Inspire, Communicate & Empower

Pete Boyes: so maybe similar to a lot of others, I started in accounting. Got out of college, actually not with an accounting degree, but got hired into an accounting firm, ironically, who put me through the accounting paces and that’s how I got going in accounting and finance. I would say though that I did that for about a couple of years and I remember being on on an accounting assignment where a company, a client of mine was getting acquired. When I was doing the accounting diligence on one side of the table, there was a whole host of investment bankers on the other side of the table doing all this crazy finance modeling and having these really interesting conversations. I remember talking to a few of them and said, hey, I want to do what you guys are doing. I don’t want to do what I’m doing today. That led me to go back to graduate school. get a degree, an MBA that allowed me to enter the world of investment banking. That led to a 10-year career in investment banking, technology investment banking, software and analytics were some of the sub-sectors that I played in. And ultimately, then transitioned in 2008 after a 10-year career of that. And that’s what transitioned me into sort of the… the role of the CFO, which I’ve been doing for the last 15 years, predominantly through private equity and venture-backed software and technology businesses.

Rohit Agarwal: Very cool. Certainly a similar transition as I’ve made. Tell us maybe how was moving from banking to the operational role of a CFO. What were you thinking? Did the opportunity present itself? Or you were actively thinking about moving on the operational side? What was the mindset in making that decision?

Pete Boyes: you know, it’s always something that you thought about, but sometimes you need a push. And for me, the push was, you know, funny enough, we’ll talk a little bit later about macroeconomic issues today. 2008 had its own set of challenges, if you recall, and we hit that big, you know, air bubble or air pocket in the economy. And it was a great time to kind of revisit and say, hey, you know, the world is a mess right now. you know, investment banking is laying off folks, the economy is going, you know, in the wrong direction. It was a little bit of a tenuous time. And ironically, one of my investment banking clients at the time, a CEO of an analytics company, asked if I would be interested in stepping in and taking a CFO role for one of their venture backed companies. I had actually been trying to… get my firm hired to represent that company to help them in strategic activities. And he just said, hey, can I just hire you instead of your firm? Long and short of it, I said, this is a perfect time for me to transition. And so that’s how it kind of came about. To your point, it’s always something in the back of your head. I think anybody who’s in investment banking and has worked those long hours and done all that work. You sort of get to that 10-year mark and you say, am I ready to do another 10 years of this? Or is this the time to reset and think of something else? And for me, it was a combination of right time, right place, and a economic situation that helped me make that decision a little easier.

Rohit Agarwal: Very interesting. Is it possible for you to give us maybe some context of how large an organization that was when you stepped in and what was the journey there? Because it seems like you had a successful exit to a larger company there. But I think, yeah, getting that context as to when you stepped in, how large was the organization and how, you know.

Pete Boyes: it wasn’t a large organization, a couple hundred employees. It was generally the, as an investment banker, I was doing more of the small to middle market technology companies. So companies between 50 and 500 employees. So this was a couple hundred million employee business, maybe 40 million in revenue, backed by some very good Silicon Valley VCs. And so… I had a lot to work with when I got there, which was good, but to your point, I had been in banking and being in an operations environment and a company environment is very, very different. Although I had some accounting skills from back in the day, I didn’t have a ton of accounting background as it related to running an organization. The first thing I had to do was be honest with the management team, the CEO, and say, If you’re looking for an accounting-focused CFO, I’m not your guy. I made that very clear because I wanted to say, here’s what I am and here’s what I’m not. I didn’t set the wrong expectations. Luckily for me, we had an amazing controller at the time who had the exact opposite desires that I had and said to me, I don’t want to do what you do. In fact, I’ll take all the stuff that you don’t like. all own that and you can focus more being strategic and externally focused. And it just, it was a perfect match for me as a first time CFO to pair that up. And ironically, that same controller dragged me into a second company about six years, seven years later. So that was a little bit of my intro to that because being a CFO for the first time when you haven’t grown up in accounting or FP&A in an organization is it’s a learning curve, right? Just on how you go about executive meetings, how you have to understand engineering and product and to learn how the sales cadence is going and to figure out how to bide your time in a more structured fashion than where I’m used to.

Rohit Agarwal: Makes ton of sense. Is there one particular thing that you perhaps wasn’t anticipating moving into that role that you got exposed to maybe in the first week, if not the first couple of days?

