From VC to PE: What Founders Need to Know for a Successful Transition with Dave Woolliscroft

Randy Wootton

00:00:04.280 – 00:01:18.850

Hello, everybody. This is Randy Wootton, CEO of Maxio and your host of SaaS Expert Voices.

We’re bringing the experts to you to talk about what’s going on in SaaS today and what are some of the trends unfolding in tomorrow.

I’m delighted to have Dave Woolliscroft join me today who has 25 years of operating, consulting and board experience with a focus on B2B SaaS and technology enabled services company. Dave has a. He’ll talk more about this. This incredible background. Started at. Well, eventually did a tour at Deloitte where he advised PE firms.

He led finance transformations and he co-founded an internal venture accelerator to help Deloitte build recurring revenue businesses. Grew it from zero to $270 million in six years. I mean, extraordinary. He then took that experience and went to a great firm called K1.

If you all haven’t heard of them, they’re one of the best out there.

He was there for six years, worked with companies that range from $10 million to $300 million and is our audience knows it’s kind of the sweet spot for Maxio and focused on finance, pricing, strategy and executive recruiting.

And then just a little while ago he left K1 to start Exit Point Partners and this is where he’s supporting lower middle market PE firms on finance, pricing and M&A opportunities. Dave, did I get all that right?

Dave Woolliscroft

00:01:19.350 – 00:01:23.166

You did, yeah. Thanks, Randy. And thanks for having me here. Very excited.

Randy Wootton

00:01:23.318 – 00:02:03.930

It’s absolutely my pleasure.

And because of your background, what I’m really excited to talk about is PE and we’re going to get into the difference between VC and PE because I think a lot of our companies and CEO’s and CFO’s that are listening are probably more early stage and haven’t thought about PE.

So we’ll talk about the broader context between the two assets classes and then what does it mean to prepare for a sale to PE, how to make that successful? And then what does it mean to live under a PE regime? I’m doing that right now, basically.

And I think the things changes for the company, for the CEO, for the CFO when you’re working for a PE firm and it’s good to know that before you go in. So I’m excited to dig in.

Dave Woolliscroft

00:02:04.910 – 00:02:07.330

Cool. Me too. Yeah. Great topics.

Randy Wootton

00:02:08.190 – 00:02:12.650

So let’s start just broadly. How do you think about the difference between VC and PE?

Dave Woolliscroft

00:02:14.590 – 00:02:20.810

So I guess, yeah. And I think also there’s kind of like bootstrapping as part of that too. Sure.

Randy Wootton

00:02:22.810 – 00:02:23.306

Yep.

Dave Woolliscroft

00:02:23.378 – 00:02:24.026

Yep, totally.

Randy Wootton

00:02:24.058 – 00:02:24.458

Yep.

Dave Woolliscroft

00:02:24.554 – 00:03:29.274

So I think quite often it comes down to the preference of the founders and then also potentially the TAM that you’re looking at.

I think most VCs are looking for those opportunities where there’s a large TAM to be able to go and address a target addressable market with whether the company is going to really be able to get to scale, potentially have an IPO as an exit. On the PE side of things, you know, they’re not necessarily potentially more able to invest in vertical SaaS with smaller TAMs.

And then it becomes like your perspectives on what the outcome is going to be.

I think PE, I think one of the great things with PE and when you’re working with PE sponsors is that it’s very rare that they have losers, as we all know, on the VC side. Actually maybe only one or two in ten kind of get to really good exits. And so it becomes a little bit associated with your risk tolerances too.

But both have a lot of benefits depending on your own personal preferences.

Randy Wootton

00:03:29.402 – 00:04:07.342

And in general, I think we find VC firms are more early stage when there still is more financial risk, business model risk people are working on product market fit. Like I’ve heard often the early stage VC funds, they’re betting on a horse and a jockey.

And whereas PE firms tend to come in, I think when there’s a little bit more scale, I think of like series C and then beyond, and they, there’s the product market fit, they probably have a replicable sales model. And I think of PE firms helping to bring a level of discipline in scaling. Would you say that’s a fair distinction or too broad?

Dave Woolliscroft

00:04:07.366 – 00:04:38.914

Yeah.

And within your lifecycle, kind of within a company, you could be doing kind of like one or all three of those starting bootstrapped, becoming VC backed. And then PE could be a potential exit path for a VC backed company.

A lot of founder, kind of like bootstrap businesses become really good targets for PE companies too, as they say, reach ten, $15 million in ARR because there’s usually a decent level of profitability there too, which is also what they’re looking for, right.

Randy Wootton

00:04:38.962 – 00:06:16.930

I do think that’s one of the orientations as well as VC. I think things have changed over the last couple of years, in particular with moving from growth at all costs to efficient growth.

But in my experience with VC is it’s primarily around let’s invest to grow and less concerned with. Okay, so how profitable are we? Because they would say, hey, any money you have is go invest in your growth plays so that you can capture the market.

So to your point, if you have a big TAM, like you want to be first mover or you want to, you have some new capability, new technology, you want to get out in front. So invest, invest, invest.

