Getting the Best Out of Fractional CFO Services with Scot Mollot, CFO at Attivo Partners

Joe Michalowski: [00:00:00] Hello, and welcome to another episode of the Roll Forward podcast. My name is Joe Michalowski, and this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done. And today my guest is Scot Mollot, Consulting VP of Finance at a Attivo Partners. Scott, thank you for joining me today.

Scot Mollot: Thank you, uh, Joe. Thanks for having me. Uh, glad to be here. Uh, excited to kind of talk with you about, uh, What I do with Attivo and, and, uh, I, sorry, I do wanna make a little correction. I am officially c f o with,

Joe Michalowski: my God.

Scot Mollot: Attivo. Yeah.

Joe Michalowski: Amazing. Uh, well, sorry about that. I looked it up. I was wrong. All right. Uh, c f o even better. Love it. Uh, thank you for correcting. I should have asked first. Um, well, love it. Uh, this is actually great for the first question, which is always, uh, mind giving everyone the quick background about yourself and how you became the c f O of a Attivo partners.

Scot Mollot Introduction

Scot Mollot: Yeah. Well, uh, you know, back background, uh, you know, I, I, I, I like to go back to the college days. [00:01:00] I went to U C L A in LA and I had an easy path. Uh, Staying with one of the big six accounting firms, uh, down in la being part of, uh, manufacturing, banking or the entertainment industry. But I chose, uh, the harder path to come up to Silicon Valley and be part of the tech scene.

So, um, you know, had less opportunities to come up here, but I was able to get one and, uh, went to K P M G, uh, on the audit assurance side. Uh, typical kind of, uh, Growth path to come through the accounting finance ranks. Um, knew, uh, fairly quickly that I. Wanted to be more of a rule breaker than a rule enforcer.

So jumped into startups, uh, fairly quickly. And for about 14 years, I, I went in and out of, uh, various startups, um, you know, covering industries from, um, online marketing, uh, e-commerce and, uh, consumer software, even biotech stint. [00:02:00] And at the end of one of my, um, last, uh, In-house, uh, gigs. The company was acquired.

Uh, I was c f o of that, that company. And, um, the, the acquiring company had a team already in place. And so, you know, I was redundant and I took some time off and I was thinking, you know, through, through my journey up until that point of, you know, you just get. Go into these startups, you’re, you have very little resources and you’re, you’re trying to keep your head above water.

So, you know, one, have I been doing things right? And two, how do I kind of be able to have some support and work with a team? So coming out of that experience and that time off, I, I joined, uh, a consulting firm, um, which, which now, um, the founders are, It came, that came from there to have found Attivo and, and really enjoyed, uh, collaborating, working on different clients, seeing how, how other folks get to do things.

’cause when you’re [00:03:00] a team of one at a startup, you, you’re pretty siloed. Like you’re, your network is busy. It’s, it’s hard to kind of check in with folks. Um, So I was at that first, um, consulting firm for about four years, and then I had the opportunity to go back in, uh, to startups and I was, uh, did a stint with Lyme, the the Micro Mobility Company.

Um, and that was, uh, the, my big classic, you know, Silicon Valley growth story. Um, working there. And then I had the opportunity to rejoin my colleagues back, uh, at Attivo after, after that was founded and, and have been, uh, at Attivo for about four years now.

Joe Michalowski: Love that. I love, uh, I, I really, uh, enjoy hearing the, the backgrounds. Everyone. I always say this, but like, uh, for me personally, it’s just, it’s been a pretty linear like path, uh, for. How I got to where I am. There’s not a lot of like, meandering through industries and kind of like finding my way in different, uh, stages of growth.

Uh, so yeah, I [00:04:00] really enjoy hearing all that and excited to talk more about, uh, some of these like consulting services that you provide because for us, I mean I, we talked to a lot of like, you know, early to mid stage to like later stage startups and. Everyone knows that, like, you kind of start out with this, uh, you know, finance is kind of the afterthought in the earliest stages.

And so you end up like, oh, we’ll get like an outsourced bookkeeper and we’ll get an outsourced, like maybe a fractional C F O. And so I was excited to chat with you about sort of, uh, working with fractional CFOs or consulting for services and kind of scaling from that point to bring in-house teams. So do you mind just setting the stage, uh, by explaining.

Sort of like the, when you typically engage with a company in this consulting fashion and why you think it’s so valuable to, to start earlier rather than later. Uh, getting finance and accounting, right?

The Stages of Fractional CFO Engagement

Scot Mollot: So, I’ll, I’ll speak, you know, specifically to Attivo ’cause different firms have different, uh, strategies [00:05:00] and, and different skill sets and, and where they kind of. Come in to play with, with the companies they work with . At Attivo Partners we work with, um, seed to series C companies. That’s kind of the sweet spot.

And usually what will happen is a VC will fund, uh, one of their portfolio companies. They’ll be a bookkeeper in place or friend of the, friend of the founder, or maybe, maybe one of the platform, uh, service that’s that’s in place. And they’ll need to kind of. Upscale the finance and accounting, uh, services.

So, you know, a typical, you know, foot in the door type of a, or, uh, you know, foot in the door type of, uh, engagement would be raise. Raise the current round of funding. Come in, do some cleanup. Get get ready for the next board meeting. Get ready to raise some debt on top of the equity and, and start to put in some next, you know, the next level of scaling, uh, finance and accounting, uh, hygiene.

Joe Michalowski: [00:06:00] Gotcha. Um, I wanna talk about, Dig in a little bit more on like what that engagement looks like. ’cause last time we chatted, you talked about kind of like the, the tops down versus bottoms up, uh, sort of engagement flow. Um, I would love, I enjoyed our chat about that. I would love for you to just go through like what those are, um, what they entail.

