Episode 108 Transcript

Brent Trimble: Hi everyone, and welcome back to another session of The Pursuit Power Half Hour. I'm Brent. Today we're talking with two CFOs in the professional services industry about their evolving role shaping financial strategy, while also driving operational clarity and cross-functional alignment. They're going to share how they've tackled challenges like rapid growth, complex delivery models, and tightening margins, and the practical steps they took to better connect finance with delivery. Steve, Dave, welcome. I'm ready for this conversation. Before we dive in, just give us and our listeners a little snippet about yourself, your role in your firm. I'll throw it to you, Dave first.

Dave Ristow: Hey, Brent. I’m Chief Financial Officer at iA. I've been with iA for about five years. We are a software and robotic automation platform serving pharmacy. I have about 25 years in finance and have implemented six different PSA systems. I look forward to today's conversation. Thank you.

Brent Trimble: Excellent. And Steve, how about you?

Steve DeSantis: Thanks, Brent. My name is Steve DeSantis. I've been CFO for 25 years for nine different technology companies. I've been at Dynatron now for about five months and have implemented five PSA solutions over that time.

Brent Trimble: Awesome. I appreciate it. Let's dive in. There's a lot of business talk, and certainly I think for our listenership, acknowledgment that the role of the CFO has evolved and changed. Personally, when you think about your role as CFO today, how has it evolved at this stage in your career in the past few years, even beyond traditional financial strategy? What does driving operations clarity look like in practice? Dave, I know you had some thoughts about this, so maybe we could start with you.

Dave Ristow: I think a lot about how a PSA can affect a business, almost like a pilot of an airplane. The view that I take of this is really a copilot for operations. What I look for is those tools, systems, and processes that we can bring to the organization to bring clarity and operational excellence.

Brent Trimble: Steve, how have you seen your role change in the past few years as you've navigated different firms at different stages of growth?

Steve DeSantis: It's a great question. I've seen that investors in particular are expecting different things from CFOs these days. They expect the CFO to understand the overall strategic strategy of the company and tie that to people, processes, and systems, and what we're doing to execute across an organization. The CFO today can't just sit in and, as you said earlier, count and report on things. They’re expected to be involved strategically across the organization. Typically, what I do is get very close to each organization and each leader, understand their key strategic objectives, how they’re tying the strategic objectives of the company, then implement a strategy around people, processes, and systems to achieve that.

Brent Trimble: That sounds very multi-dimensional. Lots of operations in there, balancing cash flow, certainly capital structure. Along those lines, you've both had to navigate firms undergoing rapid growth, whether that's organic, hit a nice ICP and taking on lots of new clients in acquisition, some with outside investment. Most of these have very complex delivery models, all of this under the pressure we've all been under the past several years of tightening margin due to costs and so forth. Dave, of those or maybe some that aren't mentioned, which of these challenges hit you hardest first? Perhaps reference your current role or maybe one past and how did you approach it?

Dave Ristow: Yeah. What you just laid out is pretty much the story of iA. We have grown by over 300% of the top line in the last four years. What hit us first and foremost is, when I came in, we had disparate systems, complemented by different spreadsheets and various ways for managing projects, with many manual processes.

Steve touched on it really well. From a strategic perspective, what we do at iA is incredibly complex. It is software and hardware. We have 550 people operating on our various projects across 30 different cost centers. Bringing control to that chaos and getting everybody aligned on a clear picture and vision for where we're headed is a key strategic focus. That brings operational excellence forward.

We have to link up as we manufacture things and as we bring in components of our large automated solutions from third-party vendors. We must connect the right resources with those parts and solution components at the right time and in the right place.

I have seen that not only does this improve the financial performance of the business, but it also brings forward operational excellence as the first key. Our second unlock here, Brent, was with customers and making sure their experience during a 30,000-hour implementation brings forward the right resources at the right time, with the right system on it. It is a complement of all those pieces. When you do that well at the core operating level, the financial results improve. We have been able to experience that here.

Brent Trimble: With disparate systems and other factors, whether that's rapid growth in the top down, maybe not the margin EBITDA we want on the back end, Steve, to you, forecasting, bringing confidence to the investors, the investment decisions, the roadmap depends on data you can trust; rigor, accuracy in forecasting, hitting that forecast with confidence. As a CFO, have you been approached in either your current role or past roles on owning a tech stack that helps ensure rigor in data, financial data that drives the forecast and makes it reliable, actionable insight led to the board?