I think that’s been modulated with the markets and the rise of inflation and interest rates where you now have VC’s also reading from the Bible of efficient growth rule of 40 models. But I think PE firms, the other thing I think about PE firms is they often have a set of operating partners.

So in addition to the investing partners they have people who are experts in go to market or finance or technology.

And so they bring those people to bear at one end of the spectrum, the really big guys like Tomo, Bravo and Vista have an entire consulting division that they use to come in and say, hey, here’s our playbook called the VCP. I think at Vista the value creation playbook and this is how we want to do it. And here’s people help you going to do it whether you like it or not.

They’re going to strongly recommend you to do X, Y and Z.

Whereas I think the VC, they may have like a people operating partner who helps you with recruiting but I haven’t seen that many VC’s with a large operating group. Do you find that to be true or what’s your experience been?

Dave Woolliscroft

00:06:17.430 – 00:07:50.580

I actually, I don’t have so much experience on the VC side but there’s even flavors within the PE kind of world too.

And there are flavors to those different types of operating partners and that is something to consider as your potentially looking to see who to work with, who comes with a very defined playbook where they’re going to want to really execute on that.

Some people’s operating partner approaches a former CEO who’s been in their seat probably had like two or three exits in the past potentially with that PE firm. And they’re a really good both bridge between the company and the investment team as well as a good coach to the CEO.

And then you’ve got the other model like you were talking about too Randy, where there’s actually these functional specific experts and they’re able to face off with different leaders within your own teams and bring best practices to bear at that point in time too.

It definitely becomes one of those things where I think also depending on the firm, sometimes they go through cycles of having have more of one or the other and then you’ll see a variety of companies that are p firms that have the variation of those approaches.

And I won’t necessarily say the one thing is better than the other, but I think it is really important to make sure that you understand the relationship with those people. If you are potentially talking about an exit to a p firm, you’re thinking about the people who do you want to work with?

Because you will work with them a lot.

Randy Wootton

00:07:50.920 – 00:09:44.976

We’ll come back to that in a second. What makes a great PE firm?

But just before we leave that point, I think the other thread you’re pulling is that VC is often a minority holder stakeholder, and so someone uses a VC, the seed round the Series A, the Series B, Series C. So you may have four different VC’s sitting around the table who come in at different valuations and have different orientations.

And so that’s a little bit of like managing the UN. Often PE firms take majority interest where they buy the whole thing or a majority of it.

And so that, for example, in Battery, we have three different portfolios. We have one, which is VC, which is the preponderance of Batteries.

Firms of 140, they have a majority owned growth equity portfolio, which is what Maxio is part of, and that’s about 30 companies. And then they have a pure PE, which is more solving for EBITDA in our case.

To your point, we have Chelsea, who’s the lead investor, Dillon, who is the principal, and Jason, who is a multiple time CEO, not a Battery employee, but a friend of Battery, who’s done it and is acting in that role that you described. He’s there as a coach, he’s there as an intermediary because it’s a much smaller board.

So sometimes if Battery, and I don’t agree around what we need to be doing, then, you know, Jason comes in and plays a little shuttle diplomacy.

And so I think it’s a great model when you have an operator who can help translate and who’s impartial and can kind of say, hey, here’s some things to think about for both of us. So I think that’s great. Part therapist. Amen. I absolutely hear you on that.

I have played independent observer or board member on a couple of boards, and I, and I do that for the CEO’s that I work with. I think there’s an empathy, a level of empathy that you can provide.

At the same time, you can kind of say, you know, in this case, I think the board member’s actually making a good point and you probably want to take it on.

Dave Woolliscroft

00:09:45.088 – 00:09:45.568

Yep.

Randy Wootton

00:09:45.664 – 00:09:59.232

So with that, we were talking about what makes a great PE firm, and you were talking about it being partner dependent. What were some of the other things that you found, like K1’s one of the best.

Like what makes K1 great and the other ones that are in that category and tier.

Dave Woolliscroft

00:09:59.296 – 00:11:04.000

I. I mean, I think kind of PE firms where they’ve got a really good focus on growth is important.

You know, it is still that profitable, efficient growth is how do you establish the playbook and then work out how to double down on it? It is kind of the introductions that they can bring you in the market too, potentially.

It can be with strategics, it can be with partners, it can be with other potential acquisition targets that are you going to look at over time? That ability to really help kind of, you know, you get the network effect of them working across many companies.

And then one of the things that is, I think, really valuable from a PE perspective is that they’ve seen many movies and so they’ve been through lots of situations in the past. Sometimes, you know, you might not think that they’ve actually, and they may not have an operating experience on the investment side question.

They don’t. But they have seen lots of movies, they have seen lots of situations and you can get kind of like that repeatability in those indicators.

And so they ask really good questions.

Randy Wootton

00:11:04.660 – 00:12:08.870

Yeah, the pattern matching, I think. And there’s excel jocks.

And so they’re gonna, they’re gonna help you figure out what metrics are going in the right direction, which ones are going in the wrong directions, and then to your point, they pattern match in terms of what’s worked across other companies. I think the other thing you had mentioned in our pre brief was the relevant experience of the partner.