Pete Boyes: that’s a great question. I’m kind of laughing because the people side of being in a corporation or an organization of that size, I hadn’t experienced, and good and bad. And what I mean by that is the amount of time, and ultimately I got much better at this than when I started to inspire. to empower, to communicate, to coach, to guide team members, not just on your own team, but throughout the organization, listening to other folks vent about challenges they’re having in their organization, trying to solve people problems, caught me off guard. I would have said, I just didn’t expect that and it wasn’t just my organization and every step of the way that I’ve been, you realize in my finance role, my CFO role. Whether or not HR rolls into that function or not, you tend to spend a lot of time in a positive way working on people issues. I don’t mean it as a bad word in issues, but people opportunities, if it’s coaching and learning. I would say that was probably my biggest eye-opener was the amount of time spent on that. I also think coming from… investment banking or to a company perspective, the employees that work there have different goals and objectives. And if you sit down with someone in an organization that may have been there for 10 years and you ask them, hey, what’s your career aspirations in the next three to five years, you’re going to get a variety of answers. If you tend to ask someone in the investment banking role, hey, what’s your career aspirations in the next three or five years, it’s to conquer the world and to take my boss’s job. And so- There’s a very different mindset that companies have in relation to where I came from and I think that was the biggest I ever had.

Becoming an advisor to CFOs#

Rohit Agarwal: Very cool. Suppose that first stint as CFO, you continue to do two more such roles, and then ended up becoming an operating partner at Thoma Bravo, which is undoubtedly one of the greatest software investors on the planet today. But in between that, maybe let’s talk about the move from a CFO to the operating partner.

Pete Boyes: That’s right.

Rohit Agarwal: It’s almost like you are an advisor to other CFOs of a few of the Thoma Bravo portfolio companies. What led to that transition? How did you think about it?

Pete Boyes: good question because you don’t necessarily go down your career path thinking that’s where you’re going to end up. But what I would say if I backtrack a little bit to the second and the third CFO role that I had, the second role that I had, and this is not uncommon, was a bigger business than the first role that I had. It was probably 50% larger. We had up to 350, 400 employees, 300 employees. it had a little bit later stage VCs, a little bit different mindset because they were thinking about going public and thought about it a little differently. The third business I had was probably double or triple that size. We had close to 500 employees and 100 million of revenue. This one was backed by another great private equity fund and best equity partners. When I took that third CFO role, I was like, I’m going to go to the next one. I think one of the things that I would espouse to anybody is, and one of the reasons why I really wanted to take that role was to continue to learn. And I had a feeling working now for a larger software equity buyout shop, that I was going to learn a lot. And I wanted to learn and understand different approaches to strategic finance and so on. So I was open-minded to say, hey, look, I know this is going to be a… a fun ride and I’m going to learn a lot, let’s do that. And so that last role learned a lot about how to not just manage a finance organization under private equity ownership, but to manage a company under a private equity ownership and not just managing the P&L strategically, but managing sort of the organization, helping out on sales operations, understanding the engineering and product development. developing talent, all because you’re looking to, obviously, in a four to five year investment cycle, hand off a great asset to the next buyer. The more we created a lot of the infrastructure and built the systems in place that would enable this business to scale and grow and create value, the better opportunity you have for a buyer to pay more for it when it’s their turn. That’s what I learned. in that last stint is really how to grow a business in all different facets of the organization, not just financially, build out the system’s infrastructure so it can scale and ready it for its next journey, if you will. I found that super exciting and fulfilling. We did a lot of things right, we did a lot of things wrong, but we did more right than wrong in that case. And so when that company was sold to a big public company, I had the opportunity to stay on for a couple of years as the general manager of the same business unit that I was CFO of. And that’s not uncommon, right? I think as we talk about CFOs today, you know, half of the time you could say the CFO was acting as a COO. And there’s a lot of operational chops. And so when the business was acquired and the existing CEO moved on, I was the logical choice by the next public company owner to step in and run the business. And so I did that for a while. And back to your Thoma Bravo question, they had reached out and said, hey, given your skill set and your career path and the experience that you had, we’d love to consider you as an operating partner. And it got my juices flowing again. I think that’s the stuff that excites me, is building teams, watching these businesses grow, taking these businesses from early investment stage to an exit. It sort of was the best of both worlds, my investment banking background combined with some operational, but I get to do it at an operating partner level and it was super attractive for me.

Rohit Agarwal: Makes a ton of sense. It seems like you are one of the rare people who has worked with both Vista as well as Thoma Bravo. I have to ask, one similarity and one difference between these two great firms.

Pete Boyes: Oh, yeah. I mean that’s a look they’re both great firms and I’ve been pleased to sort of be a part of part of both. Look, I think, you know, I think they it’s hard to tell because they’re both going after very similar markets, but they take different different tactics on how they go about managing it. You know, I would say that the big difference is well, the big similarity is that they really work closely with their partners to collaborate from a what I’d call a value creation perspective. I think Toma Brava does an outstanding job working with their operating partner ecosystem to do that. I would say the main difference is that Vista uses what they call the consulting group, more of an external but collaborative group to Vista that helps in that endeavor. So they kind of go about it in different ways. So that’s kind of the difference. but both look to grow and create value in both small, mid, and large-cap software.

Defining the modern CFO#

Rohit Agarwal: Very cool. That gives a good segue into discussing a little more on the role of a CFO, especially a modern CFO. It seems like the role has evolved quite a lot over the last 15 to 20 years. So we’d love to understand from your perspective, how have you seen the arc of the CFO role evolving over that timeframe? And even as you look, maybe look forward, how does it look? for in the next sort of 10 to 15 years.