Steve DeSantis: I think it's one of the reasons why I typically own business solutions, BI, and data analytics teams as well. A great example is for the past three years, I've been CFO with Suvoda. It provided a technology platform to pharmaceutical and biotech companies conducting clinical trials. The complexity of those clinical trials was significant.

When I first got to Suvoda three years ago, they were tracking most of their services hours in Excel, and they felt that they had a pretty good handle on margins. We implemented Kantata. First, back up for one second. We had very little visibility into a 700-person services organization that was spending 600 to 1,200 hours on an implementation, a very complex implementation. The board gave a clear mandate to get an understanding of how we could improve margin and efficiency across our services organization.

I went right to Kantata to do an implementation. We integrated that with our CRM, our ERP solution, and a BI and data analytics platform to be able to have complete visibility and real-time data on a project level and on an individual staffing level. We could drill in as needed. What it enabled us to do was identify areas to improve margin and efficiency. We also coupled it with trying to do it both from a product standpoint as well, looking for ways to minimize services work from a product standpoint, aiming to productize as much as possible.

By implementing Kantata in the overall solution, we were able to improve margin across the board. We were able to specifically identify what improvements and efficiencies were coming from services and what were coming from product improvements. It dramatically improved our overall margin from the low 20s to the high 30s and, in some cases, 40%. This had a significant impact on the company's overall margin.

The company was just acquired by two large private equity firms. Our investors said these changes in visibility and margin improvement contributed as much as $200 million of value to the ultimate transaction. It was a benefit to get that sort of visibility and insight into the business.

Brent Trimble: Enterprise value is certainly the name of the game with driving this top line growth to an eventual exit or different capital event. For Dave, Steve's mentioned the how and the why. I'd like to ask you and your experience, the what; data, insight, signals, metrics. What are the key areas you look at? If you've got an executive CFO dashboard or some kind of insights that are being surfaced, what do you use to steer the ship weekly, biweekly, and beyond?

Dave Ristow: Absolutely. Project Engagement Dashboard is a place I go daily. We have about 192 projects going on each month that rotate through. Some are large and long, some are quick hits, a couple of hours. Getting a flavor for the projects we've got and how we have to match up, we use a sales and operations planning process here to make sure we get the right resources with the right parts. That includes production capacity as well, being able to manufacture and/or ship.

The engagement dashboard is the first place I start. Then it's down to revenue, looking at backlog burn and how that is converting. Next, I work on resource efficiency. Operating margins and improvements, continuous improvement in those areas, is a place that not only we focus on as a management team, but my investors care about as well. Being able to work on that resource pool in ways with our team where I don't have to manage it, but rather they can manage it, understanding utilization and realization of projects, is where we'll focus on our dashboards.

Brent Trimble: You both, it sounds like you're in some extremely dynamic roles at present. Maybe either an example from these or looking back, the visibility of data and insight where you didn't have to parse through multiple spreadsheets, tons of regression analysis, but where good tooling or systems elevated an insight to you that helped you pivot through a period of change. It might have been a change in an investment partner or a change in the market, potentially a downturn, potentially an upturn, and where the data and your reliance on that helped you navigate through that change?

Steve, I know in your role you come into firms at various stages of growth and really helped pilot through and up and on into change. Maybe we'll start with you. If you think of a specific example and you don't have to name the company, you could talk in abstractions, but whatever you're comfortable sharing.

Steve DeSantis: Sure. I think a great example is that I was with a company over the last few years that tripled in size over a two-and-a-half-year period. We really needed to get our arms wrapped around, as we were looking at data, what information is going to help us move the needle for us in the company. What are the things we need to focus on? What are the things that are going to drive the difference for us?

I could point out that when we were looking at utilization, we wanted to look at billable and non-billable utilization because we were in the process of bringing two new products to market. We wanted to be able to see, when looking at these new products, how much non-billable utilization or time we were spending on customers that we were unable to bill for. We wanted to get insights into what issues we were having within the product itself, not just from a gross margin standpoint.

Our ability to look at utilization in those facets and drill into what is happening with the product and what areas we need to improve allows us to drive overall margin efficiencies, satisfy our customer's needs, and make sure we are delivering a high-quality product that is achieving the goals and objectives we set. Does that make sense?