So one of the reasons why I took this job at Maxio was Chelsea had been in the office of the CFO for, I don’t know, twelve or 15 years. Right. She’s forgotten more about the office of the CFO than I will ever know.

And so there is a lot of value to having deep seated expertise around the table, especially if you don’t come from that industry. So I grew up at Martech ad Tech. I wanted to shift over into a different industry. And I’ve been here two and a half years. I’m learning it.

But I think there are things where she’s been on the board of companies, like it was Anaplan and Avalara and a couple other ones that she helped through their growth phase. So she’s seen what it takes to take fintech or office of CFO Tech through the different stages and she’s seen success on the other side.

And there’s just, there’s a lot of value to help charting the course.

Dave Woolliscroft

00:12:09.570 – 00:12:34.840

Yeah, yeah.

Sometimes you see firms with that specific investment thesis where they want to be investing in this particular verticals or horizontals, but then to your point, you end up with partners or other principles that just naturally gravitate towards the same things and they’re making investments in repeated space. You get the benefit of that kind of learning and journey that they’ve been through before.

Randy Wootton

00:12:35.220 – 00:13:35.280

And so, yeah, I said that’s the last thing. And I think this is true at the VC and the PE.

If you’re raising money or preparing for a sale, which we’ll shift to in just a second, you want to make sure you know who’s going to be on your board because often they bring in the superstar and then they bring in the, you know, the principal or the analyst if the deal’s not that big and it’s that person who’s on the board. But wait, wait, wait. No, no, I want to go with Joe or Susie, who, you know, knows everybody, knows everything.

And I think that’s another important consideration is who actually is going to be there side by side with you through the, the ups and the downs and see it to a transaction.

So with that, maybe we can shift to preparing for a sale to a PE firm because I think a lot of companies that are bootstrapped in particular, but even if they’re kind of early stage, VC may not be ready for what comes to sell to a PE firm. So what are some of the criteria? I mean, this is where you’re advising a bunch of PE firms as well in terms of what their target should be.

What are you finding? What’s your pattern that you’re matching?

Dave Woolliscroft

00:13:35.890 – 00:16:31.730

Yeah, we also advise founders as they go into those sales. And so the diligence process is going to be hard, it’s going to be a challenge, it always is.

And it’s because they’re really going to get into the data.

And so being able to have a few things like predictability in your go to market execution sale process is probably going to take longer than you would expect. And you’re going to provide targets or expectations on what bookings you’re going to close.

You want to be able to make sure you hit those targets because otherwise you’ll have lots of other conversations around that. And it shows various scenes of doubt about whether it’s the market or whether it’s about the executability of the team.

So you want to have really good go to market execution, just a good muscle established in how you’re going to do that you’ve obviously got to have good ARR fundamentals. They care a lot about predictability of churn.

And if you’ve got below benchmark, whether you’re for enterprise or for SMB, that’s going to be a challenge and that’s going to impact your valuation because they really want to have that obviously sustainable and repeatable base there.

The profitability is important too, and this is sometimes where you can actually do something to really help prepare yourself to have the most successful exit. If you’re going to go that PE route, if you’re thinking ahead twelve to 18 months. But they are thinking about the Rule of 40.

So the rule of 40, I’m sure you’ve covered it before, is that ARR growth plus the EBITDA margin, and so obviously the growth rate is going to be there. But the profitability is like how do you work out?

Just take out inefficiency that already exists in the business that’s going to eventually get ferreted out under PE ownership anyway. So work out how to do it yourself and get some value for that.

The other big lever that I see on the profitability side for founders to remember as they’re thinking about getting ready for an exit process, to think about pricing, because quite often pricing that you’re going to market with, you probably determined that a few years ago, maybe just as you were starting to go out to market, you haven’t really thought about what levers there. There’s a lot of fear that exists with boundaries and changing pricing.

But when you’ve got a really good solution and you’ve got high retention rates, you’ve actually quite often got a lot of pricing power. And so how do you work out how to do something where you can not, maybe not just do like a one time price uplift?

Because that’s seen that as being more of a one time profitability improvement than an ARR improvement.

But how can you kind of continue to increase ARR year over year through price increase that drops down to the bottom line and obviously kind of like also improves your growth too?

Randy Wootton

00:16:32.030 – 00:16:36.930

Great comments, David. A couple of just clarifications, I think.

Dave Woolliscroft

00:16:37.470 – 00:17:32.284

Sorry, there’s one other one. The obvious one that I forgot is the finance guy. And it’s just like your data quality.

Like you’ve got to make sure that you’ve got like your financial data, like in order especially. Oh yeah. With the ARR schedule that it’s there by customer, it’s clean. Investment banks will often help you get ready and clean up.

Like just as you’re going into a process.

But on the flip side, like when you’re on the PE side investing, you can kind of tell that the bankers have pulled this together and you can tell that it’s not really the way that the company runs the business. So try to build just like good agreed data quality. Everyone agrees that bookings the same thing from sales to finance.