Pete Boyes: a great question and I’ll probably come at this answer a little bit more from the tech and the software point of view. But back to the conversation we were having earlier when I interviewed the first time for that initial CFO job, the questions I was asked tended to be more, what’s your experience managing cash? What accounting system do you… have experience with and have you built budgets and forecasts? I recall it was more centered around that. Today, when I’m interviewing CFOs for my portfolio companies, the questions are very different. I’m asking how familiar you are with terms like ARR, ACV new bookings. What do you think a good gross retention rate is? It’s a very different discussion today about what the expectations are. Are you familiar with NetSuite Salesforce Intact as an integrated system for accounting and sales? It’s a very different set of questions. And so what I would tell you is I would say 15 years ago, I felt like, and this is when I was coming in, I felt like the view of a CFO was more internally focused. Because I did not have that background, I tended to migrate towards an externally focused CFO. In order to be successful at doing that, you have to have a controller that, ironically, I would tell you the controller of today is a CFO 15 years ago in some ways. They’re doing a lot of the work, two-thirds of the work that CFOs did 15 years ago. That allowed the CFO to… to become more modern, I think is the word you used, where not only are they doing your standard FP&A work and work on the accounting side, but they could have the renewals team underneath them. They’ve got legal underneath them. They may have HR underneath them, and they may even have certain operations underneath them. The role of the CFO has become much more broad and operationally focused. And in many cases, you’d argue the CFO is the number two executive in these companies for the most part, and really hopefully the thought leader and the business partner to the CEO. And I think that’s really, I would say, the main piece on how that role has changed. And I think the last thing I would say to that is I do remember the role of the CFO and… sort of being GNA and it still is today. It’s bucketed in as GNA and as a cost center. And I would say that I think good modern CFOs find a way to supplement that with parts of the organization that are value creation, revenue enhancing, ARR expanding. And I think good CFOs figure out ways to incorporate that into their work.

Rohit Agarwal: Are there any specific factors that has led to this kind of a change or this kind of an evolution rather?

Pete Boyes: you know, gosh, that is a good question, especially in software. I would say that one of the key things that has led to that is the ability of businesses to go from perpetual license to subscription and SaaS. And that’s led to a couple of things. It’s like a different way to think about running a business. When you run a business on perpetual and you’re getting cash up front and you’ve got this maintenance stream. It’s a little bit different. You have different churn characteristics. You get a lot of cash up front, but you’re constantly having to reacquire new customers each year. The revenue recognition is different. When SaaS came about, you had this different mindset. You didn’t take all the money up front. You took it one-twelfth of the time or annually up front. You moved from… always focusing on new logo to focusing on new logo, but ensuring that you’ve got good retention of those customers. Because the last thing you want to do is lose a customer after only one year. You didn’t get all the benefit of probably the sales and marketing effort to get that customer. So ultimately, I think the mindset shift changed from the CFO having to then manage cash as an example a little bit more closely. You’re not getting the dollars upfront. which led to the venture community having to invest lots of dollars in this SaaS world to help finance the ramp of these subscription businesses. But here’s where I think it got better. As folks got figured out how to manage the retention and the customer life cycle, it became very sticky. And the finance community was favorably inclined to sort of debt finance, if you will, that revenue stream. it became very attractive, great characteristics, recurring revenue, and so on and so forth. And sort of that led to the change of where CFOs would come on board. They’d be able to have to show their lenders a lot of different metrics than they were used to showing. And that gets back to your bookings and your retention rates and the percent of recurring revenue versus non-recurring revenue because those were some of the key metrics. that lenders would focus on, your investors would focus on, and ultimately, as we saw for a good 10-year run, the public markets. That was a very different type of CFO and a mind shift than 10 years ago. In some respects, recurring revenue, SaaS, subscription models, the cloud enabling that has all, I think, really changed the modern CFO to be more… operationally focused and definitely metrics focused to enable not just to meet public market expectations, meet their lender expectations and then ultimately valuation expectations.

Rohit Agarwal: Makes a lot of sense. I have a hypothesis around this, which I would love to test with you. My thought process around this is, as businesses have gotten more complex over time, whether it’s more digitization, whether it’s larger geographies that they can tap into, whether it’s people moving in terms of working remotely. every leg of the process of running a business has gotten more complex. And as CEO is the only person who kind of have an overarching purview across different functions, it’s just that CEO doesn’t have enough time in a day to be able to do literally every single thing and then also look at it, you know, from a finance perspective as well. that’s where the role of the CFOs have really kind of become much more strategic that, hey, there is a person who is looking at every single function, but more from a financial lens than perhaps just from a CEO perspective, who’s perhaps looking at things more from a GTM perspective or product perspective or people perspective.