Brent Trimble: No, it does. It sounds like the symptom of unrecoverable time was leading you to a diagnosis that there were some issues in the product they were taking a look at, and being able to factor in on that. How about you, Dave, insights that really helped you pivot or stay agile in your decision making?

Dave Ristow: For us, it was five years ago when we rolled in. It used to be about the contract and delivery. Steve's point really stands—it's about connecting the operations with the strategy, that people-process-tech stack.

When we walk in, because of all the disparate systems, we were trying to piece a lot of things together. What we're able to do is unite the entire organization around three key metrics: product profitability, project profitability, and post-sale warranty and support profitability.

Two of those three—both project profitability and post-sale warranty and support profitability—where we're deploying resources and trying to line up the system components or parts with our resources was an area and an example of where we could bring real focus. As soon as we were able to get all of this into one system, we connected Kantata with our manufacturing system and our expense management system. We have one clear view of where that project is on our percentage of completion basis.

We are doing a much better job of making sure that when a center of that large machine comes off the plant floor, it is visible to our project managers and the resources that are working on that project. We can get everybody lined up to support effectively that project profitability initiative or the post-sale warranty and support profitability initiatives.

Brent Trimble: Really tying, in your case, manufacturing, an output and throughput of physical devices back to your service metrics and tuning that whole process all the way through. This sounds very operational. I'd be curious to hear how closely you work with your partner or peer in a chief operating officer type of role or office, or if there's a PMO or some other type of operation organization that's pairing with each of you. I'd like to touch on that. I want to talk a little bit about operations next. I'd be curious, Steve, do you have a chief operating officer? Do you partner with that person? How does that organization work in your current role?

Steve DeSantis: Well, I assume the role of Chief Operating Officer as well, although we do have a President that I partner with. At the end of the day, we have a PMO office with the team that I partner with to manage projects across the organization, and we work collaboratively with them to dial in operational efficiency across the company as well.

Brent Trimble: Dave, how about you in your company's current stage of growth?

Dave Ristow: We have about 427 resources that we deploy for various projects. The folks I work with include a chief operating officer, but we then break it down by segments. We have leaders over the three main segments. Those are my business partners. That satisfies the project profitability side of the equation. On the post-sale warranty and support, we’re working with our customer support leadership, and that's another silo that we partner with. We bring business systems together with the chief operating officer and those leaders to bring all of the resources together, because it is a shared resource.

Brent Trimble: It's interesting hearing you talk. I was speaking with a client last week, or a potential client, and they were talking about the sequence of growth and who they brought in. They noted it was very important for them to have a flexible CFO with an operational lens because they felt once they built to a certain level of scale, then they could bring in a COO.

Until that time, the chief financial officer really assumed those types of duties. It sounds like that's a parallel track for both of you. You're managing these dashboards, managing cash flow, and there's an enterprise value target—all the things we and our listeners would be familiar with in running a services business.

What tripwires or potential landmines have alerted you recently? Maybe due to current economic conditions, which are good but maybe bumpy? I feel like the market is trying to find its footing. Where are we going to go next with capital, the price of capital, deal flow, and so forth? Was there something recently that caused you to stop in your tracks and say, we really have to vector in on this—something is going awry and we have to dig deeper into that insight? Steve, you're nodding. It sounds like this is relevant pressure for you.

Steve DeSantis: Yes, it is definitely very relevant. Timing is perfect on that question. For us, as a software-as-a-service company, it provides a significant component of our business in the area of services that augment or complement our software. One of the key measures of success is customer retention. When customer retention is suffering, meaning customers are not continuing to renew contracts or they are canceling contracts, it puts a tremendous strain on the organization because now you have to replace that lost customer revenue with new customer revenue, and it becomes a significant issue.

For us today, some of our customers are dealing with the impact of tariffs on the business. At the end of the day, they look toward areas or costs that they can eliminate that may be creating some uncertainty. The uncertainty in their business is forcing them to reduce expenses anywhere they can. We have had to dial into that retention metric and ask why retention is going down and what can be done about it. There are many steps that go in behind that. Ultimately, making sure that our customers are getting value out of our products and services and that we are proving a strong value proposition for the return on investment is essential to what we are providing to them.