And then, uh, I have a follow up question that I think it’ll be a little interesting.

Scot Mollot: Great. Yeah. Happy to do so. So again, what I, what I kind of first described here was, uh, what I’ll call, uh, accounting first, uh, engagement. So coming in to do the blocking and tackling, you know, set up the compliance, get a, get a, get a cadence for a monthly close. Start showing some, uh, next, you know, visibility into the financials more.

More, um, nuance , and so the founders can see what’s going on in their business. Set up a monthly close process. Make sure that, um, You know, again, on the compliance side, everything’s is buttoned up. And as the [00:07:00] company scales and grows, they’ll, they’ll, they’ll run into more complex issues, um, start tackling rev rec, uh, maybe, maybe they’re pre-revenue.

And so then we have to build out, uh, policies and procedures to help scale revenue. And then as the team grows, you know, get more deep into policies and procedures around spending. So that would be, you know, what I call the accounting first, um, engagement. Then, then, you know, we get to do not as, as often, but maybe more often as, as we grow the firm, we get to do more FP&A first, uh, type engagements.

So I was with a client, uh, where they had to raise their series B. And they had a, uh, advisor that, that was part-time. They built, you know, a, a rough model that, that helped ’em operate at the current stage, but not a model that they could leverage to go to the VCs and raise a series B round. So I came in as a team, you know, as a, as the head of finance, uh, essentially, or [00:08:00] VP finance essentially at that, at that stage.

Um, and walk them through the process, build the financial model, help them raise, uh, their series B round. And as that process was, was unfolding, the bookkeeper was not able to keep up. The, the company was just scaling. You know, we’re as, as we are trying to raise money at the same time, brought in the accounting team, um, to, to help shore up, uh, the transaction volume and get in.

Get things back on track and then in, in the process, uh, help, help find a controller for them. So we, we have services at Attivo where we can help folks do the recruiting and, and build out their team. And in that process, uh, all in a fair, in a fairly short period of time, usually our engagements would be, Call it maybe around three years is kind of a typical engagement.

This one was, was quicker in the sense that the controller came in. It’s a very hands-on [00:09:00] business. It was a hardware, hardware business. The, the controller needed more help, uh, you know, next to them, you know, at, at the office. And then they hired a VP of finance internally that, uh, again, because of the complexity of the business, uh, they needed the folks in house.

So, That, that, that cycle was fairly quick, but a great engagement for us.

Joe Michalowski: Love it. I, my follow up question is, and I I it’s a little bit leading ’cause I, I kind of know your personal preference, but I know there’s no like right answer, uh, but I’m curious if you have a, a personal preference on which approach you would like to take from. Like a new client standpoint, that accounting first or that FP&A first, is there a better way, I guess?

Scot Mollot: So, so I wouldn’t say there’s a better way now if you’re saying my personal preference, I, I, you know, I didn’t stay at K P M G to do audit assurance. I am, you know, I respect gap. Um, [00:10:00] I. Don’t like gap, but I respect it. Um, so, so, so that’s, you know, an accounting function. So I’m very much more FP&A thinking about, uh, financial modeling, more strategic, uh, engagement.

Now you need to have great accounting, uh, in place, uh, and great hygiene. Otherwise, you know, call it garbage in, garbage out. You don’t have data to, to be informed and, and make strategic decisions. Um, so, so my preference is a fp a first type of, uh, engagement. Um, it’s, it’s more exciting for me personally, but there is no right or wrong answer.

What, what, what’s exciting about Attivo and, and if you think about different, Firms is, we’re fully integrated, we’re accountants to CFOs, right? And so we can handle the day-to-day if that’s all our client needs, or we can come in and just be strategic if that’s what our client needs, depending on what, and then as the clients evolve, if, if they bring in pieces in house, we can, we can flex and, and, and work [00:11:00] around that.

So, um, you know what, what’s more important when you think about doing fractional work is being able to understand. You know, what is one, what is the client’s view on accounting and finance? And typically it’s like, why would I spend money on that? Because I have to build a product and I gotta, you know, build my team.

And then, and then two really get a sense of where they’re at in, in their, you know, uh, makeup of their accounting and finance. Uh, Uh, activities. And so, um, what’s interesting, um, is, and I thought about this, you know, we, you, you did share this question me ahead of time, and I have another way to think about this is, and, and I’ve experienced this, is when you do accounting first and you get a warm intro from a vc.

There’s, there’s, it’s, it’s like, okay, we get to dip our toe in, in, in the pool here and just start working and start doing a light, you know, light touch into a, a, you know, a [00:12:00] larger engagement with a company. And along that way you’re building trust from, you know, building the building blocks. And so I’ll start with accounting, you know, in an accounting engagement and they’ll say, you know, Don’t spend any money.

Don’t spend any money. Don’t spend any money. Okay. Good guys. Let’s, let’s have a moment here and say, how about I give you a little bit of insight on this topic, and I think one of the things that I like to do is, is get a bottoms up cash forecast in front of folks where they know. Not, not what are you spending on your software, but who are you actually spending your money with?

Like, you’ve got 50 vendors here, you know, this guy’s 10 bucks a month, and this guy’s a thousand a month. And, and all of a sudden they look at it and go, why? You know, why are we still paying for this and what’s going on here? And, and, oh, why don’t we have this system in place? And so now all of a sudden the light bulb goes on and there’s this level of trust, and then they start coming to us with the strategy like, oh, I didn’t realize you could do this, and so forth.