You are the types of metrics that you run the business with. Just make sure that you’ve built some discipline around that before you start to go into a sale process and you come out looking really good.

Randy Wootton

00:17:32.452 – 00:21:11.300

That was like an unpaid advertisement for Maxio because that’s exactly what we offer is we should have a flashing logo during that time. But that was my experience when I was at Percolate was my CFO. I may have told you the story. My CFO wanted to buy this technology.

It was called SaaSOptics, one of the legacy products of Maxio. And I was like, God, no. We have too much internal software. There’s no way we can take on yet another software. What are you talking about?

It’s just a spreadsheet. And he said no and he bought it. Typical CFO, ignored the CEO and did what he wanted and we got it.

And it changed my life and changed my life because it actually influenced the way we ran the business.

So we went from spreadsheets trying to figure out after we spent six to eight days closing the books at the end of the month, we spent another six to eight days trying to figure out what the heck happened through the spreadsheet. Someone fat finger or sell and we’d be, you know, pulling our hair out and we’d slide into the board meetings hoping it was right.

From that to what I have at Percolate and today. So it’s October 7, I don’t know, third business day of the month, given the weekend.

We already have our ARR sorted, our revenue sorted, we’re looking at. I was just talking to my sales rep right now in terms of what our win rates were by segments.

What was the discount that was done by segments and already teasing out what happened and what are we going to do about it? What’s our next pricing strategy, to your point?

So I do think, like, whether you buy it from us or not, having a system that allows you to do deferred revenue, allows you to do the ARR roll forwards, to do the customer cohort analysis is, to your broader point, that’s what the PE firm is buying. They’re buying revenue streams. Well, they’re buying cash. They’re buying EBITDA. So they need to trust that all the financial statements are accurate.

But really those are governed by GAAP. And as long as you have a pretty good CPA on staff or controller, you’re most likely going to be okay.

You’re going to argue over does customer success go above or below the line in gross margin? But 99.9% of the stuff is sorted. But in the world of ARR, it’s the world of wild, wild west.

And people, to your point, have different assumptions around bookings and gross retention and magic number and all these different things. And so having those sorted out before you even go into the process. So you have a couple of quarters of predictability.

And that’s what I was going to say about the go to market execution as well. It’s not just even in the process, because I find a fast process, I mean, there are always exceptions, right.

But normally it’s four to six months, it can go longer, it can go shorter.

So you’re going to get through two quarters during the process, but you kind of want to have, I think, at least four quarters before going into the process where you have predictability on your go to market execution. Like you have a sense for your sales velocity, you understand what your win rate is, you started.

If you have multiple segments and multiple products, you’re able to break it out to really be able to show. And then AE attainment and all those ratios like AEs to BDRs and how many do you have there?

And so I think having some practice at running the go to market and with visibility, as if you were, if you have investors, you should do it with your VCs. But what is the discipline you need to run that business is spot on.

And pricing, I’m so glad you brought that up because I think that’s one of the major levers that PE firms pull that not many VC companies do necessarily. They think about growth through new ARR or they think about growth through expansion, expansion being seats or modules or jumping divisions.

But you have this whole other component around what we call monetization, where you think about your offer, the price, the package, and that’s exactly what you were saying.

Like if you could start to show that you’re proactive in terms of your pricing strategy, it really shows the sophistication, I think, of the executive team.

Dave Woolliscroft

00:21:12.280 – 00:21:54.702

Yeah, that’s right. Yeah. And it really is an example of that discipline.

It’s just like there’s a regular whole company motion, because also a price increase is a whole company motion. From sales through the customer success and the back office team. And it’s got to happen every year.

But then it is one of the rare things in the rule of 40 where if you do it right, you get the double benefit because like I was saying, it’s obviously going to impact your profitability margin because you’re able to generate more profit. But if you’re able to do it in a repeatable way, you get the benefit of it in your growth rate, too, versus being kind of discounted.

So there’s actually very few things that you can then do. Kind of like where you get the double filling.

Randy Wootton

00:21:54.886 – 00:23:06.380

That’s great. The double barrel shotgun or some other great metaphor. Your last point, I think. Spot on.

One of the things you, as a founder CEO of a company, this is your baby, you think it’s beautiful. You go into a process of the PE firm.

They’re looking to find things that are wrong with it because they’re trying to discount and get a better valuation from their perspective, an asset at a lower price.

And so any of these things where it doesn’t pass a sniff test or they have to spend extra time on it, they will real on you on that and, and negotiate down the price. Now, if you are the best looking product on the market and you’ve got lots of bidders, then a competitive process is always better.

But we got to pick one at some point. And then you start going down that chute and you’re with them for four to six months.

And if you pull out of it, then everybody else who was at the beginning of the process is going to think, well, what was wrong?

What did that PE firm find that was dark and deep and so you never get another shot at that, you know, first impression, whatever that first go, I think.

And have you found that in terms of, I mean, I don’t think there’s any PE firm that’s going into a process saying, let me look for reasons why I should pay more for you.

Dave Woolliscroft

00:23:07.120 – 00:24:52.650

No, generally not. I don’t think necessarily looking to work out why to pay less. But they are looking to see, like, do I believe in this investment?

