“For tech companies, achieving high growth is a top priority,” says Steve Isom, CFO of SaaS company Bloomerang. Indeed, a “growth at all costs” mentality has been prevalent among tech startups over the past few years. But the tides are turning. Bloomerang, which provides software to help nonprofits raise funds and manage donors, plans to budget for a more balanced approach to growth and profitability in 2025.
Why does it make sense to balance these two important financial goals? Isom, a former bank analyst, spoke with our own Katie Kuehner Hebert about the rise and fall of the emphasis on growth and profitability among public and private companies, as well as other priorities for next year's budgets.
How are the economy and markets influencing the strategic choices CFOs will make in this year's budgeting process?
Growth is often the determining factor when making strategic decisions about budgets. But there's a nuance here: it's often easier for companies with stagnant growth to cut costs and increase profitability. This is especially true for public SaaS companies, where profitability seems easier to control than growth.
Nevertheless, the market values growth more: a one percentage point increase in revenue growth is roughly three times more valuable than a one percentage point increase in profitability. So, while it's important to balance growth and profitability, the market values growth more.
The key to success is having a strict growth plan and Deeply understand the unit economics of your business to drive sustainable growth [growth not requiring additional debt or equity] The cost of capital remains paramount, especially in a broader market characterized by still-high interest rates, which puts added pressure on all aspects of the business, making strategic planning even more important.
As a technology company, are you finding ways to bring AI applications into the finance space to take on more of the administrative and day-to-day tasks?
Examples of AI delivering significant value in finance and accounting are rarer than in other functions. The market has rebelled against vendors who promised automation at scale and haven't delivered. When I talk to other CFOs, the most common question I get is if they've seen any specific AI use cases, and the answer is often “no.”
AI could eventually lead to a transition similar to the transition bookkeepers experienced with spreadsheets, moving towards higher-value, bespoke work such as in-depth analysis and strategic thinking. AI can automate the manual tasks of junior team members, allowing them to focus on strategic planning and relationship building.
AI is like a hammer looking for a nail. The finance and accounting nail has yet to appear. This topic has been discussed repeatedly over the past 18 months. I believe AI is following the Gartner hype cycle, with initial excitement, disillusionment, and then struggle to find practical use cases.
What opportunities would you recommend CFOs invest in to reskill and upskill their employees?
We need to focus on investing in soft skills training for our teams. I spend a lot of time talking to my team about stakeholder management – how to handle difficult conversations and how to influence others in the business.
CFOs should treat these topics the same way they would a discussion about the accuracy of a balance sheet or an error in a spreadsheet formula. Finance and accounting professionals tend to get caught up in what they perceive as objective truths and business observations, and forget that companies are made up of people. People are not always rational, so it's important to get them on your side.
In a remote environment, the focus on soft skills is even more important because spontaneous interactions like water cooler conversations don't happen. Injecting a human element into your work is essential. Without it, no amount of thorough analysis or reporting will produce meaningful change.
Bloomerang completed a private placement and acquisition this year. What advice would you give to mid-market CFOs handling such a transaction for the first time?
My biggest piece of advice is to ask for help first when you need it. Bloomerang acquired a business, brought on new investors, and secured a debt facility, all in one day. It was a complex series of transactions with a lot to manage. If we hadn't asked, we wouldn't have brought in the right resources we needed. It could have been disastrous.
When undertaking a complex financial transaction, especially one you have not done before, always seek the assistance of outside advisors (e.g., lawyers, investment bankers, auditors, transaction specialists, etc.) whenever possible.
Second, leverage your network. Over the years, I have benefited greatly from building a solid network of experienced CFOs and finance leaders. Don't be afraid to ask them for help. The first step is to leave your ego at the door. If you're new to something, simply acknowledge it and ask, “Where do I start?”
Approach it with a humble mindset, ask for clarification like a beginner, and build on that knowledge. This honest approach is much more effective than trying to solve tough financial problems on your own.