When, when you go for a [00:13:00] strategic first engagement, especially if you’re going jumping right into raise, uh, a round of funding, you know, this is an exciting and stressful time for the founder. And they have to make a pretty quick decision that, oh my gosh, you know, I can’t get this wrong. I gotta work with this person of all the people in the world.

I got this person I gotta work with, and we gotta get it right. And so I, I kind of, you know, in a, in a crude way to think about it, I almost think of it as shotgun wedding, right? You know, there’s, there’s a, you know, in the accounting first, uh, example, you know, we’re dating. We, we have this long, long, long time to get to know each other.

And then we decide, okay, fine, let’s go get, you know, Let’s go get married where the shotgun wedding, who knows the circumstance of the shotgun wedding, but it’s now all of a sudden, you know, we’re, we’re hitched and it’s, it’s intense and it

Joe Michalowski: I love the analogy. Uh, it makes a lot of sense to me. I think, you know, for you, and, and we’re gonna dig more into this, I’ll, I’ll let you, uh, focus on the FP&A side. ’cause personally, uh, I mean, we [00:14:00] talk about strategic finance and kind of moving things in that direction. So I also don’t want to talk about gap and kind of putting But, uh, I mean, at least from, from my perspective too, it’s like, you know, you want to dive in and do the, like, heavy work, the exciting work. But you know, without that first piece in place, without all of that compliance, like it is, Incredibly important. And so we have plenty of episodes that are about, uh, setting up those accounting workflows.

So go listen to those. We’re gonna focus on FP&A because uh, I believe Scott and I just want to, let’s call it that. Um, so, uh, with, yeah, exactly. So with this deeper interest in, in like FP&A side of things, uh, and you’ve mentioned a few examples, but I would love for you to go a little deeper on like some of the strategic projects you work with.

Clients on, on that FP&A side, like how are you, uh, coming in on that strategic level and setting them down the right path to growth? I would love some more examples.

How Fractional CFOs Help with FP&A

Scot Mollot: Well, you know, there’s, there’s a couple of table stakes [00:15:00] I think on the fp A side one is, is. Budgeting, forecasting, planning, financial modeling, right? So helping understand the business, helping, um, founders, deciphering founders, what they’re trying to do, and then understanding what are the knobs and the dials that you can work with to make an impact on the business.

So everything from pricing. Models and studies to, to thinking about, um, working capital issues and, and where cash comes into, into play. Do we have a lot of upfront, uh, costs that we’re not gonna get paid back until the end, or on the backend or, or can we flip that model and can we actually, you know, use our customers to help finance the business, um, in scaling and growing?

Like what’s dependencies? Like, what are the dependencies? If, if you’re, you know, I, I think. One of the things I like to do, uh, with founders as we start going down the path of, of putting together a financial model is do we really understand what our North Star metric is? Have we coordinated with the [00:16:00] board?

Have we coordinated with the team? Um, do we know who our competitors are? Do we know you know, what we need to go after? And when you have that North Star metric, Everything just starts cascading from that. So in order to, you know, if we’re growing a r r right, we want to our, that’s our metric. We, we have, and we have a product with our customers.

What is Engineering’s responsibility? Is it, is it, is it building a stickier product? Is it building a new functionality? Is it building a whole nother product, you know, product line to, to grow that? What are those steps it takes And, and one of the things that was interesting at, at Lyme, um, you know, being in-house that had, I had, uh, you know, we, we got to drive around, uh, and go to our, our markets where we launched and, and we, we, you know, we carpool with different folks and I carpooled one time with a junior engineer and he’s like, why?

You know, I have, I have all these competing requests from my manager. And I said, okay, well, What [00:17:00] is, what’s our number one goal we’re trying to achieve? And that is how you decide what to do, right? So if I have two tasks, and I understand the North Star metric, if one task is better serving the North Star metric than the other task, then your decision’s easy, right?

And then you just get aligned that way so that that cascades all the activities you have to do. Ends up becoming a hiring plan. So I need these resources either internally or externally. I need to bring on a project I have, uh, a CapEx requirement to, to get this done. And that’s kind of the, the, you know, step one.

I would say step one is understanding the North Star metric, understanding what each department is, is contributing to get there. And then, um, From there, resource that, and so that’s 80, you know, call it 70 to 90% of your costs right there, right. The headcount. Then the rest is, you know, you can almost put an overhead factor for, for the rest of it, you know, at a high level.

But, you know, there’s, there’s other [00:18:00] things that, that you start layering in to get to the rest of the budget and the, and the financial model.

Joe Michalowski: I love this, uh, this focus on the North Star metric. I mean, I obviously like people listening to this. Uh, you know, our audience at Mosaic is. You know, those early to mid stage startups, so everybody has competing priorities. So it’s a really good example because even like in my, in my job, it’s like, could I.

Decide to really scale this podcast, or should we spend more time scaling like our SEO efforts? Like what’s driving the pipeline? What’s gonna drive the business forward? And so, uh, you’re right, it does help me and helps everybody I think, uh, kind of align the efforts. And maybe this is the answer, so maybe it’s, uh, my next question’s really about like the common issues or areas of weakness that clients have on the FP&A side when you join them.

Is, is it finding. Like deciding what that North Star metric is, or is there something else that seems to be like a more common, uh, issue that you have to clean up?

Scot Mollot: You know, I think I, I think that is definitely one you want to be aligned, [00:19:00] um, on the North Star metric and, excuse me, it’s really hard. To say pick that one thing, but you really want to get to the one thing. I mean, if, if, if there’s three initiatives and they’re all kind of like, Leading you in the same direction, then that’s, that’s, that’s great.