Brent Trimble: Dave, you're in a different industry. How about you? Recently or near recently, have economic conditions or a metric flashing a warning signal caused you to take a deeper look?

Dave Ristow: Yeah. I’m crossing essentially the chasm of our three buckets of product, project, and wholesale warranty and support profitability. As a business, in today's environment, we're facing tariffs and seeing costs increase for our hardware and the products we service. Our investors aren't tolerant of lower margins. We have to go after those other two buckets of profitability—projects, and post-sale warranty and support.

The things we look for as we see the decline in margins in the product, some of which we couldn't just pass on to our customers given contracts, are areas where we had to make it up elsewhere. Our ability to dive in and put our hands onto levers that we pull around projects to make them more efficient, move more quickly, and deliver higher operating margins was where our focus was.

Part two, and it dovetails into Steve's point, retention is everything. What we are also focused on is SLAs. The products are slowing down into the US markets, and we're a reseller of some things that come from overseas. We had to work diligently to stay on track with SLAs for our customers. The systems we deliver are mission critical because they take a critical path in filling prescriptions—some mail order, some direct to pharmacy. That SLA component is something we can measure and influence through a combination of S&OP and aligning product and resources.

Brent Trimble: Both of your answers involve tariffs. In our industry in particular, there's a high proportion because we're in a B2B SaaS platform for services. A lot of our firms are consulting. They're selling fungible time and output, consulting and strategy, maybe delivery, so maybe not as impacted. It really speaks to the breadth of services that large firms that are acquiring, manufacturing, shipping actual physical product, that's part of the equation. Having that full view of the economic landscape for your company makes it critical because you can pull down the levers and see where you can reallocate.

Along those lines, you've both come into firms that are in sometimes nascent stages of growth, sometimes mid stages of growth, scaling or going to scale. Give us an example—again, you could speak to your current role or past experience in an abstraction—that a process or technology simply didn't work anymore, whether that was maybe by the provider, maybe they forced you into a decision and you had to deprecate a system. Maybe you just reached a point and said this no longer works, we're going to—I think, Dave, to your point, you brought a lot of disparate systems together. Whatever the case might be, maybe a nice, tangible example in that journey of evolution.

Steve DeSantis: As we've scaled each one of the businesses that I've been through, you reach a point where solutions are no longer able to take the company to the next level. A breaking point for me seems to be the $50, $75, or $100 million level where you've hit these levels and you've outgrown QuickBooks, for example, and now you need to move to NetSuite. You outgrow some other CRM solution, and now you need to move to Salesforce. You outgrow BambooHR and other HR systems, and now you need to move to one of the larger systems that is capable of scaling companies beyond $100 million. Often, these changes happen at the same time.

We are literally in the middle of implementing a new ERP, a CRM, and a new PSA. We are in the process of determining how to capture data from all the solutions across the company that we need in order to report on that and have data and insights at our fingertips. The overall thing that didn't work in the past for companies now at the stage we're at is trying to do analytics off of those solutions individually.

Now, we're creating a data lake and pulling all the information into a single source from all those solutions across the company. We are building analytics on top of that data lake so we can have those things at our fingertips. The key is having active involvement so that the data and insights we're getting are focused at the strategic level that really move the needle for the company, not just providing tons of data that distract people from the things that make the difference.

Brent Trimble: That's an outstanding answer. Those thresholds of the $50 million, the needs of a $50 million company to a $100 million company, get into things like regulatory compliance, revenue recognition, GAAP compliance, and all the types of things that are required. When your systems are strained, it can be a challenge. Dave, how about you—something that you had to really stop doing, reinvest, or do a wholesale rework of?

Dave Ristow: Yeah, that's a real thing here, where we’re at at iA. We came in. To Steve's point on the data lake and bringing all this disparate data together, it's more important today than ever with artificial intelligence. Being able to step back, that combination of a business strategy and how you're going to execute it with operational excellence and having a vision for bringing those systems together is critical.

I have an excellent business systems team, starting with master data management and understanding essentially how you're going to bring it all together. It may be best of breed systems, or it may be one ubiquitous system that can reach across most of your enterprise. At the end of the day, what we felt here is we had to replace the front-end CRM. We had to make massive improvements to the back-end CRM. Kantata fit nicely in the middle and actually replaced three different systems we were using, including a combination of Excel spreadsheets.

