Neal Naor, CFO of Alachua, Fla.-based Axogen, Inc., has had a financial career spanning countless areas of life sciences, where a CFO's smart resource allocation and spend optimization can bring great value. It spans types of business.
After working as CFO at Arbor Pharmaceuticals Mr. Naor will join Axogen, a provider of peripheral nerve repair products, in late 2023, joining Sweden's Medtech Mölnlycke. His current focus is on helping 15-year-old companies achieve bottom line profitability and positive cash. What's the key? Cost-effective sales growth.
We asked Naor about his first-hand experience with the variation in CFO positions depending on an organization's maturity, size, ownership, and, in the case of life sciences companies, the product development lifecycle. This factor can have a significant impact on what finance executives spend their time on.
Over your career, how have the demands on CFOs changed by sector, company size, and ownership?
Having spent most of my career in life sciences, I have found that the demands on CFOs vary by company type and sub-industry. Pharmaceutical companies have very long development cycles and must focus on long-term resource allocation. At his previous company, he established a global portfolio management and resource allocation function. This capability prioritized and optimized the company's long-term spending, primarily around the R&D pipeline. We supported investments in manufacturing and IT, taking into account ROI, financial risk, and investment schedule.
Medical device companies, on the other hand, are less regulated and have shorter development cycles. This shifts the CFO's focus to prioritizing tactical, medium- and short-term spending. Biotech companies focused on raising capital. They had to be able to explain the company inside and out and be knowledgeable about science.
Investor and public relations functions are more prominent in listed companies, as greater transparency is required. That transparency requires consideration and communication of short-term results of long-term efforts.
We learned that small businesses need to be practical and results-oriented. In addition, I often focused on supporting company turnarounds, exits, and successful IPOs. In contrast, in large enterprises, the size and complexity of finance teams and their operations make cost and structure optimization important. So I often led finance transformations by offshoring certain functions or moving to a shared services model. My work also focused on effectively implementing ERP and other systems.
How do you approach more dynamic situations, such as a company crisis or when your company finds itself in a difficult situation?
As a financial professional, I always look at things analytically and strive to understand the drivers and root causes of crises and develop recovery plans. However, in some cases, a report may not have the appropriate level of granularity or granularity to understand the problem and its root cause. In these cases, the first step is to fix the problem, often taking an 80/20 approach. [80% of outcomes result from 20% of all causes]. In my experience, this helps CFOs quickly understand the key aspects of an issue.
The second step is to develop and coordinate recommendations for potential solutions with the CEO and other departments, being realistic about what can be accomplished and by when. An example of a crisis I have experienced is the rapid decline in corporate profit margins. We responded by conducting a detailed analysis of the various causes and recognized that the cause was accelerated change in both customer and product mix. We will implement plans to address the manufacturing costs of some of our lower margin products, change our sales incentive plans, discontinue prioritizing those products and change their pricing in our next contract negotiations. I agreed.
What is the best piece of advice you received at the start of your career?
From the beginning of my career in finance, I dreamed of becoming the CFO of a company. Nevertheless, I was advised to start my career in a consulting firm or a large company and become a small cog in a big machine. Learn best practices and see what “good” looks like in these situations.
That diversity of experience will be invaluable for subsequent CFO roles in small and medium-sized businesses. The best practices I learned in large organizations were not directly and completely applicable to smaller organizations, but what good practices are and how to apply them. I found it helpful to know. This has resulted in considerable added value, from enhanced reporting and business support to improved tax planning and compliance approaches.