You know, as you can manage that. But if you, if you think there’s three initiatives and they’re pulling in different, different directions, then, then there’s a lot of conflict in what you’re trying to get done between the teams and, and, and trying to resource that. Right. So how do you, how do you focus those resources?

Um, I think the, the, one of the, the challenges that a lot of early stage companies have is the, you know, data infrastructure and the data that you’re going to, You know, uh, derive from, to, to build the plan, to track the plan to, to hold people accountable. And I think that’s, that’s probably the biggest challenge.

And, you know, some of it is just time. You just, you just, you just don’t have enough bodies to, to get it done. So how do you be efficient in that way? Um, you know, [00:20:00] everyone talks about bringing on systems and automation and all that stuff, and that’s great, but if you don’t have the, the owner or the stakeholder to, to drive that and keep that clean, you know, it, it doesn’t, it’s, it’s still garbage in garbage out and it’s challenging.

I mean, it, it may help overall, but, but again, you want to have that stakeholder who has the time and, and the responsibility to make sure data’s clean, you know, we’ll see. We’ll see. Uh, Stuff coming out of Salesforce all the time. And it’s like, how do I, how do I make sense of this? Like what is, you know, the booking part is easy.

Everyone can tell you, Hey, I’m gonna sign a contract on this date and it’s worth this, but how do I derive like how this rolls out from Salesforce and where then I’m, do I have to do it? Does this go back into Excel or Google Sheets and then, you know, how do I manipulate that and track that? And, and, and it’s, uh, that’s the challenge.

Joe Michalowski: We, uh, We spent, I think it was probably this time last year maybe, or maybe early this year. I don’t know, time. Time is a construct. I’ve lost track of happen, but, [00:21:00] uh, we did this big project on c r m hygiene for this exact reason because it was like, you know, all these people, like, they come in, they want to use Mosaic, and like, oh, well, like.

You look at their Salesforce data because it’s so, like the blessing and the curse of Salesforce or any CRO is like totally customizable. You can do anything in it. It’s like, wow, that’s amazing. But also for finance people, it’s like, no, it’s not really that amazing. That means like it could be a mess in here.

You could just be uploading docs. Like there’s no actual like field setup. And so I’m glad you brought that up as as an example. ’cause we have thought. A lot about, uh, trying to get customers to, to kind of uplevel their, their c r m hygiene game. It’s a tough one. It’s a,

Scot Mollot: mean, I have a, I have a client I’m working with, uh, who’s, who’s on, on Mosaic and, and we’re trying to use Salesforce as a driver of the model. And, and it’s, it’s, you know, we kind of had to put pause on it for the, for the, for the moment. Um, just because it is [00:22:00] very, you know, the, the company I work with rolls out.

Uh, deployments across a large organization, and the timing of how that gets deployed has a huge impact in the business model of like, and, and decision making. Like what, you know, do you know, we have a few products to choose from, one’s higher margin, but if I can roll out a lower margin one faster, what does that do?

And you can’t, you can’t run that out of Salesforce, at least, at least out the box for sure. And so there’s a hybrid. Type of, uh, uh, relationship between Salesforce and, and Mosaic and, and, uh, Google Sheets. I guess it’s, it’s, it’s a, it’s a little game there to get that to work.

Joe Michalowski: It is, uh, to your point you mentioned a couple times, garbage in, garbage out. It’s like that data infrastructure is, is so important and, uh, maybe that’s a part two of this, uh, this conversation because that’s a whole separate issue that we could probably talk for another hour about. Uh, so I don’t want to get too deep in the weeds on the data infrastructure, but it’s a good one for

Scot Mollot: I will [00:23:00] say, I will say something that I get on a soapbox about and, and people roll their eyes at the firm every time I start talking about this is, is I ask folks, you know, what is, what is QuickBooks? What is, what is zero? What is NetSuite? And if someone tells me it’s an accounting system, then they don’t get it.

It’s a database. It is 100% a database. And so I have a very, um, rigid way of looking at it and in the sense of, you know, there’s certain information you want in the memos. There’s certain ways of, of approaching transactions. Um, of course it pays your bills. Of course you can, you know, collect, you could pay payroll.

Of course you can do those things. But if you don’t structure the way you approach, The data, then it, you know, I, I want it where I don’t need someone to spend hours to, to do a transaction. Someone can spend a few extra keystrokes and save me a ton of time on the backend where I don’t have to like double click into something and say, oh, I understand what that is.

It’s in the right [00:24:00] period. I can trend it out and Oh, great. And, and literally, You know, out of the box reporting out of most of these systems is, is good or okay, but I’ll take data dumps out of, out of these systems and run pivot tables and have the analysis where people now have the aha moments and they can see how things are, are coming together in a, in a, in a more powerful, more meaningful way.

Joe Michalowski: I, uh, I love the soapbox. I am right there with you. I, as somebody who doesn’t work in finance accounting, I probably would’ve gotten the answer wrong. Um, but, uh, the way you describe it makes a lot of sense to me. Especially just with what we talk about here at Mosaic, like the, you know, we talk a lot about the modeling and the analysis and like all the like, cool things you can do, but, uh, the data integration piece, like if you go to our website, it’s like they, it’s really all you should be looking at.

If you’re starting, it’s like what do you integrate with? Oh, all my systems great. Like this is, this is step one. And bear clean those up because, um, yeah, it’s the root of everything.

Scot Mollot: I, [00:25:00] I can’t even imagine what you’re, I I couldn’t even imagine being a, a support part of the support team at, at a Mosaic or a company like that where you’re dealing with all those integrations. Um, I mean, maybe AI is the answer. Hopefully AI is the answer at some point. I even, you know, but it’s, it’s, um, that takes a certain someone to really want to kind of dig into that data and unwind, you know, the spaghetti and, and get it kind of straightened out.

