Fractional CFOs, building a brain trust for your company, and scaling your business

Welcome to Building Better Developers, the Developer Podcast, where we work on getting better step by step, professionally and personally. Let's get started. Well, hello and welcome back. We'd like to continue our season here, which is reaching now 75 episodes. Probably should have thought this through a little bit more when we turned it into a season, but we are getting towards the end. Do have a few more interviews left, and we are going to pick right up where we left off in our last episode, speaking with Benjamin Friedman, talking about CFOs, fractional CFOs, building a, like a, let's say a brain trust for your company. And we're going to get more into those details. And how do you do it? How do you do it? When you pull the trigger on pulling somebody else in, and particularly for us, I think, where we're doing side hustles, where there's usually not going to be somebody there initially, there's a point where you sort of, you know, grow up and cross a line and say, OK, now we've got to bring in some people that are experts in that area. And that's what we're going to talk about a little bit more in this episode. Let's get right back into it. Now, you've laid out a lot of areas that you talk to founders about. What is your, I guess, where do you begin? If you start in with a new customer, a new founder, somebody comes to you and says, hey, I want to talk to you about where I'm at and how I want to grow. How do you start that conversation? Or maybe even with that, are there things that sometimes you would, you'll maybe send a customer back and say, hey, you need to go think about these things first and then we can talk sort of almost like some pre-meeting or prep work they might need? Sure. That's a great question, Rob. So usually in that initial conversation, I'm talking to the founder about their business. I want to hear some of the history, but I'm particularly interested in where they want to be headed in the future. You know, there's zero we can do to change the past and everything we can do, or at least a lot of things I should say we can do to change the future. So I really want to understand where they're going to be headed. I ask some questions like what does success look like? What are some ways you want to grow the business in the next three months, six months? Tell me about the strengths of your company. Tell me about the weaknesses. And from there, if we keep the conversation going, I'll do a needs analysis where I'll look holistically across the company and try and understand the bright spots and the challenging and the challenge points. A lot of times we tend to gravitate either towards the very positive or the very negative. And it's tough to get people to talk about both. So I will come in with objective questions, looking again at the company across a wide spectrum of considerations to really see where the founder has invested and been successful, invested and not been successful and where they haven't put much thought or resources in order to grow. But that really could be a sticking point in the near future when it comes to scale. Well, that's a good that actually leads into another question I wanted to swing back around. As a CFO and you talked about potentially hiring like a fractional CTO and things like that, when you is the maybe the point or the an indicator to a founder in particular that it's time to put that kind of a structure in that they need, whether they call it that or not, but especially if it is a board where they need a CFO or CTO or maybe the founders not CEO material. Sometimes they are, sometimes they're not. You know what? What are some things other than, you know, sometimes that's just required if you're going through, you know, funding or something like that, you need to have that structure. But from a business point of view, more than just a banking and financial point of view, what are maybe some things that would say, hey, you need you need to sort of step into this structure and and you'll be a big boy now. I grew up from a sort of that company that you were to something that is more of a recognizable structure. So this is incredibly interesting conundrum. Right, Rob, because we as humans and founders are no exception. It's incredibly hard to be self aware. And I run into a ton of founders who are wildly as successful at going from zero to one and then have an incredible struggle going from one to 10. And I think the reason is the characteristics which allow you to be successful at going from zero to one tenacity micromanagement really driving people directly and frequently becomes a hindrance as you're trying to go from one to 10. Because at that point, you almost have to do a 180 in your leadership style and your management approach. You have to get much better at delegating. You have to get much better at creating systems. So you're not going to have a direct involvement. You're going to instead rely on process in order to move things forward. And you really have to think about what is going to allow us to grow exponentially and how am I a bottleneck in all this process? And for any of us to say, oh, I was wildly successful yesterday, and now that's a problem tomorrow. That's a really hard dissonance to come around. And so the founders who are able to recognize that inflection point and that dissonance are the ones who, again, are open to outside advice. A lot of times, your investors will be able to pattern match and see that you're running in loggerheads. Founders who are willing to look at the data and say, hey, after six or eight quarters of incredible growth, we've now plateaued the last couple quarters. And why is that? And oh, my gosh, am I responsible for that? But founders who are able to look at the data and recognize that they might be part of the problem and that they have to change in order to be part of the solution. That really comes into play. So I say that there are technical and business aspects to making that change, but the inflection point really begins with that self-awareness. The last thing you want is for your investors to pull you aside and tell you that you have a new role in the company. It's really much better to recognize that yourself and figure out how can you embrace that and move into a different role that's really going to be exciting for you. Yeah, I've been involved in some companies where that conversation has happened and it has never been a comfortable one. I know for anybody involved because you want everybody to be where they're going to be best suited. So you've got a founder that's out here and is getting to a point where they want to grow their business, but maybe they are sort of floundering. The founder flounder a little bit there. One of the things that we've discussed in the past is documenting and creating and then automating processes. A lot of times that's a mean to scale things. Is that something that you run into a lot where that big scale and grow step is that they go from, as you just highlighted, is that you've got this founder that's out there and you've got this founder that's out there and you've got this founder that's out there. As you sort of just highlight is that you've got this founder that's really got their hands on, you know, fingers on everything and then making that switch so that it is now you have processes and you've got something that's repeatable and you can scale it out and you can delegate at all of the things that are sort of part and parcel of a larger organization or reaching a larger customer base. Yes, this makes a lot of sense and aligns with my work. I look at it in three phases. One is to experiment, figure out what's working. We've talked about that. The second is to build a manual process. And the reason for that is you want to understand yourself how this is going to run. That doesn't necessarily mean, you know, every step of the way, but largely you want to go through the match maturations. And then third is when you want to automate. And the reason for going through it at these phases is really, you know, you think about good product management, and that's heavily engaged in requirements gathering and a lot of product, a lot of really amazing product managers are biased towards requirement gathering versus solutioning. And that is because if you don't understand the problem and you don't understand the solution you're trying to put in, you are very likely going to automate the wrong solution for the wrong problem. And that's the worst case scenario because you have this automated solution. Everybody looks at it and says, OK, great. That problem is now solved. They walk away. And instead, that automated solution is getting you much faster to the wrong destination. It's kind of like driving a car, souping up the engine, but you forgot to put a map in the glove compartment or download the app. And now all of a sudden you're driving very fast in the wrong direction. That's really not going to do you much good. And the longer you go fast and in the wrong direction, the harder it is to get back on course and to fix it all. So if you go through those stages, experiment to look at the data, create a manual process and make sure everything is working the way you want, making sure it solves a problem. And then you get into automation and you find the best solution based on your needs. That's going to be the best solution for you as a company. That makes a lot of sense. And it's yeah, there's examples that you can find here and there of companies like that where they so it's always very easy, I think, for people to understand. Where you have a product and you're not charging enough. You basically you don't make enough. So you sometimes every product you sell is actually a loss if you're not tracking enough. And if you suddenly blow up the business and get 10 times as many customers, you're just now losing money at 10 times the speed. And it's that I think a lot of people can very easily understand. It's like, oh, yeah, if I'm putting out more money than I'm taking in, that's going to be a problem. But I think that, you know, as you highlight, there's a lot of areas that that kind of stuff that if you have inefficiencies in your process already, if you automate them, it's just going to magnify those inefficiencies. That's totally right. You're you're just taking a small problem and making a big problem. So it's funny. A lot of my conversations with founders, there is this pattern of how do I make the best investment in order to get the best returns? I know and I love how founders are constantly trying to pivot, solve problems, do things as quickly as possible. In many circumstances, I'm saying, hey, let's take a pause. And I'm not talking about weeks. I'm talking about days or even hours. Let's figure out exactly what we're trying to accomplish here. And then let's figure out the best solution. And as part of that process, it's talking with others. I find that successful founders are willing to discuss their current challenges and their proposed solutions with others because they're willing to take in that feedback. It's a confidence of I'm looking to do the best for my company to grow my business. I don't have an ego around the particular path. My ego is around the destination and where we're headed. And so if you take that pause, you ask people for input, you run it through, you think about the long-term implications, you're going to have much more success in many circumstances. It's totally worth that little bit of investment for that huge return. Yeah, yeah. Sometimes that old measure twice cuts once kind of approach is, you know, take that time, step back and make sure you're going in the right direction and doing what you wanted to do. That's right. Now, you I didn't want to back it up a little bit. You way, way back. You mentioned idea of a fractional CTO. There's also fractional CFOs and things like that. So I guess to start, for those that understand, don't understand, maybe get a brief definition of what a fractional role would be. And then why would you why would you want that? Or why would that be appropriate as opposed to just go out and hire? Like, say, if it's a fractional CFO versus a CFO? Sure. Great question. I definitely appreciate it as well, personally. So a fractional resource is somebody who comes in typically working part time versus full time. Hence the fractional in the title. But they're coming in and bringing a lot of value for lower cost. So they're bringing expertise. They've typically done the role over many years. And it would be really challenging to hire that person from the outset. But you're bringing in a ton of expertise to work with your team, to share ideas. In my instance, it's to help you not make the failures that I made in my history. And it's giving perspective to the leadership team, to the founders of somebody who's worked across many companies, many situations. I know a lot of founders are wedded to the idea that what they do is unique. It only applies in their industry. And that is absolutely correct. But what a fractional leader does is gives you perspective of how problems are solved in other circumstances, in other industries, in other ways. And that might give you ideas to build off of how to get through your challenges and move forward. I already mentioned the cost. It's typically a fraction of the cost to have that expertise. And you're also mitigating risk. So if you're thinking about hiring a fractional COO or CFO, which is where I land, you're saying, hey, we may need this role. Here are some things this person may do. By bringing in a fractional resource, you're mitigating the risk of commitment. So you're saying to the team, hey, we're looking to bring in this person to provide us expertise. And let's see how they fit in with everything else happening at the company. And you run that experiment for three months, six months, maybe longer. And you say, OK, hey, that role is adding value or that role is not adding value. You can then go down either path without having fully committed both in compensation and equity and everything else that comes with a full-time position to really experiment to see how that role fits in with your plans. So how often or I guess is there maybe it's not consistent enough is a fractional position, something that ends up becoming like a try before you buy or something like that, that they end up, they start out with a fractional position. Whichever position it is, and they end up down the road saying, hey, we want to hire you. We want to remove the fractional part and have you be a part of us moving forward. And particularly somebody like yourself, that's your title, your job in general is on the fractional side. Is there something that if somebody wanted to go out to find that kind of resource that they would maybe look in two different areas of business, maybe look at the fractional part of the job? Right. So I've seen it work out a few different ways, Rob. One is they bring in the fractional leader and it's just not a good fit. Whether it's the expertise is not needed right now or whether it's the expertise is not needed right now. So I think that's a good question. And then the other question is, how do you get the expertise out there? So I've seen it work out a few different ways, Rob. One is they bring in the fractional leader and it's just not a good fit. Whether it's the expertise is not needed right now or the person is not a good fit. And you and I see that all the time in our work. It just might not be a good fit and they might decide, OK, we're going to go a different direction. The second scenario is they bring in that person, they recognize the value. The company keeps growing and the needs have extended to full time. Maybe that person will step in and that's one scenario or maybe that person's final project will be finding a full time hire. Because at that point, it becomes a very different position. Some people in fractional work really love working across clients and having different opportunities to provide value. Others are kind of testing the waters themselves. Right. This is a two way relationship and they might find that they've found they might find that they're in a perfect environment for what they're looking for in their career. And they want to stay on and they want to be there full time and see how this journey evolves and ends, hopefully. So they might want to stay full time or you might say, hey, help me find somebody in this role. You've been a great asset to us. I'm going to help you find new opportunities. For us, I want your last project to be help us find somebody full time in this role. And I've been I've been in that in a couple situations where you know it's a we need somebody in a pinch. And then it does turn and it's always actually to me that's very it's it's a win win for everybody because you have somebody now that can really help you find a person that's going to be a good fit. And if they're not, they know enough in that role to say, here's where you need to look. These are the kind of people you need to talk to. This is the these are the questions you need to ask or the skill sets they have, particularly from a technical side. A lot of times I see that where you have a CIO or CTO or something that it can be very different being a CIO for a product company versus a service company versus a software company. And it's just and I think in a lot of it's like a financial if you're CFO, it's different if you're for a big company or a small company or if you're depending on what your products are. And there's so many different flavors that just saying, hey, we need a X, whatever that title is. It seems like it's always it's never enough to just, oh, OK, we're just going to go pull that title. It's like, no, there's a lot underneath that that is really going to make that person the best fit for you. Yeah, that totally makes sense to me as well. What I would add to that is a lot of times founders are thinking about their immediate needs, but it's harder to consider what your future needs are. So I'll talk with founders and to be like, OK, we need a dev manager, you know, with this much experience in this industry. And I'll go, OK, that makes a lot of sense. But what happens as the company scales and grows? Does that role change at all? And if so, what is going to evolve? And a lot of times I come back to emphasizing fundamentals over specific experiences. So that's not to say you don't want somebody with experience. That's great. But also, I'm looking at somebody who's smart, flexible, organized, responsive. These are characteristics that are going to be impactful no matter where the company goes, no matter what direction. So that dev manager may end up running IT one day or they might end up being a solutions architect one day. We don't exactly know. And for us to predict the future doesn't make sense, but we can control the present. So bring in somebody who has the skills you need for today, but also is capable of evolving in their role. They're always going to be supporting the company in the future and ask questions around that, you know, ask questions around their curiosity. When it comes to organization, maybe you have them present or show some of their work or walk through how they would solve very real problems, you know, walk through with you. How would they address those situations? But think about what this person is going to bring in the future as well as the present. And I guess just to bring that back full circle. When you're talking to a founder and you're coming in and going through those initial discussions about where are you at and what is it that you know, what are your goals as far as growth and we're going to help you grow and scale. How much of that is where you are now and what you want to do to just sort of like, you know, go from one to two and how much of that is also working with us to say, hey, there's a we don't want you to repeat the same thing. We don't want you to go zero to one really quick and then slam the brakes and then one to two really and then slam the brakes. We want to give you that growth pattern. So now you can go to 10 and beyond, essentially. How does that factor into those those conversations or is it more something that you focus on the sort of the current? Let's get you going. And then as you go further into the relationship, then you start pushing that out a little bit further and looking at that, you know, to the next level. You're playing if they if they have something like that. So I try to be realistic when I talk with founders, I realize they don't have a ton of time to think about the future, the plan, you know, calmly and to organize their thoughts. And so the way I try to strike this balance is I say, hey, give this a little bit of thought, hire people who are going to be adaptable as your business grows. The needs you have today are very unlikely to be your needs tomorrow. That dev manager might have four or five developers now, but your company might have 50 developers in a year and a half. And so their role is likely going to dramatically change. So think about some of the skills that will be useful in the future. And then the other way I like to look at it is I say, hey, you're going to be investing a lot in these people you're hiring. Don't just think about who looks great today in one interview and they say all these great things or they're the person you want to grab a beer with or a coffee with. Think about how you're actually going to measure their success quickly and objectively. So take the time to come up with a job description. If that's not you have somebody else build that job description, very specifically what this person is doing and build an onboarding plan that talks about what milestones should they have. In two to three weeks, not waiting three or six months to decide if this person's helping your company grow that conversation about a bad fit. If it has to happen is much easier within the first month than it is six months later. It just becomes awkward. It becomes more energy. It's harder to justify to yourself that you have to let this person go because of the sunk cost bias. So really think from the outset, how is this person going to immediately impact the company? And how am I going to see that in the first week, two weeks, three weeks? Ask them to do some low lift deliverables. Maybe they do a hiring plan for the next developer. Maybe they do an onboarding plan for their existing developers. Maybe they do a product plan for what should be coming out of the team. And this is all assuming it's a dev manager position. But have them come up with some deliverables that they have to give you right away. And you'll know pretty quickly if they're responsible and capable or if there has to be a discussion or if there has to be a rehire. Excellent. So it sounds like you're not just doing these quick couple week tests on your products and your market and in MVPs. You're also doing this within the employees and the staffing as well as to do the same thing and say, hey, we're going to bring somebody in or bring a couple of people in. And we're going to we're going to put them in situations that we can quickly do some evaluations to say, yep, this is somebody we're going to go forward or no, we need to we need to change gear before we get too involved in sort of invested in this person. Yes, that's very much it. I love the connection. Whether you're building a product, adding a feature, trying to reach a new customer demographic with your technology or hiring. Always think about the immediate next steps, what you're trying to accomplish and how you know if that's been successful so that you can either double down, pivot or completely change direction in any of those circumstances. That's a good. I think that's a good wrapping up point because we sort of hit our way into time. I want to thank you for your time and for coming on and for the people that are out there are like, man, I love Benjamin. He's awesome. He's got some great stuff. What are some of the better ways or the best ways for them to connect with you? Sure. Probably a good place to start is the website www.webuildscalegrow.com. I post frequently on LinkedIn so you can find me at Benjamin Friedman under Build Scale Grow. And then for those people who learn through reading, I have a book out there. It's called Scale Reach Your Peak. It's available on Amazon, both in print and digitally. It's almost 500 pages. But before you book, I want you to keep in mind it has over 130 articles with five to seven minute lessons about how to dig in a whole range of topics. Public relations, financial models, fundraising. It gives you an introduction to the topic, some things to think about strategically, but it quickly turns into some practical advice and how to move forward if you think that's going to be a priority in the near term. We all love some bite sized nuggets like that to just come in, learn a lesson, be able to apply it as soon as possible. So, as I said, thanks so much. This has been great conversation. I think everybody now they can, you know, pencils down, they can stop taking notes and they can breathe for a little bit and allow some of this to sink in and digest it a bit. We'll have links in the show notes for all of the places that he's discussed and hopefully, you know, let him know, say, hey, Benjamin, this is heard you on the podcast. Loved you. I want to learn some more and see where maybe he can help you out. Maybe he can help you build, scale and grow your organization to the peaks that you never even thought you were going to get to. So thanks a lot. I'll let you get back to your day and enjoy talking with you, Benjamin. Thanks, Rob. Same here and love the analogies. Thank you. Have a great day. You too now. And that will wrap up our conversation with Mr. Friedman. If you have any additional information, questions, things you want to talk about with him, there will be links in the show notes as always. Feel free to drop by and say hi from developer or building better developers and let him know that you enjoyed the conversation and some of the content he brought. Definitely a little different from some of our other guests. Little different point of view and perspective. And hopefully that was informational, at least if not also maybe a little inspirational or motivational or some other all for you so that you can sort of apply the real business world to your side hustle. Because I know sometimes we we struggle with that a little bit because it's a you know maybe a little bit of a hobby or something like that. It's it's not something that we always see as the business that it is or that it will become. And sometimes it needs that extra that outsider, that other voice, that other set of eyes to help point us in the right direction. That being said, hopefully you can take your eyes and point them in a direction other than here for a little bit and go out and get productive for your day until the next time that we join in with the next session. And we'll be back with our next interviewer. We're getting there, getting towards the end of this season, but we do still have a few more left and they are just as good as the ones that have gone before them. We did not save necessarily the best for last, but we also did not run the best early on. There's going to be some good information. So you may have to get another notebook and another pencil to get through these last few episodes. That being said, let's kick you back out into your day and go out there and have yourself a great day, a great week, and we will talk to you next time. Great momentum and great success. Hi, this is Rob from Building Better Developers, the Develop-a-Noor podcast. We're excited to be on Alexa now. 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