Because they’ve obviously got a fiduciary duty to their LP’s. And then I think everyone in PE knows that and they’re focused on their own returns. That’s kind of like the business that they’re in.

The biggest indicator of success for potential return for them is the price that they pay for something at the beginning.

So they’ve got to make sure the fundamentals are right and if you invest in a business where you think that maybe the product fundamentals are good, but perhaps you don’t have confidence in, or you find out that you don’t have a repeatable sales motion afterwards, you can lose a year, perhaps in your investment cycle, because you discover that and then you got to hire a new sales leader and then build a new approach and all of a sudden that’s another year, kind of like within the whole period. And that obviously costs money. So they want to make sure that they are really comfortable about the fundamentals of the business.

And then as a founder, the important thing to remember is that you can’t be in every meeting talking about every aspect of the business.

They’re going to talk to sales, they’re going to talk to product, and they’re going to look at the engineering side of the house, they’re going to talk individually with the CFO.

And so that’s where just that again, the rigor around execution and data commonality amongst the team that’s a data driven business will hold you in good stead.

Because if everyone’s talking about the same metrics in an internal management meeting each week, you can trust then that by the time they go and talk to a potential PE acquirer that they’re still going to say things in a consistent fashion.

Randy Wootton

00:24:52.950 – 00:25:44.500

It’s a great insight and great segue to our next conversation about life under a PE, because I do think it’s very, very different.

When I was a VC backed company, Percolate, we had Sequoia, GGV, Lightspeed, First Round Capital, and like, look, I haven’t done a bunch of these, but those are some top tier firms with great partners on board. We would meet once a quarter for the board meeting and we would do maybe once a month touch base.

I’d write an end of month report and you give them an update. But it wasn’t a full board meeting unless we were about to go through a process. And it wasn’t, it wasn’t regular, it was periodic with the PE firm.

I’m meeting with them every week. I mean, at least every other week at least. Yeah, right.

No, and, you know, I’m on no bat phone with the lead partner, so maybe give us a little bit of context and perspective on what does it mean to move into life under PE.

Dave Woolliscroft

00:25:45.600 – 00:26:30.316

Yeah, yeah, it’s good. And I think this is one of the things that I see as being for some people, the biggest change.

It can be quite a shock for some families as they kind of move into life under PE. But the active board is the largest one.

And so that ranges from, typically, I think there’s a touch base at least once a week with either an investment partner or an operating partner, there will quite often be monthly operating reviews. And I actually recommend all my clients to do monthly operating reviews with their PE sponsor because it just gains that regular alignment.

And that’s not just going through the financials, that’s going through the whole operational metric set for the business on a monthly basis. And then you got the quarterly board.

Randy Wootton

00:26:30.348 – 00:26:32.212

Meetings that happen, too.

Dave Woolliscroft

00:26:32.396 – 00:27:28.336

And then you’ve got the other reporting that you do, which is like generally, again, kind of in a PE environment, I suggest people provide weekly reporting of key metrics. It’s like what’s happening for leads, pipeline changes, bookings, upsells, churn, view cash. We’ll come back to cash in a minute.

But it’s like those kind of key heartbeat metrics for the business. The same thing that your management team should be looking at on a weekly basis.

It’s good to just give to your kind of like PE sponsored team because it’s one of those strange things about the human psyche, I guess, that if you don’t know what’s happening, you worry.

But if you receive the information on a regular basis, then, yeah, they may ask you a question as a result of it, but then they’re not necessarily thinking the worst because they don’t have access to the information.

Randy Wootton

00:27:28.528 – 00:29:22.000

Right.

So, oh, gosh, I could tell my executive team to listen to this part of the call because I think they’re like, randy, you are like over functioning in terms of the amount of information we produce. But what I always tell the team is this is, so we do a weekly forecast call, we do the red account call and do a weekly forecast call on Fridays.

By Monday, all of those numbers are wrapped into four or five slides which capture what’s going on with our pipeline, what’s going on with bookings, what’s going on with renewals, and we send that to the board with cash. So we also include the 13 week cash forecast. And to your point, it’s a predictable set of metrics. And I’ll throw in some commentary.

And then that happens every week except for if, like, we’re going to go into a board meeting or the end of the quarter. We also do an end of month review, which I’m working on now for September. I’ve got the narrative going.

People are adding comments and stuff, and I walk through more details around what happened on the bookings, what happened on the churn what happened?

Even, like, our costs in terms of p and l hosting costs, we had some things going on, like what’s playing out there, and you never want the board to be surprised. But if you get that out, right, you get that financial data out, and then you provide the data on a quarterly basis.

Ideally, what ends up happening, I think, is you’ve had the conversations around the financial metrics, and then you get to talk about the business. If you show up at the quarterly meeting and you haven’t been keeping people up to speed, they’re going to take you to math camp on your financials.

And then you say, okay, show me now the p and l, what’s going on here. Double click on this, do that. And then you’re going to go through the ARR reporting.