Joe Michalowski: We have a shout out to Caleb and his team, Gracie, Cosmo and everybody else, like we have some incredible data people in here. And I know recently we did an episode, uh, talking to one of our co-founders who also is kind of spearheading those efforts, uh, Brian Campbell and, uh, talking about Stripe data and.

Kind of making sense of Stripe data. And I, I, it’s always really interesting to talk to them because as somebody that I’m, I’m just on this side, I, I, I see the dashboards and the charts and they’re like, you don’t know what’s going on behind all that. And it’s like, there’s [00:26:00] so much mess, like in all of these systems.

And so, you’re right. I mean, I, I don’t envy anyone in those positions, but I am very lucky, uh, to be at a company where we have them because, Every time it’s, they’re, they’re some of the smartest people they’ve ever met, and I, I don’t know how they do what they do, to be honest.

Scot Mollot: Yeah, I mean we, we, we definitely at the firm have a lot of love hate with, uh, with Stripe and, and how it gets set up and how we. You know, ’cause that’s the source of truth. And so you know, you have to work with it, you have to figure it out. And so obviously, depending on how, how, where, and that’s, and, and I think we, we talked about like, you know, or, or I don’t know if the question’s coming up but you shared some questions with me or if we already kind of touched on it.

But that’s part of kind of the hygiene, right? If the sooner we can come in and help, you know, provide some insight into, you know, how to set up these systems or what’s important. Because usually what’s important with a lot of the systems is the engineering team or the founder thinking what they want and it’s their frame of reference, which [00:27:00] obviously that that is critically important.

But, but once you go down the path of setting something up and that way it, it, there’s a lot of pain and trying to restructure things, uh, to, to scale it for, for the future growth on, especially on what accounting and finance needs.

Joe Michalowski: Yeah, that’s, uh, it was, uh, you know, something that, you know, we started, we talked about this in, in the beginning a little bit. It’s just like, why is it so important to, to get finance and accounting right, as early as possible. It’s what we talk about. It’s because, you know, I did an episode with uh, uh, the CFO of a company called Galley, and he. Talked about the C RM cleanups project. So like it wasn’t, uh, hey, here’s how to set up your c r m for success. It’s, here’s how I went back in three years of c r m data in, in hub. For him it was HubSpot and had to clean everything up. And it’s like, that’s the value of like working with someone like yourself and Attivo and, uh, getting this right early is that you don’t have to go back through [00:28:00] years of contracts and, uh, data entry just to.

Just to get to the starting point, you know?

Scot Mollot: Yeah, it’s, it’s, it’s a challenge. I mean, we, you know, we, it’s not the fun part of, you know, being a fractional accounting and C F O is, is doing the cleanup. It’s, it’s, it’s obviously painful budget-wise, and, and it’s, it kind of delays, it takes time for us to be able to kind of really get our stride because we gotta spend time going through the cleanup, um, uh, being, uh, you know, from the accountant side of the brain.

It’s, it’s, it’s nice to clean things up and, and, and get, to move things forward, but it’s like, there’s always something that’s just like, oh, it’s just not quite right. Being, coming from the accountant brain. Um, but you have to let it go and you say, okay, this is, this is, uh, you know, good enough and, and over time, we’ll clean things up.

We just can’t like, dive in and, and, and, and, and spend the budget like that right away.

Joe Michalowski: Yeah, exactly. Uh, I [00:29:00] did say that we were gonna spend more time talking about the FP&A side, and we kind of like started toeing the line about just like data cleanup, things like that, which is, I mean, important to FP&A, but it’s not actually the fp a part. So the, the, the question I wanna ask you is like, You’ve mentioned this a few times, kind of like the, the engagements where somebody comes in and you need to get them to the next round of funding.

I wanna talk a little bit more about that. ’cause we’ve been talking a lot about funding. We’re kind of in the, the way the market is working, like the peak of venture funding was like early 2021. We’re like 18 months removed from that. And now like all those companies are coming due to like raise again in some less than stellar. Market conditions we’ll say. Um, so I’m curious, like what are some ways that you can help set them up for success when that is like the main goal? They come to you and they’re like, Hey, like we’re starting with you. We need to get to our series A or a series B, or whatever. It’s like, how do you set them up for that success?

Where to Start with Fractional CFO Services

Scot Mollot: Uh, you know, again, going back to, [00:30:00] uh, having a good financial model in place. Having a good story to tell. So, you know, the, the founder has a vision. And, and it’s very easy to, for them to talk about customers and, and tam and market opportunity and the excitement around the product and show you the demos, but the financial story has to kind of match that.

And so making sure that, that we’re taking into account all, all the pieces that will come together in, in that, in that process, you know? Being an advisor and, and a partner with, with our founders. You know, we have, we have networks of folks, obviously we’re tied in with the VCs, so where can we make introductions and, and help, you know, help them get, get in front of, uh, potential investors.

Um, how can we approach the, the tough questions? You know, I’m working currently on five Fundraisings, um, at different stages with, with my clients. And, you know, there’s one end of the spectrum where. [00:31:00] A VC just came to the client, said, here, take my money. And they said, okay, great. And then we just really just worked on diligence and got, got the paperwork and we’re on the other spectrum where, You know, we’re, we’re asking, um, the existing investors to lead the round and, and they are, are really digging in hard and saying, do I want to double down in this investment?

