Catherine Birkett’s job as CFO of the London-based fintech GoCardless has quickly evolved as the coronavirus pandemic crossed the globe.
As finance chief for the past 15 months, Birkett has been tasked with preserving the startup's future ambitions while continuing to attract potential investors.
Before joining GoCardless in 2018, Catherine was CFO for one of Europe’s fastest-growing telecoms providers, Interoute, where she took revenue turnover from $20 million to more than $700 million while fundraising through debt and equity markets.
In 20 years as a CFO, Birkett has weathered several recessions and guided a company through the dot-com crash in 2000. But, she told CFO Dive, the coronavirus pandemic is a different beast.
"In high-growth industries, the CFO focuses on growth rather than cost control," Birkett said. "Up until we hit this crisis, we saw growth as the big value generator."
But that world, where growth is king, does not exist right now.
"I came to GoCardless because the culture was different from my previous business in traditional telecom," she said. "I had to be willing to understand that money in this new tech world can be spent for good purposes like staff happy hours, a tennis table, food and drink in the office, and things like that. Many successful businesses have been built on that kind of culture."
And yet when the pandemic arrived, "suddenly, now everybody is coming to understand the other part of my job: controlling spend and cost, and advising on where I think cutting costs is appropriate versus where, if we cut back too severely today, it could harm long-term business. That's a difficult line to balance."
Defining 'discretionary'
GoCardless, like many businesses, has targeted discretionary spending. Birkett describes "discretionary" as anything not under a contract. Employee salaries, which are based on contracts are not discretionary spending, so layoffs are not part of the fintech’s plan.
"The focus was much more around things we don't have a contract for, such as staff well-being, like food and happy hours," she said.
Birkett keeps a close eye on each of the company's contractual commitments. "When any come to an end, they become discretionary." Cutting spending also means evaluating whether particular pieces of software are vital, or whether the company should continue investing in them.
GoCardless, which operates branches in London, Paris, Munich, Melbourne and San Francisco, has yet to make a uniform decision on remote work in the future.
"Expenditure on office space, specifically in luxurious cities, like London or San Francisco, is a very material number," she said. "We have to think about it in a different way going forward."
But cutting discretionary costs carries its own kind of risk. Birkett said CFOs should be "really careful" not to cut anything without considering the long-term impact. "Ultimately, we will return, at some point, to a world of growth," she said. "Be that in six months, a year, two years, we will return, and you’ve got to be ready."
Long-term funding and near-term KPIs
Startup CFOs need to be clear on how funding will last, and devise plans on how to manage and measure it, Birkett said.
GoCardless is dependent on external funding; it posted a pre-tax loss of nearly $20 million in 2018. Fundraising, in the near term, is going to be hard, she said. "In a world of conservative planning, the best time to fundraise again will be 12 to 18 months out, not six months," Birkett said.
With future sources of funds cloudy, CFOs must rethink their key performance indicators. "Focus on the KPIs that tell you what will happen in the immediate term, in the next two or three months, not so much on the long term. Think daily revenue.”
Planning and transparency
Birkett has engaged in extensive scenario planning. The worst case, she said, would be a second serious outbreak that causes economic growth to deteriorate even further.
"As a payment business, we're linked to [gross domestic products] and how they grow," she said. "That's a macro-factor that could hurt our business. Nothing in this world is certain, but with the best insight we've got right now, we can get through this crisis and eventually begin growing again because we won't have altered the basic fundamentals of our business."
Birkett advises CFOs to engage with their management team. "You've got to understand what’s happening in real time,” she said. “What are sales doing? All this impacts where numbers are going to go."
Maintaining an open line of communication with workers is vital but can be difficult, Birkett said. GoCardless has an ethos of transparency, both inside and outside of the business, she said.
The company’s CEO, Hiroki Takeuchi, has garnered praise for sharing a transcript of his town hall comments in a blog post in an effort to help other startup CEOs forge a plan forward. In the post, Takeuchi outlined GoCardless's multi-pronged plan to deal with the economic crisis: reducing non-headcount spend; furloughing a small handful of employees; reducing salaries by 5% to 25%, staggered by income.
Throughout the planning and decision-making progress, Birkett continued to prioritize protecting the long term. "We must be a business that can create growth and jobs in six to 12 months' time," she said. "If we have to make some sacrifices today, ... we know our revenues will be hit in the short term because some of our merchants simply are not operating.
"Think calmly and logically, and remind yourself that you're doing the right thing for everyone, ultimately, by focusing on the business's long term," she said.