And so I don’t think you ever get a chance to have a conversation about the strategy or some of the things you want to dig in on and want their feedback as advisors. And so I think to your, this broad theme of PE is about predictability, meaning you’re regular and consistent.

You call out what’s working, what’s not. And I think, to your point, it’s almost like you don’t want to. It’s in the PE world. You’re not out of sight, out of mind.

If you’re out of sight, all of a sudden everyone’s like, okay, what’s going on?

Dave Woolliscroft

00:29:22.820 – 00:30:49.550

That’s totally right. Yeah. And it’s like a couple of things. You made me think of it, Randy.

Like, one thing on board meetings, by the way, like sometimes the default kind of underpes that every function is going to talk about their stuff, kind of like in a board meeting. And I generally don’t like that. It should be probably in the deck that goes out in advance, people to review.

But if you’ve kept everybody up to date, kind of like you, the CEO, get to talk with the operating partner or the investment partner and decide what’s going to be a good, interesting, useful agenda in that meeting. And then it may just be like just focused on marketing this one session, and then that’s good because it’s valuable to you.

So you do this other regular stuff to your points, and then you can direct those board meetings to what you care about. And really the whole thing, it’s just like, hopefully skills that you’ve learned early in your career of managing up. Now you do have a boss.

Like if you were a founder before, now you’ve got a boss and, like, what’s on their mind? How do they become successful, which should hopefully be aligned with you.

And then how do you make sure that they don’t have to worry about what you’re doing so they leave you alone? That to me, is always the art of managing up.

It’s like how do you give your boss enough so they leave you alone to do the things that you’re good at doing?

Randy Wootton

00:30:50.250 – 00:32:50.546

That’s great. I want to come back to that just a second. But the comment around the rhythm of the business, as I was mentioning, we do a quarterly board meeting.

It’s 3 hours. We do a monthly board meeting. I don’t bring everybody to it. It’s actually a monthly checking call and I will do topics.

So like in October, we’re going to talk. We have a new head of marketing.

She’s going to come in and give an overview of what’s going on with marketing, what’s working, what are the trends we’re seeing, what are her bets? For Q4? We’re really focused on expansion. So my head of customer success is going to come in and present that.

So it’s a very focused conversation around those specific topics. I will have provided the end of month summary report for September, so we’ll touch base on that.

But I don’t want to spend any time on that because these are the two things that are really important that happens monthly. The quarterly board meeting happens at the end of quarter.

In between the monthly meetings, I do, or try to do a one on three, I call it, where it’s the three other board members and me, and it’s an open agenda and I come in with a couple of things I’m thinking about, but it’s usually not a lot of prep or materials. And we, they have things they want to ask me about without everybody else in the room.

And so I do think having that balance of really formal quarterly board meetings where you’re going through and you’re approving the minutes and you’re making sure they’re especially in the VC world, but you’re sort of overseeing the fiduciary responsibility versus the monthly topical versus the just informal check ins. And just know that’s going to be part of your life.

And the point that you’re making earlier as a CEO, needing to be comfortable that the board is also going to be engaging with your executives directly. The CFO, one of the principals, we’re talking all the time.

We have an M&A conversation where I have other people involved and they’re going to reach out and they feel perfectly free to do it. Reach out to whom they want, when they want. Now, we try to keep each other informed, but you’re not going to be the conduit of all information.

And so again, to your point, if you have scorecards and a predictable rhythm and everyone’s singing off the same sheet of music.

Dave Woolliscroft

00:32:50.658 – 00:33:04.122

Yeah. You know, when you. That’s really good, Randy.

You know when you do those monthly spotlights and you bring people into those, do you end up having to coach your team to make sure that they’re sharing the ugly stuff as well as the stuff that’s going well?

Randy Wootton

00:33:04.186 – 00:35:16.360

Yeah, yeah, yeah. I think that.

I think if anything I’ve learned, like, my natural instinct is I’m one of those rah rah guys and I want to show you why everything’s possible. And I do think that’s probably true for a lot of early stage CEO’s as well.

Like they started a company with a vision for how they could change the world and they received a lot of no’s and people are telling me it was impossible and they had to like for through force of will and brute force, just get, get their product out the door and he or she getting people to buy into it. And then you move into this model where you’ve got to be very self reflective and self critical. And I call it managing the exceptions.

So if you have a scorecard, use scorecard with metrics and targets. You always start with what’s red? You say, here are the things that aren’t working. These are why we think it’s not working. Here’s our mitigation plan.

Here are the things that weren’t working last quarter. Here’s the status. And it’s like you’re just in this world of negativity, whereas you want to be spending time talking about everything that’s green.

But I think in general, my experience with investors is they assume you’re going to do good stuff. What they want to know is what’s not working. And then they want to try to be helpful and dialogue and work through those things and whiteboard.

And it’s kind of like, hey, look at my dirty underwear. But in some ways, like, I’m going to mix the metaphor here, but it’s like, yeah, you want them to help you clean your underwear.

And I do find that is the biggest value is as a CEO.

