The next normal of finance
Earlier this month, we sat down with senior Los Angeles finance leaders to have an open dialogue around how the finance function has changed since the beginning of the COVID-19 pandemic. During the discussion moderated by Drew Schulz, Finance and Operations at Kajabi, we tackled how LA startups have pivoted financially with budgeting and forecasting, but also how some have continued to hire in a remote landscape.
What was your initial response and how did you pivot financially to take on the challenges that resulted from the COVID-19 pandemic?
Economic uncertainty caused an enormous drop in demand, which forced many startups to reevaluate their forecasts and freeze on headcount.
“We knew we needed to help the company last through the Summer of 2022. The CEO and I worked together to come up with what we both thought was a very conservative sales-case until we could establish more clarity over the next quarter or two,” says Aleks Lyng, Head of Finance & Business Operations at Knowde.
“I partnered with our lead recruiter who had been triaging headcount requests from the various department leaders and we looked at our current operating model in order to prioritize. We pegged a number for overall spend based on that initial conservative case, and then decided where to shuffle those dollars between apartments. We also established clear commercial milestones, with the idea that if we hit those milestones, we’d be able to unlock additional hires,” he adds.
“To avoid layoffs, we initially elected to not hire anybody. More recently, we’ve been exploring new hires based on a lead plan on a 30-60-90 based on sales,” says Clarissa Avendano, VP Finance at Gen.G.
What are you doing to improve retention in your businesses?
Many startups were faced with the difficulty of keeping remote employees engaged in a new remote workplace.
“Startups that don’t currently have the cash for end of year bonuses might consider giving their employees options. For example, we give each employee (we only currently have about 25 employees) 1,000-2,000 shares. We also conduct weekly town halls in order to keep people informed about what’s going on on the corporate side of things. Other culture-build activities like Monday bingo night with nice prizes has helped bring everyone together,” shares Scott Lai, CFO at Burst Oral Care.
How has your budgeting process changed with employees working from home?
Layoffs were the only option for some businesses who needed to cut costs in order to stay afloat.
“We've been fortunate enough that our business rebounded pretty fast, and the trajectory has remained pretty consistent, which has allowed us to largely assume status quo from a forecasting and budgeting and preparation standpoint. That being said, we certainly qualify any forecast we’re putting with a disclaimer that it is “subject to change” as the COVID situation evolves,” shares Justin Rofel, VP Finance at DAILYLOOK.
“The other thing I've done internally and with our board is to provide various sensitivity analyses and scenarios, just so people understand the different goal posts as far as our growth and our liquidity, based on variables that could be affected by the pandemic,” he adds.
How has forecasting changed for your business?
Financial strategizing became a significant challenge as nobody knew what disaster to expect next.
“Our standard operating procedure is to re-forecast maybe quarterly, although for some businesses semi-annually would make more sense. I think it's a fine line between just constantly forecasting and re-forecasting, which takes away from your time to actually operate in the business and help bring value by creating the right level of visibility and forward-looking guidance,” says Aleks Lyng.
“We were careful to make sure that any kind of major communications with the board were well thought-out and positioned in a way that created trust in our ability to navigate this really challenging time,” says Clarissa.
“We've been using elementary systems like QuickBooks, but we are looking into bridging into something better like NetSuite. Some of the helpful tools we've been using to manage contractors as well as budgeting that are relatively cheap include Deel and Tipalti, and Budgyt,” she adds.
How have you approached hiring and onboarding new hires remotely?
Companies that were able to flourish or remain profitable during COVID had to reimagine their hiring and onboarding process in a virtual world.
“At the start of COVID, we conducted interviews in a more traditional format, which included a phone screen and then a second round of interviews (plus a case study). We found that to be extremely time-consuming, opting instead to start with that qualifying case study in the first interview to better understand fit and technical skill. The second round was then an opportunity for people to ask questions from their perspective or review a presentation. Switching to that process has been very helpful,” says Chanel Li, Head of Finance at Pangaea.
“For us, interviewing hasn’t changed much, but the onboarding process has. We’ve come up with a system where managers record training videos to create a virtual training experience. After the new hire views those videos, they have a one-on-one with each lead to discuss any questions they may have,” says Tushar Makhija, VP Sales and Customer Service at Airbase.
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