Pete Boyes: No, that’s exactly right. And to my earlier point, that’s why I do think really good CFOs in today’s world can be considered COOs in so many respects. And in fact, this is just my own personal belief as is in my career. Whenever I hire anybody, either at the VP, director level, down to a senior analyst, my first question is, how good of a communicator are you? can you sit down with an engineer and have a discussion and understand the product? Can you put the headset on, in fact, we do this, we did this last company I was at, and spend a day with customer support and listen to the calls they feel, right? Understand that. Can you sit down with product and understand what the product requirements document might look like and at least have a conversation so you can shake hands and meet that individual? The point of that is the best finance leaders and the best finance, I think, employees are well-rounded within the entire organization. They’re not siloed and just sitting in their office banging away at models. That’s a large part of their job in many ways, but you’ll be better at looking at trends, seeing where things don’t make sense. If you understand… after talking to the engineering team, how they store data in AWS as an example. And it’s not a finance person’s job to understand the details of it, but at least if you ask the question and they tell you there’s a storage area and there’s a compute area, and this is how the costs rise, well at least you know enough to ask some questions. And I think that’s where the CEO then now relies on this CFO to help ask those questions to your point, where you may not have. the time as a CEO to do that. Just relying on your head of engineering or head of product or DevOps to be focused on that. It’s not their skill set either necessarily. They’re working on uptime and getting product out the door and driving engineering excellence. So, I do think having a broad-based finance function of folks, not just at the CFO level but across the organization leads to… you know, better performance overall.

Designing the finance function#

Rohit Agarwal: Makes a ton of sense. You have been part of multiple different organizations and as you enumerated, different sizes of organizations. Would love to pick your mind in terms of creation of teams, finance functions across these different sizes of organizations. How would you go about, let’s say maybe start with an organization of around 40, 50 million of revenues, 200, 250. odd employees, what kind of finance function makes sense for maybe that size of organization, then leading up to maybe 100 odd million of revenue, and let’s call it around 500 odd employees. I think that would be interesting to understand.

Pete Boyes: no, I mean, good question and probably a lot of different ways to go with that answer. I would say though that, you know, not surprisingly at the lower end of the level of that scale, right, folks are going to be cross-trained in accounting and finance. You’ll have discrete departments, but the folks will be doing work on both ends. You’re just not big enough to necessarily have a… 100% of the function just on FP&A and finance and just on accounting. You’re obviously going to have to still at those levels have key accounting functions to close your books on time, to start to consider. You may not have it at the time, but your go forward accounting system. I’ve been on companies that used QuickBooks up to $70 million if you believe it. You can manage a business. you know, still on a non-scalable platform for a while and be okay. So those small businesses, I would say, you might have a controller that’s solely focused on the accounting side. But if you had two or three other employees, your finance person who’s building your budget is also probably sending out invoices and billing. You might have somebody, you know, on the accounting side that’s used to just doing AP runs as an example or helping out with payroll, but they’re also going to be dabbling on some functions within finance. So I would say in that sub 50, you’ve got sort of two departments, but you can just imagine an image with a lot of lines crisscrossing each other. And I think that’s okay because that’s just the… the size and scale and the time of the organization at that point. I think as you grow from there, I think the lines start to break apart and you begin to get more discrete functions within accounting and finance. I’d say at that second level, the accounting sort of breaks apart and you really do define your accounting team into your standard accounting function. Then where finance starts to change a little bit in that level is… is where they start going horizontally across the organization, back to what I was saying before. You might have a couple of finance people to support the organization, some doing FPNA and modeling and forecasting, and others working across all the different functions. You might have one or two that are responsible for sales and sales ops and revenue operations, but they’re also talking to product and engineering and different departments. So you’re running around as a director of finance. not just helping do a forecast for the CFO, but you’re really understanding the business across all functions. Take the next step up to that highest level, and you have the flexibility of having individual finance roles structured to a department. So you might have an individual that’s solely focused on finance support for product, or finance support for sales or engineering, and you got that luxury of. of having a little bit of specific skills. And that’s kind of how I see the formation of finance and accounting, you know, expanding between, I think, a small business where everybody’s doing a little bit of everything to these larger software businesses where you can support departments with the ability to manage that with individual finance leaders in a way that I think is cost-effective.

The first 100 days#

Rohit Agarwal: Awesome. That makes a lot of sense. Let’s move into a little bit of a hypothetical situation where let’s assume I’m a new CFO appointed at a company. Would love to understand from you advice on my first 100 days at this company in this new role to be able to set up a really good foundation for long-term success.