Is this really the right thing for our strategy? And so how do we kind of like guide those conversations? How do we. Give, how do I give the founders the information so that they can, they can go through that, that tough process, go through the tough questions, um, and really, you know, show, you know, ultimately, ultimately the VCs want to see.

 Revenue, opportunity and growth. And if, if there’s a one or two year path of development, how, how do we get past that? How do we show that? How do you give them the confidence that, that this is going to lead to, um, this development work and [00:32:00] this money spent is gonna lead to, uh, a positive outcome in either revenue growth or, or building some IP that that.

That will be desired by a company who can scoop it up. So it’s uh, that, that’s where kind of the, the nuance and challenge comes in.

Joe Michalowski: We, uh, actually this week, uh, on. This is Friday, July 21st. It was Tuesday. So the 19th we, uh, did a webinar with, uh, Omer Ventures. So they led our Series C, and so it was like a Q&A and that was, uh, something they harped on a lot when answering some of the questions was like, Hey, like as an investor, we are looking to make like, like we know it’s a long-term partnership.

So like there, there’s an understanding that like, just because the market conditions are bad doesn’t mean your series B investment is gonna be like, Paying massive dividends next year. So like, there’s an understanding. But you, like from the finance side, from the FP&A side. Yeah. You need to show, like, you need to be more diligent about showing that path [00:33:00] to how you do become, uh, the, the windfall that they’re looking for because, um, yeah, it’s a lot stricter out there than, than maybe it was a year or two years, three years ago.

Scot Mollot: Yeah, I mean, you know, the challenge is it’s, you know, the, the money. Is there, the VCs still have the money. The valuations have changed, so, so it’s the multiples, right? So, so the multiples got out of whack from historicals, so now they’re back down to earth where everyone is saying, oh, we’re getting a down round, or we’re getting squeezed, and.

Yes, but you, the rounds that were raised in the last couple years were, were, just didn’t make sense. Were too high. Um, so, so you have to get folks their heads around that. I mean, ultimately at the end of the day, you know, I’ll talk with some founders and, and they, they may not appreciate the bluntness, but it’s like, you know, zero times, anything is zero.

So if you have no cash, you have no opportunity. Yes, you [00:34:00] might get squeezed. Yes, you get diluted, yes. You might lose control. Hopefully you’re, you know, you know, hopefully that’s not the case. But even if, even if, at the end of the day, if you can kind of like, you know, put a check on your ego and say, okay, what is the best thing I can do to get an outcome?

And if it’s, if it’s, you know, bringing in. Either someone else or, or getting that investor that maybe they’re, maybe they’re, you know, rightsizing the valuation, but they’re the right person to help scale it and have an opportunity for an exit. I mean, you, you’ve gotta think beyond that and then, you know, um, You know, entrepreneurs, serial entrepreneurs, obviously if it’s their first time, you know, they’re gonna learn from that.

And, and hopefully in the next, next go arounds that, uh, you know, they’re, they take that, all that knowledge in to check into place when they go for fundraising for their next venture.

Joe Michalowski: Totally. It’s like, uh, would you rather own like 50% of one watermelon or like 8% of a [00:35:00] watermelon farm? It’s like, I take the, I’ll take the farm honestly. That’s just worth more.

Scot Mollot: it, it’s, it’s tough. It’s, it’s, it’s tough. I mean, you know, you invest your blood, sweat, and tears into this venture and no one wants to give any of it up. And you, you shouldn’t, I mean, but there’s very few folks. I mean, you know, not everyone could be Mark Zuckerberg and, and, and really control their destiny throughout.

It’s just, that’s, that’s a, that’s super rare. But you see that, you know, you see those, that’s the outcomes you see on tv. And so it’s like, why should I give anything up? It’s like, well, it’s, that’s, that’s not the, uh, typical.

Joe Michalowski: Totally. Uh, all right. I, I love all that. I want to keep us moving. Um, I want, you know, uh, Scot, I could probably talk to you for a very long time, so I might have to start out condensing some of these

Scot Mollot: No problem.

Joe Michalowski: I want to talk about, um, Sort of the inflection points where you’re either starting to outgrow fractional C F O services or it’s time to bring that team in-house.

’cause obviously like you’re not gonna work with companies forever. I [00:36:00] was surprised to hear that you guys are working with clients as late as like Series C. ‘Cause in my head, you know, that’s usually like, You know, you should have like a full in-house team. So I’m curious what those inflection points look like and how that transition works as you, um, start to help companies bring on their in-house hires.

The Evolution of Fractional Engagements

Scot Mollot: So typically, you know, one, one, it’s economics. You know, our bill will get, there’ll be a lot of work going on. There’ll be uh, complex business activities, um, going on and scaling. And, and the, they’ll look at economic and they say, well, I can, I can hire someone in-house. And, and that, that starts to make sense.

Um, where we’re also, you know, if, if the complexity of the business will require someone to be in-house, just, you know, the, the founders just now need. Their, their finance team 24 7. And, and you know, we’re working with multiple clients, so it’s, we can’t always be there. We, we do everything we can, but it’s, it’s hard to be dealing with competing requests all at once.

Um, [00:37:00] and I think, you know, where we are still engaged with companies in the later stages is, is they’ll build a team, but they’ll still use us for certain pieces of. Of, of, you know, the puzzle. So maybe, maybe we’re working on rev rec projects. Maybe they built the accounting team, but they want, you know, still want us on the FP&A side.

Um, maybe they’ve built, you know, they have the controller as their, their top finance person. They have a whole org, but they want the C F O to come in and provide guidance and support. So that’s how we’ll stay longer, uh, uh, longer engagement with our, our clients within our companies.

