Episode
  • CJ Gustafson emphasizes the importance of three core elements in annual planning: revenue, productivity, and profitability. He discusses the necessity for CEOs and CFOs to align on these pillars at the outset of planning.
  • CJ addresses the challenge of beginning the planning process with limited data, typically only six months into the current year. He advocates for starting the planning in August, using available data and re-forecasting to fill gaps.
  • CJ shares his journey from M&A consulting to CFO, highlighting the evolution of his role across different sectors of finance. His background in business models, resource allocation, and company valuation has shaped his approach to financial leadership within a startup.

Episode Highlights from CJ Gustafson

3:46 — Strategic Planning Timeline

The discussion begins with an overview of the strategic planning process, emphasizing the importance of setting a timeline and working backward from a board meeting for approval. The process typically spans three months and involves collaboration with different departments to validate the feasibility and set clear goals.

“I think it’s usually a three-month process from soup to nuts… I break it into working with three different audiences… start out to see the CEO and the CFO… then you’re going to work with the department leaders… and then the board comes in at the end.”

6:42 — Hiring Strategy and Profitability Goals

The focus shifts to hiring strategies and setting profitability goals. The discussion includes a gut check with the CEO on the number of hires and a review of the company’s pressure to reach break-even, providing insight into the early stages of financial planning.

“So I’ll usually throw a number out there to the CEO. Like, hey, 150 people. You think we can do this? What we’re discussing with revenue with that many people, just like a quick gut check.”

39:06 — Departmental Interlock and Budget Negotiations

The conversation moves into the intricacies of departmental budget negotiations, highlighting the varying levels of back-and-forth required with different departments. The concept of an ‘interlock’ is introduced, where departments such as sales and marketing must align their contributions and expectations.

“It’s differing levels of back and forth because some departments like check, that was easy… other ones, it’s a much more difficult conversation… you need to get more people involved in what I call an interlock.”

16:04 — Unraveling Billing Data Complexity

Brian delves into the process of making sense of billing data. He explains how they look at every detail of historical data, factoring in credit memos, refunds, and time zones. The discussion then shifts to how they handle current month data, emphasizing the importance of having a comprehensive view. This part of the conversation underscores the complexity of managing billing data and the need for efficient processes.

“We’re looking at every single invoice, every single probation line, what’s the amount, what’s the quantity, are there discounts included? All of that is factored in. And so you have this rich bottoms up every detail for your historical data.”

Full Transcript