Pete Boyes: good question. And I do that with a lot of in this role today where we’re on board, either on board new CFOs that come on board or I’m new to a company that we’ve just acquired. Kind of the three things I would say. Number one is the first thing I think you need to do as a CFO is talk to your stakeholders. And there’s kind of two stakeholders. There’s, you know, back to my Make sure right out of the gate you’re talking to your investors, you’re getting to know them. What makes them tick? What are they looking for? What do they not like? Ask them, you know, hey what are you missing right now that you don’t see if you’ve either been with the business already or in your diligence that you didn’t see. Find what they’re saying. Then there’s the internal stakeholders, right? Back to my department analogy. Go talk to each functional leader. that you serve, right? Because you have, as a finance leader, you’ve got internal customers and external customers. You’re supporting your internal employees, right? Whether it’s processing expense reports to helping them with budget and approving purchase orders or purchase recs for different products and services. Ask them and capture that insight, right? So you gotta be a good communicator, step one. I think step two, which I love doing, is then do functional reviews. I would tell every CFO, sit down, and even grab your number two, and whoever that individual is, sit down with each functional leader, your head of product, head of sales, spend an hour. Ask them to just walk you through their organization and how they manage their teams. Some people get super excited about that, and they’ll bust out with 40 slides, and they’ll talk to you for three hours. They love it. Those functional leaders, they love to talk about what they do. And so you’ll get a variety of, you know, I was encouraged, don’t make it prescriptive. Just ask them two or three simple questions and see how they respond and absorb all that. Because back to my other point, I think good CFOs have to understand every aspect of the business. Now you’re not going to learn it all in your first two hour session, but you’re going to learn enough to get you going. So that’s step two, I would say, in your first 100 days, just spend the time getting to meet each functional leader and do a deep dive with at least one other individual in your organization. And then I think step three is you sort of take all that feedback, external and internal stakeholder feedback, your understanding of those functional reviews. And then I think you look at your own team that you have and the systems that you have. Back to my QuickBooks. You know. based on what you just saw and the growth of the business and all the things that you know, evaluate, do I have the right accounting systems, do I have the right FP&A forecasting tools, do I have the right project management software or sales force software or CRM software to run this business. And take all those inputs and then conversely or in parallel, do you have the right team underneath you to… get to where you want to go based on what you’ve heard. And so it’s listening to your stakeholders, it’s understanding the business from the perspective of the functional leaders, and then it’s sort of evaluating your team. And if I was sort of presenting that to the board as an example, here’s what I did in my first 100 days, then I would get to that sort of punch line and say, based on all that, I’m going to go My recommendation is going to be we need to upgrade our accounting system in order to scale. We have terrible reporting on these key metrics and you’re never going to get what you want unless we either add functionality or scale. Oh, by the way, I need to hire people over here and let go of people over here because they’re in the wrong seat. I think if you focused on those three things in your first 100 days, I think the… CFO would be well sort of suited to move forward.

The CEO-CFO relationship#

Rohit Agarwal: Love it. Very cool. Let’s talk a little about the relationship of the CEO and CFO. It seems like from a CFO standpoint, not only does that, not only the CEO is the manager, but also just from an overall company standpoint, there’s a lot of nuances to that relationship that enables the company to do a lot of things or on the perverse not do many things. So how do you think about that relationship and if there are any sort of interesting hacks that you have used during your time to foster that relationship?

Pete Boyes: good question. And my point of view, when I went down this journey 15 years ago, was that I took on the belief that the CFO needed to be basically the business partner, the right-hand person to that CEO. That that CEO could lean on in good times and bad and to… share frustrations, opportunities, right? Obviously you’ve got engineering and product and strategy, but there needs to be one individual that can be that business partner. And I felt that was the CFO’s job. And so, my number one criteria when I looked at those roles was how was my relationship going to be with that CEO? Because I think in order for me to be effective, we need to communicate well, we need to, they need to trust me and to make it effective. Doesn’t always work that way, but that was my goal. My second goal was if I did my job right, I would enable the CEO to scale. And why or what’s that? Does that mean to go off on the beach and do nothing? No. You want, especially in investments. where in companies where you’ve got a time horizon, likely where you’ve got an outcome that needs to happen, you want your CEO thinking strategically, working strategically, getting out of the day-to-day weeds that may slow that individual down. And so always took that as a challenge. In fact, when you do one-on-ones with your CEO, I would always ask that question, what can I take off your plate? I think if you ask that question to a CEO, you’ll get interesting answers, but you’ll realize the CEO says, well, gosh, I do this all the time. I’m like, why do you do that every day? You shouldn’t be doing that. When you ask that question, you’ll find that. is focused on the strategic things and allows the CFO, I think, to take some of that off the plate. Now, the CFO doesn’t do all those things necessarily. I’ll take some of that stuff off his plate, but it’s also my job to quarterback it and say, gosh, if you’re doing these three things every week, that should be done by this individual, by that individual. And I’ll tell you what, why don’t we take that off your plate and we’ll come back and just share with you the output and save you a lot of time. So… So I think that would probably be my favorite pack. It’s just in your one-on-ones asking that question about every two or three weeks. Talk to me about what’s taking a lot of your time right now and let’s debate whether you should be focused on that or not.