Joe Michalowski: Uh, you mentioned earlier that, that you have actually helped, uh, clients bring on those in-house hires, like as you’re working with them, and that’s something we get asked a lot is like just finding the right people. Like, so I’m curious if you have any tips for, um, finding the right candidates and finding the right people to fill those early finance and accounting roles.

Scot Mollot: Yeah, I think you. For, for us, [00:38:00] you know, one is, we’ll, we’ll provide the job description, we’ll help, help build that job description. We’ll go through the interview process with them and bring, bring on their team. We have recruiters in house that we can actually do recruiting engagements with our, our companies to help find those teams.

Um, you know, I, I understand the industry you’re in, understand. You know, who are the competitors out there that, that are the model competitors? Look at, you know, go through LinkedIn and look at, look at folks backgrounds and make sure it makes sense. You know, I, I would say just because people are not actively looking, um, those, those are the ones that you can come knock on their door and you’ll, you’ll be surprised that they might get interested in what you’re doing.

Uh, and get excited about that and, and be willing to make a move. Um, and, and I think a lot of the network, I mean, I’m working with a company, um, where they have, um, you know, a history with Tesla and, and, and folks that are coming from that, that realm. And, and they already know, like literally like, okay, [00:39:00] when that person’s ready, I, I know we’re gonna hire that person.

And, and they, they kind of already have that planned out, even on the accounting, on, on all levels, like engineering, accounting, sales, marketing. They, they just kind of have all those folks already. Uh, for when they’re ready to, to come over.

Joe Michalowski: Wow. Uh, I’ve, I’ve always been impressed by, uh, so I was in the same boat. I, I wasn’t, like, I didn’t apply for this job at, at Mosaic, like I just ended up networking with our co-founder. We were in like an agency agreement and he, that’s like one of his, uh, best skills. I don’t know how he does it, but he just seems to be constantly in recruiting mode.

Like even like just. Finding interesting people, finding people that are in, um, unique positions to maybe help mosaic someday. It’s really just like planting seeds and like, you know, someday you’re gonna come back and it’s like when they’re ready, like I’ll have already kind of put my foot in the door there.

Scot Mollot: Yeah. You know, I think with, with the, you know, with the, with the pandemic [00:40:00] being remote, there’s a lot of organizations you can be a part of where now, now you get exposure. You don’t have to show up at. At an event downtown, you can now click into, uh, slack channels and so forth. And so there’s a lot of, lot of more ways to kind of get, um, reach out to folks and, and get in front of folks, which is, which is powerful these days.

Joe Michalowski: Totally. Um, all right, Scott, I’m gonna turn the dial. I have, I have like three, we’ll call it three-ish questions left. I’m gonna turn this into a, Semi. Lightning round because again, um,

Scot Mollot: no worries.

Joe Michalowski: I’ll just be with you for like three hours and we’ll just keep chatting.

Scot Mollot: It’s great now.

Joe Michalowski: yeah, so the, the first one I wanna talk about is like the, the, the tech side.

And we talked a lot about the data cleanup and things like that. But I’ve asked a few, uh, you know, finance pros in the past, like the spreadsheets versus software sort of debate in the industry right now. Like something like Mosaic, where we’re like, we’re gonna build a platform. You’re gonna come in, you’re gonna use something like this.

[00:41:00] Versus like spreadsheet plugins or just straight up using Excel from the, your side where you’re coming in, um, like externally to help these clients. Like I’m curious where you stand on kind of the future of finance software versus spreadsheets.

Scot Mollot: Yeah, we’re definitely intentional at Attivo to, to move towards platforms. So, uh, I, you know, the Excel extenders. It, you know, we’re still in Excel, so it’s not quite solving, uh, fully solving the problem. So, uh, platforms like Mosaic on the FP&A side where, you know, the, the time spent to set up a model in Excel and set up Mosaic is, is.

Roughly the same. Um, but the backend is where you leverage all the benefits of, of the reporting, the dashboarding, the immediate, uh, budget to actual reporting. Um, it’s, it’s, it’s, you know, that’s the time saver. And that’s where, you know, we, we get to take our, you [00:42:00] know, uh, the, the kind of the spreadsheet jocking, we turn that into more strategic analysis and, and review.

Joe Michalowski: Totally love it. Uh, need to, I would be remiss at this point in. July, 2023. If I didn’t ask you if you had thoughts on AI in finance, uh, do you have personal affinity for it? Are there any clients doing interesting things with it already? Uh, would be remiss if I didn’t ask. So

Key Takeaways and Career Lessons

Scot Mollot: So AI is, AI is, is, is really intriguing. Interesting. I think there’s, there’s, you know, from a client perspective, I work with a client in the medical, uh, records, uh, space. And so ingesting data and having that data be being populated across the record, so cutting out manual entry and then using that data to do automatic scheduling and reminders and making sure that hey, you know, we keep patients on track with, with their.

Their, um, medical, you know, their medical programs and so forth, what they’re doing, and then keep doctors updated real [00:43:00] time so that, that all of that care is done, done well and relevant. And, uh, so that’s what one of my clients is doing. Um, on the firm initiative. For me, thinking about FP&A is we have a lot of, you know, we work with over 250 companies at the firm.

We’re we’re 90 plus consultants with, uh, with over 250 companies. How, you know, I would love a one click button of, of benchmark data, like, you know, of our clients in the various industries that we have, how do they benchmark out by, you know, round amounts raised, um, you know, revenue metrics, headcount, metrics?

How do I, how do I get that data? And so, I can do that manually, which is super painful of like downloading spreadsheets and, and typing things into cells and figuring that stuff out. How, how can AI help us do that? And actively trying to figure out, um, you know, solve that for, for the firm.

