John O'Donnell, CFO of Aveksa, a Waltham, Mass.,-based developer of access governance automation solutions, discusses investing in areas with returns and the impacts of employee turnover.
What was the biggest challenge your company faced over the last 12 months and how were you able to overcome it with financial leadership? During the past 12 months Aveksa has experienced tremendous growth due to high demand from large enterprises for our access governance automation software. As CFO, my biggest challenge in the past year has been trying to support this growth from a financial perspective as it involves additional headcount, resources and office space. Balancing resource needs and expectations across all the different departments has been challenging, but it is my role to make sure everyone understands that resources are limited at times and need to deployed judiciously in order to meet the overall company goals. That being said, it’s a great problem to have.
What has made your company stand out and be successful financially? Aveksa’s success in the last 12 months is directly tied to the value our access governance automation software is providing our customers. We are competing with large, public software companies that oftentimes have already sold into accounts in other areas. As we are a small company, it is critical that our products are superior to the competition. If we can get to the evaluation stage then we will most likely win the deal based on the strength of our products. From a purely financial perspective, we’ve been very successful in controlling costs by putting significant investments in areas that provide a significant return, such as sales and product development, and not doing what some start ups do which is spend lavishly on marketing events or fancy office furnishing.
What is the most important thing you’ve learned in your position? The best lesson I learned is to never stop planning. Just because a company has an approved operating plan and budget at the beginning of a fiscal year doesn’t mean that plan will not, or should not, change during the year. Being able to react and adjust to changes at Aveksa or in the macro-economic environment in general is critical to our ongoing success. This is true for everything from finances to Aveksa’s product roadmap. Also, it is important to maintain solid cash reserves always – the worst time to raise money is when your back is against the wall as your options quickly become limited.
How do you prepare for board meetings and what information is most important for you to present? Prior to our board meetings I meet with our CEO, Vick Vaishnavi, and other management team members to create an agenda. This agenda is then discussed with the board chairman to get his thoughts and buy-in on the topics to be discussed. I have to keep in mind that our board members are not living and breathing Aveksa each day, so they find it very helpful to start each board meeting with a “state of the company” update where we discuss market trends, Aveksa’s progress toward corporate goals set at the beginning of the year, and a financial update showing actual results against the original budget, particularly changes in hiring and cash flow estimates. This helps to set the context for the rest of the board meeting.
What’s a common error in cash-flow forecasting, and what advice do you have? I would not refer to it as an “error” since it is planned for to some degree, but the most difficult item to forecast is turnover, and turnover has a direct impact on cash flow. Turnover, whether it is involuntary or voluntary, in all positions has an impact on the expenses for items such as severance, recruiting and salary changes. Turnover in the sales and services groups could also impact the revenue projections and, consequently, cash flow. As such it is important to plan for some level of turnover during the year, but also to ensure that a company has some budget flexibility built into the annual plan in order to cover unexpected expenses. It is also important from an HR standpoint to ensure that all departments have a hiring pipeline. We are constantly reminding our managers to identify and talk to talented individuals continuously so that the lag in replacing someone is kept to a minimum.
What do you do to retain your strategic vision despite the crush of day-to-day operations? Constant communication with department heads and organization leaders enables me to understand what our customers are looking for and what challenges we face as a company, and what each department can do to meet these challenges. As the CFO, I wear many hats within the organization – finance, legal, HR and IT, and as a result, my role is like the hub of the wheel where all the departments intersect. Ensuring that all departments are talking and making informed decisions about where to invest resources and not making unilateral decisions or operating in silos is a very important role a CFO must play.
What’s your favorite business book? I am currently reading the Steve Jobs biography by Walter Isaacson.
Aveksa is a Waltham, Mass.,-based software company specializing in enterprise access governance automation solutions. O’Donnell is a Certified Public Accountant who has more than 15 years of financial leadership experience. As CFO of Aveksa, he is responsible for the company’s financial and administrative operations. He joined Aveksa from Empirix Inc., where he was controller and a member of the management team. Prior to working at Empirix, O’Donnell was vice president of finance at CA Inc. and controller at Netegrity, an enterprise security management software vendor. O’Donnell began his career as an auditor with Ernst & Young LLP and holds a bachelor of business administration degree from the University of Massachusetts, Amherst.