Navigating triple headwinds#

Rohit Agarwal: Makes a ton of sense. Right now, it’s a pretty peculiar environment that we are living in from a financial or a business standpoint, where every company has been forced to change their focus a lot more on the profitability side. And certainly, it’s applicable for the technology companies, per se, which have seen a tremendous funding tap opened. for the last couple of years. What kind of conversation are you having with CEOs, CFOs, especially to be able to navigate these times? And by definition, your portfolio in general is anyways more profitable, right? So they don’t hopefully perhaps have a kind of an existential crisis, right? But then maybe for the general audience where a few of the companies might actually have a really tough time to be able to get to the profitability. They may not be profitable right now. So what kind of advice, what kind of conversations are you having with CEOs and CFOs, especially around the current market environment?

Pete Boyes: Well, it’s very different conversations than we’ve had over the last 10 years. I mean, for sure. You know, 2008, I referred to that a while back in this conversation. You know, that was a big jolt to tech and to the economy, but it was kind of short-lived. And I don’t think it was met with sort of the double whammy that we’re facing today. maybe even the triple headwinds that we’re facing today of a lackluster macro environment of drastically increased interest rates and a tough funding environment. You kind of have almost triple headwinds today. I think CFOs have faced one, maybe two of those, three over the last 10 years, but they’ve rarely faced all three. And so if you kind of go back, Part of that is no one’s fault. It’s just the market paid for growth. The public market’s paid for growth. Because financing was cheap, both equity and debt, and the economy generally was good during that period, CFO’s job was to drive top line growth. Focusing on profitable growth was not a thing. the market dynamics have changed. And that’s the thing about being a CFO, you gotta be flexible, right? It doesn’t mean the world’s always gonna be profitable growth for the next 50 years, but for the foreseeable future, that is sort of the world that we live in. And you know, Orlando Bravo has talked a lot about that, about profitable growth. Luckily, Thoma Bravo has had that mantra for a long, long time. And so most of our CFOs have heard about that concept. have thought about that concept and we’ve managed our businesses to that. So I kind of feel like we’ve had a little bit of a head start in this world because of just the way that we’ve managed our companies. But it’s different. And so you may be a CFO who has never had to experience cost cuts, who’s never had to walk through significant layoffs, who has to… gets a goal on how to squeeze vendors on fees to push their own team for price increases in an inflationary environment on product. Everybody’s afraid to do that. You’ve got to focus on that. And then managing cash at a level where you can’t just lob in a phone call to Silicon Valley Bank to increase your line anymore or to raise another round of venture money at an up round. That is a difficult environment. And so, one of the things that we’re working with our businesses, if you think about almost a graph here where historically you’ve had good bookings momentum in an upward trajectory in a good environment and very stable, if you look at a second line, very stable interest rate environment, which means your interest expenses generally the same. Well, those two lines just started to diverge, right? You’ve got the interest rate expense line going up, you’ve got bookings and macroeconomics going down, and now this gap, this sort of, I would call it this cash gap or this profitability gap, which used to be very stable and you can manage, has bifurcated very quickly. And if you weren’t paying attention and are not paying attention to that in this environment, It’s going to catch you off guard. And so a lot of folks in this environment need to manage to that, need to ensure that the businesses are managed in a way to minimize that risk, that cash risk that can occur in a tough, I’d solve this triple headwind where you’ve got a tough macro environment, you’ve got high interest rate environment where many of the software companies are debt financed. then you’ve got sort of a quiet or a slow financing environment on top of that. And I think those companies that manage through this, I don’t know, this 12 to 24 month period, the best are going to come out of it with great results.

Rohit Agarwal: Very cool. Yeah, I think the triple headwind is quite an intriguing concept to think about. And I think every CFO has to think about how to navigate all those three vectors.

Pete Boyes: I mean, it’s new. It’s new for everybody. I would say, I mean, some people may roll their eyes at that, but I do think trying to manage all three of those at once is definitely new muscle for I think the growth minded CFO that, to be honest with you, it’s been that way in this sector for a good 10 years.

Rohit Agarwal: I totally concur. When I joined Zenoti, I think within five months, COVID hit. And when I joined, it was like, you know, basically growth on all kind of fronts. And that’s kind of where the focus was. And then all of a sudden, right, like, we didn’t even know if we are going to get enough money from all of our customers, like for, you know, subscription customers, but there is no way if they’re shut that they’re going to pay the same amount that we were supposed to receive every month. so, yeah, that was interesting times to be able to even just change the mindset around it.

Pete Boyes: in fairness, I do think that’s right. And I do think COVID, it’s fair to say COVID gave, I think, the modern CFO, if you will, a taste of what one or two of those headwinds could look like, no doubt, in a short period of time, you had to react quickly. But the investing in the finance environment, an interest rate environment hadn’t switched yet. And so, although the macro environment took a big tumble, kind of like it did in 08 with COVID, you still had two tailwinds in financing market and interest rate, and the interest rates being low, that enabled folks in that seat to, I think, manage through that as best they could. Whereas today, I think, although I do think things are improving, there’s still triple headwinds that are kind of beaten up against you.