We were able to simplify the orchestration of not only the customer lifecycle, but also what we do at iA in terms of our lifecycle—everything from innovate and develop, to sell and market, through to installation and post-sale warranty and support, through profit drivers. We link that into our systems, all with the concept of master data management.

When we pull together the sales and operations planning process, we can only do that because of the data. We can only do that because we've had a strong focus on improving our systems and bringing that discipline back to the team. There's a lot of change management involved in that process, helping the team to navigate that journey. It is not easy, but being able to come out of it and step back is important—fundamentally, they're the ones that run it every day. Getting our leaders to lead helps us focus on the strategy and the longer-term result. That's how we've walked that walk. It's nice to see the team want to talk that talk today.

Brent Trimble: As we wrap up our session here, you're both seasoned. By that I mean this is not your first venture or your first role as a CFO. You both have rich experience. The benefit of that experience to pass on to others is advice. Everyone closes these types of sessions with advice to a peer or colleague, or maybe someone who's in a formative stage at the CFO level.

Specifically, I'm sure you could talk very long and with extremely useful, practical information about the role of CFO, but specifically in this idea of a CFO owning and optimizing the tech stack for the firm. Going back to a little bit in a $25 million company or $50 million company, many times that CFO hire also serves as COO. As you scale, what advice would you give to other CFOs about either the importance to own, optimize, maybe select, or manage the enterprise technology stack of your firm? We left off with Dave on the last one, so Steve, I'd kick that over to you. If you think the question doesn't really matter, I'd love to hear your thoughts on that.

Steve DeSantis: When I think about the tech stack and owning it, it really comes back to people, processes, and systems throughout the organization, tying that back to strategy. My recommendation for CFOs is to make sure that as you're looking at building out a technology stack that's appropriate for the size of the organization you're running, you don't just solve today's business problem. Think about the business problem, especially if you're a rapidly growing company. We're growing at 30% today. If I'm just trying to solve the problem today, in a year from now, we're going to be 30% larger, two years from now, even larger. We are not going to necessarily solve the problems down the road if we just look at today's issues.

It's easy to get focused on the problem today, but it's worth thinking about being responsible not just for providing a return on investment for the current investors looking for the 3x to 5x return. We're responsible for building an enduring company that can provide a 3x to 5x return for current investors and for the next round of investors who are going to invest in the business and acquire it. Everything we do around owning and optimizing a tech stack should ensure we're able to meet needs today and in the future, all in the context of supporting growth and strategic objectives both for the current investor group and for the next group.

It does not mean you overinvest; it means you appropriately invest and stage those things with the insights you need for what you're trying to achieve over the next several years.

One last thing I want to add, as Dave mentioned earlier, is leveraging AI to reduce manual processes and to use technology in a powerful way. If you're not thinking about that as a CFO today, you're going to be behind, putting your company and everything you're doing strategically behind. Make sure every area in the company where you can leverage AI in a meaningful way to do things more efficiently is part of your overall strategy as well.

Brent Trimble: Outstanding, a great segue. Dave, how about you? Again, advice to colleagues in the CFO space, other peers around ownership of the firm tech stack?

Dave Ristow: Steve touched on some of the very important pieces about building for scale and building for the long term, as well as bringing artificial intelligence. The only thing I can add to that is really around helping our employees, when they think about tech stack, to understand that our customers are at the center of the universe and that one of our greatest points of differentiation is the quality and the speed with which we deliver.

When they then start to think about the tech stack, it's about bringing the maximum amount of efficiency and effectiveness to the customer, whether that be in how we engineer product, how we sell and market product, how we deliver that product, or how we service that product. What I want my team to understand is to have a full appreciation for what that tech stack can enable, and not get caught up in a patchwork of systems. Be willing to change, be willing to lead that change management, and really think about it with the customer and our long-term differentiation strategy at the forefront.

When we do that well, revenue and margins go in the right directions, which then satisfies our investors. Getting them down at that level is really important to me.

Brent Trimble: That's outstanding. It's great talking to both you and Steve. Always good to see you again, and happy we got to reconnect. Dave, great to meet you and hear some of your insights, particularly some of the complexity you're dealing with and how you're tying in manufacturing and services. Thank you both for coming and sharing your insights. For our guests, thanks for joining us today. We hope you're leaving with practical takeaways that provide guidance and insight as you apply them to your own role.

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