There’s so many times where I’ve got some pattern matching because I’ve been CEO three times, but I don’t have the pattern matching that they have sitting on 20 boards over the last ten years. And you just want some help. You wanna say, hey, look, we’re having this struggle. I’m not sure why. Here’s what I think it is.

And to be able to lead with that as the vulnerability and humility to say, I don’t have all the answers. Can you help co lead with me? I think is one of the greatest skills that executives have to learn.

Stepping up onto the C suite as you move from being the person with all the right answers to being the person who can feel comfortable enough saying, I don’t know why this isn’t working, but here are three ideas and what I think I’d like to do. You always have a recommendation, what do you think? And then inviting people to be part of the solutioning.

Dave Woolliscroft

00:35:17.020 – 00:35:38.240

Yeah, then that’s good. One other quick thing there is having a scorecard for each kind of functional leader is super important. I agree.

It is kind of a red flag if you can’t come up with a scorecard. I’ve seen that before. So do that. And then the other red flag is don’t change the scorecard each quarter because you don’t like the answer.

Randy Wootton

00:35:39.180 – 00:36:36.996

Right? Amen.

I do think that’s a great comment in terms of we in the companies I work with, we try to create a year long operating plan, and the operating plan has a set of objectives. It has a scorecard, it has some metrics, and we think the metrics are the right metrics.

And you can argue about the targets, the targets, right or wrong, but if you thought deeply about these are the leading or lagging indicators of success, then those shouldn’t change.

You can talk about why they haven’t improved, but you don’t want to change your metrics means you haven’t done the hard work up front to think about what are going to be indicators of success or things going off the rails. Yeah. So with that, so with PE, we talked about more active board, we talked about the lots of questions.

And for the CFO, the role really changed in the finance department, we talked a little bit about the reporting and the timelines. But what else would be your recommendations for CFO’s that are getting ready for a transaction?

Dave Woolliscroft

00:36:37.148 – 00:38:58.450

Well, so I think the thing to realize is that the game changes pretty substantially for finance once you go into PE ownership to, if you found a bootstrap, you might be running it on a cash basis.

And that’s totally okay because it’s all about how do you just manage the bank account BC you’ve got less chickens that are happening in PE, kind of like it’s a pretty serious game right from the get go for CFO’s. And you’ve got to make sure that you level up both from an accounting standpoint perspective.

You’ve got to be able to make sure that you’ve got the back office that will support the business growth. And then there’s going to be a lot more questions around FP&A from an FP&A perspective.

The other thing that I usually think of as part of FP&A is cash forecasting too, because the other thing to not forget is that there will usually be debt involved in a transaction at some stage. And so you never want to be the cause of a cash surprise.

The Friday afternoon call to an investment partner saying, yeah, we probably can’t make payroll next week. Could you send us some money? That’s a very difficult conversation.

So you’ve got to have a really good focus on cash and then you are going to get a lot more questions and there’s going to be a lot more rigor around the data that’s coming out of FP&A. So you’ve got to make sure that you’re resourced appropriately.

And that definitely means quite often that you need to hire FP&A potentially for the first time, you should make sure that you’ve got a reasonable level of FP&A resources for the business. And you might need to address some of the systems kind of like within your businesses too.

Whether that’s, you know, a full ERP implementation, whether that’s just like a really good revenue and billing subledger like Maxio. The types of things that will actually really help you do your job with, with confidence and reliability.

You know, you talked before as well, Randy, about like how you got three people that are involved, kind of like in your business. I assume that’s not including all the kind of associates and senior associates that are also looking at your data on a regular basis.

And they’re getting into stuff and they will find things that are wrong and you don’t want them to find things as a CFO. You don’t want them to find things that are wrong. Too often they will do, but not too often.

Randy Wootton

00:38:58.990 – 00:41:13.046

Yeah, because there’s Excel jocks, right? Like their whole agreement and those early stage analysts is to run models and do the due diligence and find what’s not working and sniffing out.

Cause then they look like the hero. Right? So I think you’re absolutely spot on.

When we talked earlier, we talked about when CEO’s flame out, a PE firms sort of the top two reasons you just called it out, one is not knowing the cash. And the other one, which you are alluding to is this.

They haven’t figured out what it takes to be successful and don’t bang on the table to get what they need.

I think often CFO’s feel like, gosh, you know, I’m telling everyone else not to invest in software, and I’m telling everyone else to reduce the amount of headcount. But I think seasoned CFO’s need to know for this size company, this complexity, what is the resourcing I need? The system, the process, the programs, the tech and the people. It’s still a work issue. And if you don’t set yourself up for success like that can be a death knell.

You know, one thing about Maxio we talk about is my CFO today is a seasoned CFO who’s worked at multiple companies, also has been at PE firm, Post, Vista, and Marlon, so has a broad perspective.

And he would say at a size, a company our size, with the complexity of number of customers, number of bills that go out, he would need a team of twelve, and we’re operating with six. And that’s the advantage of Maxio being able to help support the collections, payments, all the AR, et cetera, in the reporting.

Now, should we have seven, maybe. And so he and I have been having conversations like, yeah, we probably do need to invest in FP, the one we’ve been talking about.

