How MFiles Reached $130M in Revenue With Lessons From CFO Justin Kim (Interview with CFO Justin Kim)

Event Context and Introduction

Nathan Latka

00:00Quick context. This was recorded March twenty eighth and twenty ninth. So a couple weeks ago at my live event, saasopen.com. We had a thousand software CEOs there. If you missed it, we hope to see at the next one, September fifth and sixth in New York City, saasopen.com. But for now, let's jump into the recording.

Justin Kim's Role as CFO and COO

Justin Kim

00:22>> Yeah. So my my role is the CFO and COO of the business. Started when we were really starting to scale the business, so I think I was asked to share my lessons learned, and the challenge was boiling it down to nine.

Overview of Talk: Team, Tooling, and Leadership

Justin Kim

00:39>> All right. So, yeah, what I'll cover is basically kind of three categories. One is in terms of the team and people. Obviously, the work is really, for a position like mine, it's really about building the team and then enabling them to obviously do what they do. So I've got some thoughts on that. In terms of tooling, sharpening the axe, lots of lessons learned there. And in terms of just the intangibles for a company that's growing as

01:13>> fast as we did, which I'm sure, you know, that's of interest to everybody, clearly lots of kind of leadership mistakes and lessons learned there.

MFiles Business Overview

Justin Kim

01:25>> And I promise none of this is going to be that earth shattering, so it's really just based on kind of practical experience. And hopefully, some of it will be useful. So maybe I'll tell you a little bit about mFiles. We're a knowledge work automation company. Our core platform is a document management platform that automates management of information, workflows, and compliance. So

01:50>> the story starts way back and started in kind of the

01:57>> early twenty ten's, if you will, in terms of actually becoming a recurring subscription SaaS business. Welcome. And

Revenue and Growth Journey

Justin Kim

02:09>> so today we're doing somewhere in the neighborhood of $130,000,000 something like that. And so it's been a great, great ride. And definitely lots of change throughout, but especially in the last kind of three to four years. And happy to tell you about some very real stories. I'm sure every story, every company is a little bit different. So happy to tell you about mine, and to the extent that's interesting to you, hopefully.

Fitting Team to Stage of Business

Nathan Latka

02:36All

Justin Kim

02:37>> right. But yeah, we're basically kind of at the stage of scaling the operations, really getting better or, you know, the blocking and tackling is kind of behind us, I hope. So it's really about optimizing things like margin and the metrics. That's our stage. So in terms of the first category, kind of the people and the teams related lessons learned. So number one for me, it's really just making sure you fit kind of your team to the

03:11>> stage, right? And so I've definitely made a mistake.

03:15>> Happy to admit that early on when I first got to MFOS, I said, well, the first thing I need is just a killer controller that just done public company stuff. I want someone who's just up here. And at that stage, it didn't work out, because that's not what we needed. We needed someone who's going to be able to roll up their sleeves, work with the teams to build some basic things. We didn't need to go from

03:41>> zero to 100 miles an hour, right? We needed someone to get us from zero to 20. And so that's my lessons learned in terms of fitting to the stage. Cultural fit, we're Chemfiles is also a Finnish company, so we have a unique culture. So obviously you know all about that, but that was very critical for us, and I can admit we've had some misses there. And then just in terms of speed, the scale and how fast

04:08>> we were growing, we just needed to move fast. And if I made a mistake with Teams, which again I have plenty, the worst thing you could do is try to make something work that's not going to work. Just fail fast, move on, get better.

Finance Operations Pyramid and Progression

Justin Kim

04:24>> I won't spend too much time on this. I'm sure you've seen probably hundreds of pyramids in your career. This is sort of my thought process when I think about stage from a finance and operations standpoint, what's the basic stuff? Early on, you worry about maybe just making sure you can collect cash, making sure you can close the books and report the financial statement. And then eventually you can work on things like how do I get my

04:52>> reporting, get my budgeting straight. And then you can even get into things like, okay, forecasting, and so on and so forth. But figure out where you are. When I started AmpFalls, we were probably lower on the pyramid than I'd like to admit.

05:08>> Terms of the key sort of things I worked on, I thought this might be interesting to just, again, every company is different. But for us early on, was really about fundraising. Can we close a month? That was actually not easy at first, right? Are we compliant? Do we have basic things like SOC compliance, ISO compliance? Most of our customers were asking for that. That was not a given. We invested in IT. I invested in a controller

05:38>> to really get accounting to the next level. Then we went to FP and A, really getting about budgeting and analysis.

05:47>> Then we built out the legal function. We were using outside counsel, we invested in an internal team, then forecasting. So kind of gives you maybe a progression.