Joe Michalowski: Um, [00:44:00] I will clip this, send it to the product team and they will, uh, you know, I’m not gonna promise that they’ll fix that problem, but I would like them too as well. I would also like benchmark data, so it’s a good use case for sure. Uh, and I’m sure it’s on the horizon, so fingers crossed. Um, wanna say that I appreciate you indulging my lightning round efforts here and so doing great.

And I’ve got two more questions for you. One more is, uh, For anyone listening that has not hired, uh, a company like Attivo, a fractional C f o, or a consulting firm, uh, any tips you have for evaluating partners and kind of choosing your path there.

Scot Mollot: So understand, you know, what’s at the firm? Are they a fully integrated firm? Are they specialized in a certain part of accounting and, and finance? Um, uh, you know, fully integrated firms have, you know, you can, you can grow more with, with the firm. Uh, and uh, or, or if you just need that specific need.

Then it’s okay to work with that specific need. We, you know, we at [00:45:00] Attivo are fully integrated. We will partner, you know, we’ll, we’ll work around with other partners, understand what the firms do and deliver and what they do and don’t deliver, and how they’re partnered to handle those, um, activities and services that they don’t provide.

Um, again, we focus on, on deep partnerships across the areas that we don’t. Do ourselves, and we have multiple options to go through so we can present our clients with different, different partners that we’re tight with that, that can help provide that. Um, and I think one key thing is understand how much the firms invest in their people and, and what does that look like?

So, We, we at Attivo, the, the partners have made a very, um, intentional effort to invest in our team. We have lunch and learns, we have mentorship programs, um, we have offsites to kind of really understand issues, understand, you know, firm policies, procedures, and how we help help scale our companies up, uh, [00:46:00] as they grow.

Joe Michalowski: Uh, amazing. So I’ve got one last question for you, Scott. I ask everyone that comes on. Um, what is one thing you know now that you wish you knew when you started your career in finance?

Scot Mollot: You know, I, I, yeah, that’s, that’s a great question and I think everyone says that on your podcast, as I’ve heard. Um, it’s what I, what I, what I came, what I keep coming back to is I wish I learned how to better appreciate and leverage my network and really go after, um, You know, stronger mentors, uh, in, in my career.

Um, being on the other side, now being, you know, the C F O with, with Attivo, we all have mentees if we have a mentor as well. Um, and, and just really leaning into that, that process, you know, I’ve being. You know, going into startups, being a team of one, being overwhelmed, I felt, oh, my network’s overwhelmed. I can’t bother them.

They, they don’t have time for me. I don’t have time. [00:47:00] I, you, you can always make time. And, and now being on the other side later in my career, um, as you can, you know, we’re, we’re running out of time here. You can see I love talking, I love sharing what I know. And, and I think I didn’t, you know, you, you people love to really, you know, Validate what they’ve done their entire career and impart that knowledge.

And don’t be afraid, uh, to reach out to folks. I mean, if, if someone’s really, if it’s a hard sell on me, yeah, I’m not gonna pick up a sales call unless I really need that product. But I have a lot of founders coming and say, Hey, help me understand what we’re doing. You know, I’d love to pick your brain on, on is this something that’s valuable in general?

Not, not so much as a sales call. And that’s, that’s interesting. That’s, that’s a great conversation to have. And, and I, you know, I try to have more time, uh, in my day to, to do that.

Joe Michalowski: I love that anyone who’s listening that has listened to enough of these knows that I’ll always say that it’s applicable. Not just to finance, but to, to everyone else as well. ’cause I, I feel the same way when somebody [00:48:00] reaches out to me on LinkedIn, they’re like, oh, like I’m, I’m trying to start this podcast.

Like, what do you, and I’m like, I’ll, I’ll chat about this all day. This is great. I love, uh, talking to people about what I do and, you know, it doesn’t have to be, uh, you know, hard sell or anything. Uh, so I think that’s a great point. Um, Scott, I really appreciate you being here. Again, appreciate you indulging my rapid fire question.

Normally I would just skip the questions, but I thought the last few we had were really good ones, so I was like excited to get your your take. But, uh, for now, um, I wanna turn the floor over to you. Where can people go to connect with you to learn more about a Attivo to maybe work with a Attivo if they’re in that position?

Uh, the floor is yours. Whatever you would like to, to pitch and promote

Scot Mollot: Great. No, I appreciate it. Uh, thanks Joe. It’s been, it is been a pleasure speaking with you and, and, and happy to go through your questions. You know, uh, the best for me is LinkedIn, uh, you know, Scot Mollot, M O L L O t on LinkedIn. Uh, also we have, uh, Attivopartners.com is a good way to [00:49:00] kind of look at, uh, See what we do at Attivo, kind of get to our story.

Um, really, you know, as, as you’re scaling, excuse me, as you’re scaling and growing, as you’re, as you’re even just embarking on your journey with your company, definitely, uh, speak with someone like us, uh, and, and get some advice upfront. You know, we, you don’t have to do full engagements. You, you can, you know, we can have a discussion on what it looks like and a lot of times I speak with early stage founders and, and give them a little bit of advice, and they’ll come back later when they’re ready to do a full engagement.

Joe Michalowski: Love Uh, well, Scott, thanks again for being here. Uh, really appreciate it. I think clearly we’re gonna need a part two at some point because, uh, you know, there’s a lot to go through and I think you and I could probably chat for a lot longer. But yeah, thanks for being on the roll forward. Hope

Scot Mollot: No, that was great. Really appreciate it.

Joe Michalowski: Scott.