But I do think CFO’s need to really be deliberate and intentional about what do they need at this stage where we are and what’s going to get them to the next 20 million or the next 30 million, and have that be part of the long range plan that you put together. Well, great. Well, Dave, this has been awesome. So just like to close out with our speed round.

Speed round includes three things, favorite metric and why. Your favorite book. You got lots on your bookcase back there. I’ll be interested to see which one. I love traction, the other one’s execution.

Oh yeah, I got great ones. But what’s your favorite book and why? And then your favorite influencer.

So, someone who you like to read, who you think is actually generating new content versus just cycling on the content that’s going around the echo chamber.

Dave Woolliscroft

00:41:13.238 – 00:41:56.040

Sure, good questions, but I’ve got a kind of a fudge answer for the favorite metric, because really it’s like whatever is the relevant leading metric for that business.

So the lagging ones are great, but really it’s about usually something go to market usually, quite often, it’s like what’s actually happening with Pipeline week over week or sales activity. But that’s the stuff that I think really helps. Just build a good, healthy rhythm and cadence within a business.

And predictability as a CFO, I think just helps you sleep better at night. So whatever’s going to give you the most predictability from the go to market motion is kind of like my favorite.

Randy Wootton

00:41:56.120 – 00:42:20.220

That’s great. That is. I really like that answer.

A lot of people say ARR or gross retention or net retention, but I think your point in terms of you’re trying to build a growth business because that’s what’s going to drive the valuation. What’s the indicator that all the effort and energy you’re putting forward is impacting the leading indicator.

I love week over week pipeline as one of those. Yeah, but, yeah, great. Okay, so favorite book.

Dave Woolliscroft

00:42:20.520 – 00:42:35.018

So yes, I do have a bunch of books on my shelf. I do love The Advantage by Patrick Lencioni, but I should take this opportunity to plug my book. So actually, in my spare time I write fantasy novels.

So check out my book, King’s Hold.

Randy Wootton

00:42:35.194 – 00:42:36.442

King’s Hole.

Dave Woolliscroft

00:42:36.586 – 00:42:38.626

King’s Hold. With a d at the end.

Randy Wootton

00:42:38.698 – 00:42:47.450

Hold. Oh, okay. Right on. I’m a huge fantasy science fiction fan, so, yes, I will. Is this been? Did you self publish it? Did you get a publisher?

Like, what’s the.

Dave Woolliscroft

00:42:47.570 – 00:42:56.334

I did find it on Amazon. I self published, yes, it’s available on Amazon. So I’ve got four novels that I’ve written kind of over the past six years.

Randy Wootton

00:42:56.422 – 00:43:03.130

Oh, have you really had no idea? That’s wonderful. Congratulations. I started four books, never finished any of them.

Dave Woolliscroft

00:43:03.710 – 00:43:06.526

Oh, well, we can chat about that separately if you like.

Randy Wootton

00:43:06.598 – 00:43:25.360

We chat about that at some point. I got this one that I’m putting together and I can’t get the darn thing across the finish line. So I will follow up with you on that.

Okay, so King’s Hold by a great author’s name, Dave Woolliscroft. So it must be good. Okay, favorite influencer, who do you follow and who do you like?

Dave Woolliscroft

00:43:25.480 – 00:44:20.040

So on LinkedIn, I really like from the Topline podcast, Sam Jacobs, AJ Bruno and Asad Zaman, I think. But Sam, I think is great. And I just also, it’s funny, more of a finance operational guy.

I kind of feel like I’m doing a little bit of inside baseball from the go to market side, and I both learn a lot, but I love the fact how they’ve become so focused on profitable, efficient growth over the past year.

And so I think there’s just great wisdom for a lot of founders out there, whether you are financially sponsored backed or not, but being able to make sure that you’re getting the right efficiency from your dollars and how do you build a business going to be, you know, long term, long term, accretive and sustainable for you? It’s good. So I would definitely recommend Topline and fan top.

Randy Wootton

00:44:20.120 – 00:44:21.980

It’s called the Topline podcast.

Dave Woolliscroft

00:44:22.320 – 00:44:24.368

Topline podcast. Yeah. Yeah.

Randy Wootton

00:44:24.544 – 00:44:40.880

Okay, well, we’ll put that in the shower notes, and then if people want to get in touch with you, Dave, either looking for some advice, because that’s what you do these days at exit point partners or want to catch up on fantasy novels, is the best way to track you down on LinkedIn? Or do you have other, your own website, or what’s the best way for people to get in touch with you?

Dave Woolliscroft

00:44:41.040 – 00:44:53.464

LinkedIn is good. I do have a website, and there’s a form on there, too. Let’s realize now that I have a very long name and also a very long name for the company, too.

So I didn’t really help anybody out there. But yes, you can find me in both places.

Randy Wootton

00:44:53.592 – 00:44:58.024

Awesome. Well, thank you again for your time, Dave. I really enjoyed the conversation. I look forward to reading your book.

Dave Woolliscroft

00:44:58.112 – 00:45:00.620

Thanks, Randy. I enjoyed it, too.