Rohit Agarwal: I’m curious to ask after, I mean, especially in these kind of triple headwind, um, kind of market situation, how many scenarios are CFOs planning? Like in typical times you have three scenarios, you know, bull case, bear case, and base case. How many scenarios are people planning for these days?

Pete Boyes: you know, I think it just depends on the market that you’re in. I will say though, I think, I don’t think it’s as bad as maybe we’re making it out to be from the standpoint of, you know, we don’t know how bad it can get. I think we know where we are and it’s relatively stable today. It’s just a headwind. It’s not necessarily, you know, is there a second or third shoe to drop? I don’t think there’s necessarily that fear. So I do think the initial scenario building was probably Q3, Q4 of last year. I would say that was when I think folks weren’t exactly sure of if there were a second, third, or fourth shoe to drop, how far interest rates would climb, is the macro environment continuing to erode, and is there a recession? I think if you fast forward to today, six months after that period, I think we feel a little bit better about the predictability of where we are today. And so scenario planning six months ago was different in terms of, hey, what do we need to, over the next 12 months, what do we think our interest expense may be? Or over the next 12 months, what do we think our bookings growth may be in this tough environment? And therefore, where’s our… their cost base need to be. That’s where the scenario planning was done. I would say the latter part of last year. I think this year we’re sort of looking at our scenario planning and how we’re doing to that. And so the variability off of that is much smaller than it was, I’d say six months ago. So I think that we’re on the back end of that, given that things have generally stabilized. We kind of know we’re in a little bit of a slow economy. We’re in a generally a, gh interest rate environment, but is it going to go up that much more? It’s a little bit easier to predict that today than it was six months ago.

The M&A integration playbook#

Rohit Agarwal: It’s good to know that people have already adjusted to the new reality. Very cool. Let’s change gears a little bit. During your career, you have been part of multiple acquisitions, or M&A transactions in general, whether on the buy side or on the sell side.

Pete Boyes: Well, hopefully they have. I know we have. I know we have.

Rohit Agarwal: you know, from statistics perspective, majority of the acquisitions do not work, right? Yet there are strategic, you know, large strategic buyers that are buying sort of companies of different sizes. There are private equity firms that are doing this for a living. So there has to be some unique framework or some interesting… something interesting that they have been able to figure out that others have not in terms of how to make M&A work, right? So can you maybe share some light in terms of what makes an acquisition work versus what makes an acquisition to fail?

Pete Boyes: great question. And lots of moving parts to this, but I’ve done enough to, I think, have a pattern of what seems to have a better probability of working than not. Nothing too crazy, but a couple thoughts that I would sort of say, hey, there’s probably, once again, I love talking about three key things, but number one is you have to have a clear strategy as to why the acquisition makes sense. And a colleague of mine shared this little tidbit and said to one of our CEOs, hey, I wanna do this acquisition, it’s great. We said, great. Before you do anything, I want you to write us a one page press release of what the press release would sound like as to why you bought this business. And it made that individual scribble down, you all read those. PR press releases that says, company A by company B, and here’s why. And if you can’t quickly articulate the why, that’s probably take a step back and say, is this really making sense? And so call it the press release test. Do you have a strategy? Can you articulate that strategy in a one page press release effectively? Step two, and I say this a lot, but you have to have management and executive buy-in on that strategy. If you don’t have executive buy-in on that strategy, it’s gonna be a long haul. And so, you know, communicate, empower your executive team, get them inspired, fire them up about it, get that management team to buy into that strategy and make sure they’re aligned on why it makes sense. Because ultimately it’s those individual executives that have to drive the integration and change. And if you’ve got the majority of those executives that are rolling their eyes and saying, this doesn’t make any sense, it’s gonna fail. That would be sort of point number two. And to that, you can’t bring everybody in every time, but I’m a big believer in when you’re doing your diligence and you’re doing your work, incorporate more than less of leaders in that organization. Set up a task force. set up leaders in the organization, have them participate. You enable them to participate in a diligent session. They feel ownership. They feel the desire to want to make it work. Then I think the third thing, and this one is a little bit more challenging, is integration. And on integration, I think lessons learned here is, do it fast, do it faster, do it fastest. Do it soon, do it sooner. If you let integrations drag on, I think it slows the value creation down. It’s going to be more painful to combine a sales force right out of the gate. It’s going to be more painful to figure out org structure to combining engineering departments, which inevitably you’re going to have some folks that don’t fit into the new org structure. It’s going to be painful to try to combine two accounting systems. get to one payroll system, all this is gonna be challenging, but the sooner you get it behind you, the better. And I can tell you for every acquisition that I’ve been a part of in one side or the other, where it’s dragged on and you finally get it done, you do your post-mortem and everybody says, in hindsight, we should have done this way sooner. And that rarely, you rarely hear someone say, no, it was perfect that we waited 18 months to combine the two sales. so I think the last piece of, I think my experience, right? So the CEO press release strategy, make sure it fits management buy-in at the next level down, and focus on quick integration. Usually those, you got a higher chance of success if you follow those three steps.

Rohit Agarwal: Love the PR test. Makes a ton of sense. Is there some difference between a product acquisition versus a revenue acquisition? And how does those two play out based on these three different vectors that you talked about?

Pete Boyes: those are two completely different cases. In some cases, you are looking to scale the business and only looking to buy revenue. I think in order for those to be effective though, it’s got to come with significant integration and cost restructuring to get the benefit of that. It’s always, I think, a bad idea to think of always getting revenue synergies from an acquisition where, hey, you can easily cross-sell these products and you’re going to get even a bigger lift than what the revenue is. I think that’s, you’ve got to believe that will happen, but I think you have to think about that business without that, right? And you have to earn that right, earn that value over time. So I do think revenue is not a bad strategy if you need to buy it, but it’s gotta come with the right expectations. I think products are very different by, right? It could be a feature gap, it could be an engineering hole that you need to fill. You know, and I think you’ve gotta recognize that that’s likely not gonna be an accretive transaction from a profitability standpoint, but you’ve gotta believe that it’s gonna create value either in the time horizon you know, as an investor and as a management team, you’ve got the time to realize that value that comes out of those product acquisitions. Maybe it takes out a competitor, which helps you in the long run. But it’s a little bit harder on product only to ensure that you’re getting the value creation that you want in a timely fashion.

Rohit Agarwal: Makes sense. Let’s… Let’s switch gears a little bit and talk a little more on you personally. Tell us what motivates you today, Pete. You’ve seen an amazing career from the accounting side of things to being a banker, to being a CFO operator and now an advisor. So you’ve seen that whole arc. What keeps you going today?

Pete Boyes: good question. Look, I think for me, I love the journey of value creation and watching a business sort of morph into a great business. Great businesses to excellent businesses, good to great, whatever you want to define it. I think myself personally, I’m a competitive person. I enjoy… winning in a good way. I enjoy hitting quarterly sales numbers just as much as the sales guy or gal does. I enjoy that aspect of it. And I think what the excitement and inspiration I get in these is watching these teams build cohesive teams, grow the business and create value. I think that is one of the key things that keeps me going. I think number two, I mentioned this earlier, I’m always learning. And I think if you’re constantly learning and you’re constantly wanting to learn, you’ll never get bored. And you’ll always want to continue to find ways to grow and help organizations. And I’m just a constant learner. And I’ll say, I’m always learning new things in this role, even with some of the folks that I’m supposed to be coaching. They’re teaching me new things each time as well. And then I think the third piece of it is team building, right, and I do think as I’ve gone through my career and sort of seeing the next generation come up, I do get gratification satisfaction at watching sort of my peers and my team members grow into those roles and be successful in those roles. And I think that energy and excitement that I get of watching these teams create value, grow their own careers, have success is exciting for me. Maybe the last piece I would say too is technology is always changing. I’ve been in software and technology now for 20 plus years in some capacity either as a CFO or a banker or now as an operating partner. And maybe that goes into the learning part of what I was talking about earlier. But I love the change, I love the new businesses that we get to work with, everything from healthcare and leading software that’s supporting cardiovascular to automation technology for credit unions and banks. I mean, the whole gamut is exciting to me. And seeing that new technology spur and watching those businesses grow is something that will keep me excited to keep doing this work for. her job plenty of years.

Rohit Agarwal: Very cool. It’s no joke that the role of the CFO is quite demanding. And I’m sure during your career, you came across many situations which can be defined as shit hit the fan kind of situations. Wanted to understand, how did you keep your calm during those situations and navigated those choppy waters?

Pete Boyes: Well, you know, and yourself, Rohit — we had the opportunity to meet each other years ago and I had been a banker, you were in the investment banking world. And so, you know, I kind of think my experience growing up in that world, kind of learning what works and what doesn’t work, right? I think any good leader takes the good and the bad from their experiences. And so, you know, I think of being self-aware was sort of my number one thing I took away that I brought to my organization. And what I mean by that is, you’ve gotta understand, I think, the limits of the benefit that you get when the shit hits the fan. What can you get out of your team? And I think if you’re aware of that, you understand, I think, the people you work with, the teams that you work with. You’ve been a good listener. Um, you understand what makes them tick and motivate, um, you can weather that storm relatively easy if you’re completely blind to that and you, you just got your blinders on and you’re going down that path, um, folks are going to fall off the bus, right? Or they’re going to hear selectively what they want to hear. And so I would say, you know, in my experience, if you spend the time early on getting to know your teams. get to know what motivates them, get to know how to inspire them. They’ll go through walls for you. They will work through those tenuous times, those challenging times when somebody’s asking for 46 points on a diligence request list and they want it by tomorrow morning, and your team is looking at you and there’s just no way. You’ve got a way to give them the triple clap and say you got this, and they gotta feel like you got your back. You got their back. I think those that are successful at sort of building that trust and building that inspiration within their teams can weather those storms. I think those that are blind to that or lacking the EQ, I think are going to struggle with that.