06:00>> Relatively recently hired a CISO, Chief Information Security Officer, built out a cyber security team. Every company at scale is going to need that today, obviously. And then we're kind of working on things like optimizing the business now. Pricing, deal desk, how do we get more out of the deals? How do we make sure we do good business? Right? So maybe that gives you kind of a sense for the sorts of initiatives that you might have.

06:31>> Hardly scientific, but my I'm happy to admit my personal failures. So these are, I would say, I'll just say this is turnover on my team throughout the years. And if I just did a quick, again not scientific, my sense for what didn't work, was it a performance skill set issue, or was it a lack of culture fit? Almost always for me, it was culture fit. Things like, can't keep up with the pace of business and change,

07:03>> can't collaborate with the teams, can't sort of keep up with the business initiatives changing, and so on and so forth. So just really critical. The other thing that I'll highlight is that, again, not scientific, but sort of recently, I'm learning myself, if things aren't working out, make a decision, move on, fail fast. Right? So that's my kind of wrap up of the first kind of teams, people section is really fit everything, culture as well as what

07:34>> stage you are as a business. And then again, just moving very fast.

Tooling: Designing Systems for Future Scale

Justin Kim

07:41>> Speaking of fast, I'll try to keep us moving, get us back on pace. So second section is really about tooling and systems related, probably no surprise again. Like I said, nothing earth shattering here. Really designing everything for many years ahead, especially when you're a growth company like we are. Investing really early on in forecasting, that's something that takes practice. And it's so important. When you get to 100,000,000, let's say, and if you haven't already been building

08:14>> your forecasting muscles, when you get there, you're in trouble, right? Because at that point you need to be really good. When you can forecast this quarter, next quarter, you need to be on, right? And so you need to really start that early. And then, less is more is sort of my way of trying to rationalize. It's way too easy to get into analysis paralysis. So just really need to try to avoid that. If I go back

08:39>> to our revenue growth, obviously just conceptual, but for us in 2018 is when we did a big system rebuild. Went to NetSuite and brought on some other solutions. We clearly designed the business, though, for looking three, four, five years ahead, were probably in the $2,030,000,000 range when we were doing it. And we intentionally, all the requirements were based on, hey, when we are a $100,000,000 business, this is what we need. And obviously that's what we've built

09:07>> for. And that's certainly working out for us, and couldn't say that more strongly how important that is.

Building a Forecasting Cadence and Culture

Justin Kim

09:19>> In terms of forecasting, so again, fairly straightforward stuff, but to me just critical. Number one is, again, start early, but have a very clear cadence. So what we do with our forecasting, and we've been doing this for a long time, is on a certain given day of the month, you start your collection effort, and that's when the business areas know they have to give us their input. Right? Engineering knows that's when they need to give us

09:48>> their hours. Sales knows that's when they need to give us their sales forecast. So we know we have very clear dates and cadence that we collect it, we roll it up, we have very clear review cycles, and those are all calendared. Just super important to get that going, and then the business gets used to it. And then that leads to the second point, which is you don't want the forecast to be your forecast. It's not my

10:11>> finance forecast. Right? That's got to be owned by the business. So if you happen to miss, the whole business is accountable. Right? And that's not where we started always, I would say. But that's where we are now, which is great. And then kind of the nerdy aspect is, once you do this, and you do it early, and you do it on a repeatable basis, then you got to track how good you are. And when you miss,

10:37>> and you will, right? You got to track, well why did I miss, how much did I miss by, and then track that. And then it's actually fairly straightforward at that point. You've got a statistical basis for hey, you know, I'm usually within x percent of my forecast, I don't miss by more than that. So you know what haircut you need to take next time, right? And you're never going to miss, right? So pretty straightforward. Some quick

10:59>> don'ts, don't buy into the hype. I love our sales people, but they're internal optimists, so you have to kind of take a grain of salt with what they say. So be objective. Don't try to forecast too far ahead. We have we're pretty rigorous. We always look at this quarter and next quarter, that's it. If we're asked for something two, three quarters ahead, you know, we can get some ballpark estimates, but we don't know. I mean, that's

Metrics and Avoiding Analysis Paralysis

Justin Kim

11:25>> just to be honest, that's just too far ahead, right? So we can admit that. And then again, very important point, you don't want the forecast to be your number. That's got to be the business's number. Okay? Moving on to tooling and reports and financial analysis, analysis paralysis, you know, does your desktop look like that? Because mine did at one point where I had so many Power BI dashboards and so many different versions of them and I

11:51>> couldn't make sense of anything. And I'm easily overwhelmed, so that was definitely the case for me. But also for the business, it's tough to get true insights if you're trying to do too much. And then obviously just administratively trying to manage all of that is really, really difficult. So as much as possible, I'm sure, you know, you all obviously look at this, but just try to boil down to as few metrics as you can, what are

12:17>> really important, fairly basic things that you can track very easily. We learned that pretty early on. So that's sort of the wrap up for the tooling. Again, just looking ahead, when you look at systems, forecasting, make sure it's a well baked practice process, and then in terms of metrics and analysis and reporting, less is definitely more.

Leadership in High-Growth Companies

Justin Kim

12:46>> And then the final section, talking just generally about leadership. I think especially when you're a high growth company, and let's say you're doing less than $20,000,000, $30,000,000, $40,000,000, something in that range, The company does need a lot of leadership, and I think, you know, the CFO, the COO position is really key in providing clarity to the organization. You can't have mixed messages. It's tough to say things that are too nuanced, because folks will read into that

13:16>> what they want to read into. So just very clear communication, very clear goals, strategy, and just being very, very, again, very clear and simple and straightforward. Collaboration is key, obviously. I would actually boil that down and say be nice, because I think that actually does come back to bite you if you're not. And stuff happens, so you need to have a plan B.

13:45>> So, a good adage I like, if you want to go fast, go alone. If you want to go a long way, go together, right? So, certainly for us, our company, I think we collaborate really well, And it's very, very important. Finance and operations for us, and I suspect it's the same most organizations, it's a kind of a function that works with everybody. Right? And we have to play nice, and like when I talk about cultural fits

14:11>> and misfits for our group, that's where you might fall short. You have folks that are maybe very good at what they do, but if they can't sort of collaborate with other teams, especially when you have a high growth company that's moving fast, that could really, really hurt you. And then, I'm sure everyone will be with me when I talk about just cleaning it up for this audience, stuff happens. For us, 2018 to 2019, we had a

14:41>> transition to a subscription recurring revenue model, like a lot of companies have done. So that was big for us. That was very challenging. And then of course, 2019 happened. And the pandemic, we had protests, we had elections, we now even have wars. And we had last year, we're just talking about the anniversary of the SVB banking crisis, which I don't, I mean, I don't know if anybody predicted that. So what does 2024, 2025 hold? I don't

15:12>> know. But we're prepared with the plan b, and we've had to we've had to use it. So, pretty basic stuff. But but those are my my lessons learned. Hopefully, was, you you got at least one or two things in there that were useful, and, thanks for your attention.

Audience Q and A: Managing Remote Culture

Nathan Latka

15:27Thanks, Justin. Any questions for Justin?

Justin Kim

15:33>> Move on. Yeah.

Nathan Latka

15:35Talk about culture early on. You talked about culture early on. Sure. How do you approach trying to change the culture with like a fully remote team?

Justin Kim

15:48>> Yeah, that's good. Yeah, that's a good point. Culture is is difficult with the with the remote team.

15:55>> I would say I wouldn't try to change the culture. For my experiences, company culture is kind of what it is, and it's really just making the most of it, and trying to get the teams that can kind of work within that culture. In terms of shaping it, you can obviously shape it in terms of, like for us, we you know, our focus has to be has been around making it more performance oriented, right? And you could

16:20>> do those things obviously through kind of making sure goals are clear, folks are held accountable, things of that nature. But sort of the intangible aspects of culture for a business. I think, like for us, it's a strength. Our culture is a strength, so I wouldn't want to change it. I want to just make the most of it and leverage it. From a remote standpoint, tech companies, I don't know. I'd love to hear if others think it's

16:46>> a challenge. For us, the remote aspect hasn't been a challenge, because everyone's sort of professional, they do what they do. So really it's about just holding people accountable that, hey, if that's your commitment to do something, and if you haven't done it, and if that happens to be because you're remote and you're not in person, that's sort of beside the point. You didn't meet your commitment, so that's the way we manage it.

Nathan Latka

17:10Thank you. Yeah.

Advice to Younger Self

Nathan Latka

17:18Thank you. What would you tell yourself ten years ago that you wish you knew that you know now and you wish you knew then?

Justin Kim

17:26>> That's I like that question. Yeah. What I've I would I would say I would have given myself advice ten years ago would have been probably to

17:38>> to maybe

17:41>> be a bit more laid back. I mean, I'm pretty laid back already, but I think you have a tendency to maybe drive a little bit too hard, and you're losing

17:51>> sleep at night,

17:53>> and things have a tendency of working out at the end if you're kind of focused on the right things. So really just

18:02>> providing, also from a leadership standpoint, you know, leadership through calmness and poise, I think that's really important. And if you're sort of maybe frazzled and trying to do too much, I think that definitely shows. So that's what I would say. Yeah. Alright. Thanks, Justin. Alright. Well, I'll give Justin a hand. Appreciate it. Alright. You, everybody.

Nathan Latka

18:31Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software

18:57founders. So far, we've invested in over 400 software founders totaling a $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer.